A California Professional Corporation provides advantages for a medical practice. A California Professional Corporation or “PC” is a unique form of business legal entity which protects its professionally licensed owners from liability while providing extended opportunities to invest in a 401(k) or other retirement vehicles and deduct important benefits. The advantages of a California PC for medical practices are primarily limited liability and additional deductible expenses and benefits.
Key Takeaways About why the California Professional Corporation Provides Advantages for a Medical Practice:
- The California PC must be owned by a those with an advanced degree who carry specialized licenses including but not limited to doctors, dentists, engineers, architects, lawyers and certified public accountants.
- The ability to take additional deductions to increase profit retention is another of the advantages of a California Professional Corporation for a medical practice.
- Continuity is a major benefit of a California Professional Corporation. The PC ensures the practice survives key life events such as disability, incapacity, divorce, bankruptcy or death of a shareholder.
The California Professional Corporation Must Be Owned by Licensed Professionals
The California PC must be owned by a those with an advanced degree who carry specialized licenses including but not limited to doctors, dentists, engineers, architects, lawyers and certified public accountants. As a medical practice, one of the key issues is malpractice and other sources of risk and liability. The California PC protects each owner from issues of malpractice or liabilities created by other shareholder practitioners due to another professional’s actions or negligence. The PC also limits the liability of its owners if the corporation’s debts cannot be paid.
Additional Deductions Increase Profit Retention
The ability to take additional deductions to increase profit retention is another of the advantages of a California Professional Corporation for a medical practice. This unique form of corporate entity allows your practice to offer and receive tax deductions for various employment and fringe benefits including:
- Dependent Care
- Health Insurance
- Life Insurance
- Disability Insurance
The PC can be structured to elect for the same taxation as an S Corporation. Income flows through the entity to the appropriate shareholders eliminating the type of “double taxation” one would experience from another entity such as a C Corporation.
Continuity is Another Way the California Professional Corporation Provides Advantages for a Medical Practice
Legal and financial protections and tax advantages are not the only way the California Professional Corporation provides advantages for a medical practice. Continuity is a major benefit of a California Professional Corporation. The PC ensures the practice survives key life events such as disability, incapacity, divorce, bankruptcy or death of a shareholder. The shareholders’ agreement in a PC establishes how surviving spouses/heirs are to be compensated and how new practitioners can be brought into the group.
The practice and/or its owners may wish to give consideration to a Management Service Organization or MSO to provide additional protections while enhancing the ability to streamline overhead and support services while attracting external investment. The ultimate goal is to maximize the quality of care delivered to your patients as well as the patient experience as they interact with the practice and its people and facilities.
Typically, the MSO handles things like:
- Office space and facilities
- Staff hiring and HR administration (non-licensed staff)
- Billing, collections, and revenue cycle support
- IT systems, marketing, and operations
- Vendor contracts and back-office functions
The Professional Corporation retains complete control over all professional services, clinical judgment, and licensed activities. That distinction is critical under California law.
Serving the San Diego and the California Medical and Healthcare Community for More Than 40 Years
The experienced medical practice and healthcare business attorneys at the Watkins Firm have served the healthcare community for more than four decades here in San Diego. We have advised and represented individual physicians and healthcare practitioners in contract negotiations and issues with large healthcare organizations. We have represented large national interests as well as local practices. We can help your medical or healthcare business with business formation and all associated employment and regulatory compliance including physicians contracts.
We create, review and update medical employment agreements and all employment related documents. We work to ensure your new medical practice or healthcare business is compliant with all aspects of the Health Insurance Portability and Accountability Act (HIPAA) and compliant with Occupational Safety and Health Administration (OSHA) regulations as well as all federal, state and local legal and regulatory compliance issues. The Watkins Firm represents medical and healthcare business entities in business related litigation and dispute resolution.
