How to Form a Medical Professional Corporation
If you are a doctor or other type of healthcare provider, you may be interested in forming a professional corporation within the state of California that will allow you to provide medical professional services legally under the law. Understanding how to form a medical professional corporation will help you determine your next steps and ensure your legal rights are protected.
California State Laws
Medical professional corporations in the state of California must adhere to the following California State Laws and Codes:
- California Corporations Code
- Business and Professions Code
- California Code of Regulations Title 16. Professional and Vocational Regulations, Division 13.
- Medical Board of California, Chapter 1. Division of Licensing, Article 13. Professional Corporations
Professional Corporation vs. LLCs
The state of California will not allow a medical profession from forming any type of traditional corporation or Limited Liability Company for their medical practice. Instead, the doctor must register their practice as a professional corporation. If this process is done incorrectly, the Secretary of State of California may reject the registration and can leave a doctor open to lawsuits and/or government fines. The Medical Board of California may also impose discipline or fines. Additionally, the benefits of establishing a medical professional corporation will always limit a doctor’s personal liability against lawsuits and creditors as well as decrease the amount of self-employment taxes of the shareholders, and allow any profits or losses to pass through to shareholders without double taxation.
While you should always visit with an experienced attorney regarding the start of your medical professional corporation, the following are the first steps to take.
- Name Your Medical Practice. You do have the option of making up a fictitious name, however, you must ensure it is accepted by the Medical Board of California.
- Articles of Incorporation. File the Articles of Incorporation with the Secretary of State in California.
- Notify Your State Agency. You should notify your Profession’s state agency immediately that you are forming a medical professional corporation.
- Hold a Board of Directors Meeting. You should hold a Board of Directors meeting, take the time to appoint directors.
- Determine Shareholders. Stock in a professional medical corporation may be issued only to the following licensed persons: podiatrists, psychologists, registered nursing, optometrists, marriage/family therapists, clinical social workers, chiropractors, acupuncturists, physicians’ assistants, naturopathic doctors, physical therapists, clinical counselors, and pharmacists. These shareholders may only own a sum of shares not to exceed 49% of the total number in the company.
- File and Apply. Make sure to draft your bylaws, apply for your employer identification number through the Internal Revenue Service, file Form 2553, file the Statement of Information, pay taxes to the California Franchise Tax Board, apply for any appropriate business licenses and registrations and make sure you follow all of the correct steps if you are hiring any employees.
Contact an Experienced Attorney
The formation of a medical professional corporation in the state of California is a complex legal process. Visit with an experienced attorney at the Law Office of Kris Mukherji at (858) 442-5747 to help you ensure your legal rights are protected.