California Professional Medical Corporation Formation
Complete, attorney-handled incorporation for California physicians—from Articles and Bylaws to your EIN and California securities filing.
$2,495 flat fee, with standard California state filing fees included.
Start My Medical Corporation · Talk to the attorney · Call (310) 765-2525
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LawInc since 2005 · 5,000+ businesses formed · A California law firm
Before you start: what a medical corporation does and doesn’t do
A medical corporation does not protect its owners against malpractice suits for their own malpractice. It can, however, provide protection against other types of lawsuits, such as a lawsuit by an employee or a contractual dispute.
Physicians can’t practice through an LLC in California; a physician’s practice incorporates as a professional medical corporation. No Medical Board registration certificate is needed to form one. For background, see what a California professional medical corporation is and whether California physicians can use LLCs.
If you are a California physician deciding to start a medical corporation, the steps below walk through the process.
Step-by-step: how to form a California medical corporation
1. Consult with a California attorney
Doctors sometimes take the inexpensive route when incorporating a medical practice, and that can be costly in the long run. Timing, formalities, tax questions and liability issues are all worth discussing before the incorporation process begins. Physicians often earn large incomes and face liability exposure from multiple sources, so professional guidance matters when forming a California medical corporation.
To have a California-licensed attorney handle your formation, start online or call (310) 765-2525.
2. Determine eligibility: who can own a medical corporation
Every owner of a California medical corporation must be qualified to own it. Doctors often mistakenly believe they can bring on friends or family as investors and part owners.
- Physicians must hold at least 51% of the shares.
- Under California Corporations Code section 13401.5, certain other licensed professionals may hold a minority of the shares. Professions listed include licensed doctors of podiatric medicine, psychologists, registered nurses, optometrists, marriage and family therapists, clinical social workers, physician assistants, chiropractors, acupuncturists and naturopathic doctors.
- No shareholder may be unlicensed. Unless a friend or family member holds a qualifying license, they cannot be a part owner of the medical corporation.
The attorney reviews your proposed owners against California’s profession-specific rules before filing.
3. Consider a buy-sell agreement if there will be more than one owner
A serious mistake when forming a medical corporation with multiple owners is failing to plan for what happens if a shareholder dies, becomes incapacitated, divorces or wants to sell their shares to a third party. Without a buy-sell agreement (also called a shareholder agreement), these situations are not addressed; by default, nothing governs what happens to the corporation and its shares.
Everyone gets along during formation, but circumstances change. Discuss a buy-sell agreement with an attorney. Note: shareholder and buy-sell agreements are not part of the formation engagement described on this page.
4. Decide between C corporation and S corporation tax treatment
There are two basic ways a medical corporation can be taxed:
- C corporation (the default). The corporation is a separate entity for tax purposes. It files its own return and pays its own taxes, and the owners file separate individual returns. This is commonly called “double taxation.”
- S corporation. “S” refers to Subchapter S of the Internal Revenue Code; S corporations are also called “small business corporations.” The main benefit is “pass-through” taxation, which avoids the double taxation associated with C corporations.
C corporation status is not necessarily a problem in every situation, but many medical corporation owners elect S corporation treatment. Review the choice with your CPA. Tax advice is not part of the formation engagement.
5. Name the medical corporation (B&P Code §2415 and the Fictitious Name Permit)
Under California Business and Professions Code section 2415, a Fictitious Name Permit must be obtained from the Medical Board of California unless the corporation’s name is the full name, or last name, of the doctor (as it appears on their medical license), followed by Medical Doctor, M.D., Medical Corporation, Medical Corp., Podiatry Corporation, Podiatry Corp., Professional Corporation, Prof. Corp., Corporation, Corp., Incorporated or Inc.
- The Fictitious Name Permit application requires a copy of the medical corporation’s Articles of Incorporation.
- Check name availability with the Medical Board before forming. A name that is available with the California Secretary of State is not necessarily available with the Medical Board.
- The Medical Board publishes Fictitious Name Permit guidance, including current fees and processing information.
The attorney reviews the proposed corporate and practice name for California medical-corporation requirements and identifies any additional Medical Board step before you use it. Medical Board fictitious-name permit applications are not part of the formation engagement.
6. Designate an agent for service of process (registered agent)
A California medical corporation must have an agent for service of process, also called a registered agent. The agent receives official documents on the corporation’s behalf and must be available at a California business address during normal business hours. Failing to be available can result in a default judgment if the corporation is sued, so designate someone reliable.
A shareholder, director or anyone else who meets the requirements can serve as agent, or you can use a third party. LawInc’s formation package includes optional first-year registered agent service.
7. File Articles of Incorporation
Filing Articles of Incorporation of a Professional Corporation with the California Secretary of State is the official first step in forming the corporation. The Articles include the corporation’s name, business address, registered agent name and address, number of shares and the corporation’s purpose.
8. Prepare organizational minutes
The directors and officers should be appointed and documented in the corporation’s organizational minutes. Minutes matter if the corporation faces a lawsuit or audit, and minutes should also be prepared annually.
9. Prepare bylaws
Bylaws set out the rules and operating procedures of the corporation: where its offices are located, how it is operated, the time, place and manner of shareholder meetings, stock issuance, director powers, number and elections, indemnification, officer types and duties, record keeping and general matters. A medical corporation’s bylaws should include the ownership and share-transfer provisions California requires.
