Physicians and California Professional Corporations
In California, physicians who want to incorporate their medical practice must do so by forming a special type of entity called a professional corporation (PC or P.C.). Physicians are not alone in this—other professionals such as dentists, chiropractors, naturopathic doctors, and veterinarians are also subject to the same general standard.
At The Law Office of Kris Mukherji, a significant portion of our legal practice is devoted to advising licensed professionals on business law matters. We want to make sure that you have the tools and information you need to protect yourself, your career, your business. Here, our San Diego physician practice management attorney provides an overview of professional corporations in California.
What are the Advantages of Forming a California Professional Corporation as a Physician?
As a business structure, a professional corporation offers an important benefit to physicians. It allows you to access corporate liability protection while remaining personally responsible for your professional practice. What does that mean in practice? When you form a PC in California, you will not be personally responsible for the company’s business expenses such as a commercial lease, a vendor contract, or other commercial debts.
At the same time, each physician within the PC will remain personally responsible for their own professional conduct. In other words, there is no shared liability for a malpractice claim. If you form a professional corporation with another doctor in California, neither you nor your business is legally responsible for a medical malpractice claim filed against them.
Forming a Professional Medical Corporation in California: Legal Requirements
Not just anyone can form a professional medical corporation in California. Under the state’s Moscone-Knox Professional Corporation Act, there are strict rules and requirements for forming a professional corporation. Further, only a limited number of parties can “own” shares in a PC. In California, each director, shareholder, and officer of a professional corporation must be licensed to prove the same professional services being provided by that corporation. In total, licensed physicians must own at least 51% of the total shares in the business. Allied profession may hold the remaining 49%. Some examples of allied professions are physician’s assistants, psychologists, social workers, and family counselors.
A Medical Services Organization (MSO) is a Useful Tool
Owning and operating a medical practice carries a large administrative burden. It takes a lot of time, effort, and energy to manage a medical practice. However, as not previously noted, only licensed physicians or allied professionals can serve as a shareholder or director in a medical professional corporation. Unfortunately, practicing physicians do not always have a lot of time to focus on the day-to-day business issues, such as human resources (HR), payroll, and coding compliance.
A medical service organization (MSO) can help to solve this problem. As described by the California Department of Managed Health Care (DMHC), an MSO is a healthcare-specific administrative entity that helps physicians with the non-medical aspects of running a professional practice. An MSO can work with a PC in a manner that complies with California’s Moscone-Knox regulations.
Contact Our California Business Lawyer for Immediate Help
At The Law Office of Kris Mukherji, our San Diego business law attorney is a diligent and solutions-oriented advocate for physicians and other medical professionals. If you have any questions about professional corporations or medical services organizations, we can help. To set up a confidential initial consultation, please call us at (858) 442-5747 or contact us online. From our office in La Jolla, we provide business law services in San Diego and throughout Southern California.