CALIFORNIA PROFESSIONAL CORPORATION FORMATION
San Diego Medical Business and Health Care Attorneys
The formation of a California Professional Corporation or PC is totally different than a normal LLC, S-Corporation or C-Corporation. If you are interested in forming a health care corporation for the purposes of starting a medical business or physicians practice in California, you need business attorneys with deep experience in health care law and the business of medicine.
The Watkins Firm has served the business and medical community in San Diego and throughout California for decades. We can guide you effectively through the process to ensure compliance with all federal, state and local laws, as well as Occupational Safety and Health Administration (OSHA) regulations. We also provide advice and counsel on the impacts of the Health Insurance Portability and Accountability Act (HIPAA).
Physicians and healthcare practitioners can basically practice as a sole practitioner or in partnership with other physicians, medical professionals and healthcare practitioners. Sole proprietors are exposed to personal liability for all debts and legal liabilities the practice incurs. In a partnership, each partner is also fully exposed to all debts and liabilities “jointly and severally.”
The decision surrounding the formation of a business entity is therefore centered upon the limitation of liability and perceived financial and tax benefits.
What is Different about a California Professional Corporation or PC?
A California Professional Corporation or PC is specifically designed for advanced degree professionals who are required to carry a specialized license, including:
- Physicians and MD’s
- Psychiatrists and Psychologists
- Physician’s Assistants (PAs)
- Registered Nurses
- Physical Therapists
- Certified Public Accountants
- Attorneys and Lawyers
- Marriage and Family Therapists and Social Workers
The State of California and the Medical Board of California prohibit the “corporate practice of medicine” in our state. The intent of these laws is to separate the business decisions associated with medical practice and insurance from the practice of medicine and related decision making.
This prohibits non-physicians or other entities from holding a majority interest in a medically related Professional Corporation. Physicians may not be retained as either an employee, contractor or independent contractor by a non-physician or entity.
There are specific legal structures associated with the ownership of a Professional Corporation as well as those licensed professionals who may have an interest in the PC.
All professionals must be licensed to practice their profession in the State of California.
The California Professional Corporation Protects the Continuity of the Practice
The shareholder agreements and corporate by-laws of a California Professional Corporation control decision making authority as well as the valuation of an interest in the event of divorce, incapacitation, death or severance. This allows for the continuity of the practice as physicians and licensed professionals come and go, age, pass away or face other life and/or business related issues.
The Limitation of Liability Associated with a California Professional Corporation
The California Professional Corporation provides additional personal protections for individual professionals which separate them the debts and liabilities of the PC while ensuring that they are not liable for the negligence or malpractice of another member of the PC.
The Professional Corporation does not exempt a practitioner from malpractice, if the practitioner specifically committed or participated in the associated act(s). Unlike a partnership (where partners are jointly and severally liable for the actions of their partners) the Professional Corporation does protect individuals from actions of other associates if they did not participate or contribute to the alleged malpractice.
A California PC provides advantages associated with increased retirement and 401(k) contributions, when compared to many traditional forms of business corporate formation. The PC also provides a structure that allows the company to offer and receive tax deductions for various employment benefits and additional fringe benefits such as:
- Health Insurance
- Disability Insurance
- Dependent Care
- Life Insurance
Potential Tax Advantages
While the Watkins Firm does not provide tax advice, the California Professional Corporation provides potential tax advantages to physicians and medical practitioners and professionals as well. A Professional Corporation may elect to be taxed as an “S Corporation.” This allows profits to pass through to the shareholders for taxation at an individual level, avoiding the “double taxation” associated with a traditional C Corporation.
Experienced Medical Business and Health Care Attorneys
There are many restrictions on the structure of a California Professional Corporation, as well as limitations regarding the structure and voting rights associated with corporate officers, directors and shareholders. It is important to work with experienced business attorneys with deep expertise in the medical practice and health care industries.
The Watkins Firm offers extensive experience in the formation and operation of many different types of medical business entities including medical practices, physician groups, surgery centers, hospitals, and urgent care facilities. If you are considering the formation of a medical business or health care company or facility we invite you to contact us, or call 858-535-1511 for a complimentary and substantive consultation. Learn about the unique challenges of today’s competitive and highly regulated medical and health care industries, and the work the Watkins Firm has done for many other professionals and organizations in the San Diego and California health care community.