Pro-Tip: “It’s wonderful. It’s complicated, and it is completely involved. Unlike any other law we do. We’ve been doing this since the 1980s, representing doctors and medical entities, and physicians are the smartest people on the planet and they operate in laws that are the most complicated for any business I’ve ever heard of. My first job as an attorney I started working for an attorney named Chris Popov, who’s with me today. And that’s what his practice was, forming, selling and buying healthcare providers, companies, forming medical corporations, PT clinics, MRI centers, psychiatric groups that operated in multiple states, all kinds of complex laws, medical rules and regulations. And it, it took many, many years to master this area of law. I’m still learning.
The medical practice act, business and professions code section 2052 and the California business and professions code section 2400, generally cover a lot of what you can and can’t do. And one of the things you have to understand is who and can’t own a healthcare practice and what types of procedures you can use to facilitate the sale of a healthcare practice, to other licensed professionals. And also, how can we involve other business entities that aren’t licensed professionals in such a transaction?
The California Professional Corporation is a healthcare provider’s only business vehicle. Healthcare providers can’t be limited liability companies. They can’t be these other types of entities. They can be general partners, which is severe liability, or they can be professional healthcare corporations, which shields them from personal liability. To some extent, although a licensed doctor, the one who’s doing the work is always going to be personally liable. That’s why they have to spend so much money on malpractice insurance, but it also is a vehicle where you can bring in other shareholders who qualify. And there are a list of exceptions. Usually most of the owners of a professional corporation providing healthcare have to be licensed healthcare personnel, but there’s a list of exceptions to that law, but it is what doctors use to do business.
Most healthcare businesses have realized the cost savings and profitable advantages of Management Services Organization or MSOs. They can enter into agreements with other corporations or other business service providers. They can buy their own ancillary service providers as long as they comply with all the requirements for that too. So a sole medical practice through their medical corporation can branch out into other forms of business if they know how to do it. And if they work with an experienced lawyer at the Watkins Firm, we can structure everything so that they’re in compliance with Medicare and also the licensing rules and regulations for California, and any other state they’re in.” – Dan Watkins, Founding Partner
If you would like to learn more about the advantages of a California PC for medical practices and how the Watkins Firm can contribute to the success of your medical or healthcare entity we invite you to review our podcast Episode 7 – Medical Practices and Healthcare Businesses, well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
Meet Daniel Watkins:
Daniel W. Watkins is a true people person who sincerely listens. He cares deeply about what others are going through. Dan enjoys digging into the facts and finding creative solutions to problems. He contributes his insights candidly and constructively.
Dan’s interest in people make him deeply invested in every relationship and his exuberant personality makes him a true litigator. Dan fights for his clients with a fierce and calculated commitment.
Dan has practiced in the areas of business, medical practices and healthcare business, high tech/science, real estate and employment defense law since 1987. He is a trusted litigation strategist and true trial attorney with over 50 jury and bench trials to his credit. Dan has successfully represented both large companies and individuals and achieved substantial victories in well-publicized trials throughout California and the U.S.
He is experienced in business and corporate formation and administration, as well as all forms of alternative dispute resolution, including binding arbitration and mediation.
THE ROAD TO BECOMING A BUSINESS LAWYER AND LITIGATOR
Dan has almost 40 years of experience working with, for and against some of the largest insurance companies in the country. He has successfully tried and litigated cases in the areas of Healthcare Compliance, Commercial Litigation, Unfair Business Practices, Fraud, Breach of Contract, Battery, Premises Liability, Product Defect, Medical Malpractice, Discrimination, Sexual Harassment, Construction Defect, as well as Unfair Competition, Defamation, and Trade Secrets.
In December 2003, Dan commenced litigation against Health South Surgery Centers-West, Inc and its’ subsidiaries, exposing the company’s extensive mismanagement and misconduct of its’ surgery centers. Dan has also been asked by some of California’s largest municipalities and corporations to conduct legally required investigations into matters involving alleged employment discrimination and harassment.