10. Issue stock to the shareholder(s)
Shareholders are the owners of the corporation, and their ownership is documented by stock certificates. A certificate should include the corporation’s name, number of shares authorized, number of shares issued, shareholder name and date of issuance, and should be signed by the corporation’s president and secretary.
A California medical corporation’s certificates should also carry language restricting ownership to the licensed individuals permitted by Corporations Code section 13401.5, an often overlooked step.
11. Keep a stock ledger
The stock ledger records the shareholders, the number of shares issued and the date of issuance. It should also be used to document any future stock issuances or transfers.
12. File IRS Form 2553 if electing S corporation status
If the corporation will be taxed as an S corporation, file IRS Form 2553. The form includes the corporation’s name, address, date of formation, representative and shareholders. In a community property state like California, shareholder spouse information should also be included. The filing deadline is within 75 days of incorporation. S corporation treatment takes effect only if the IRS accepts the election.
13. File a Statement of Information
File a Statement of Information with the California Secretary of State within 90 days of incorporation. It includes the medical corporation’s name, Secretary of State entity number, business address, mailing address (if different), officers, directors, agent for service of process and business type. The Statement of Information is then filed annually.
14. File the California securities notice (limited offering exemption)
Within 15 days of stock issuance, a limited offering exemption notice under Corporations Code section 25102(f) should be filed with the California Department of Financial Protection and Innovation. If the value of the securities is less than $25,000, the filing fee is $25. Failure to file can result in a penalty. The notice tells the state that you are not selling stock to third parties and exempts you from further securities filings.
15. Open a corporate bank account
Open a bank account for the medical corporation shortly after it is formed, and use it for all of the business’s financial transactions. Mixing funds could lead to invalidation of the corporation in a lawsuit. The initial deposit should be reflected in the stock ledger.
16. Obtain a local business license
Most cities require businesses operating within their boundaries to pay local taxes and obtain a business license, an often overlooked step. The state’s CalGold site can help identify the licenses and permits your business may need.
17. Notify third parties
Everyone the practice does business with should know that it is now a corporation. The goal is to avoid any later argument that they never knew they were dealing with a corporation.
18. Work with your CPA
Stay in touch with an accountant to keep up with tax filing and payment deadlines. The California Franchise Tax Board will not remind you about the $800 minimum tax. Failure to file and pay taxes can lead to invalidation of the corporation in a lawsuit, so engage an accountant shortly after formation is complete.
19. Maintain corporate formalities
To keep the liability protection and tax benefits of a California medical corporation, act like a corporation: prepare the required documents, submit the required filings, prepare minutes annually and file the Statement of Information annually. Mark your calendar and remain compliant; failing to do so can lead to suspension of the medical corporation. Ongoing compliance and annual filings are not part of the formation engagement.
For more on avoiding mistakes, see common California medical corporation pitfalls, structuring a California medical corporation and California medical corporation advantages.
Everything included in your $2,495 formation
Your formation file for a California professional medical corporation includes:
- Articles of Incorporation — filed. Prepared as a California professional medical corporation and filed with the Secretary of State.
- Bylaws. Written for a professional medical corporation, including the ownership and share-transfer provisions California requires.
- Organizational minutes and Certificate of Secretary. Documents that adopt the bylaws, appoint your directors and officers, authorize your shares and include the corporation’s initial banking resolutions.
- Stock Purchase Agreement and Investment Representation Letter. Your initial share issuance, documented.
- Stock certificate and stock ledger. The certificate with its legends, and the ledger that records the issuance.
- EIN, Statement of Information and California securities notice. Obtained and filed for the corporation, including the limited-offering exemption notice.
- Formation memorandum. A written closing memorandum: what the corporation must do next on records, filings, taxes and the medical-corporation rules that apply.
- IRS Form 2553. Prepared and filed when you elect S corporation treatment.
- Optional first-year registered agent service. Choose LawInc as your registered agent for the first year at no additional charge, or designate your own registered agent.
$2,495 flat fee. Standard California state filing fees included.
Your questions go to the attorney handling your formation.
Three things your attorney reviews before filing
Before filing, your attorney reviews whether a medical corporation fits your practice, who will own it and the names you plan to use.
1. Entity fit
Physicians can’t practice through an LLC in California; a physician’s practice incorporates as a professional medical corporation. No Medical Board registration certificate is needed to form one.
2. Ownership
Physicians must hold at least 51% of the shares; certain other licensed professionals may hold a minority, and no shareholder may be unlicensed. The attorney reviews your proposed owners against California’s profession-specific rules.
3. Name
The attorney reviews the proposed corporate and practice name for California medical-corporation requirements and identifies any additional Medical Board step before you use it.
Learn more about ownership, naming rules and Medical Board requirements: What a medical corporation is · Common pitfalls · Physicians and LLCs · Structuring a medical corporation · Medical corporation advantages · All California professional corporations
Start your medical corporation with LawInc
- 1. Start online. Tell us about you and the practice.
- 2. Attorney review. Entity fit, ownership and name are reviewed before filing.
- 3. Formation handled. Included documents are prepared, required initial filings are handled, and your formation package is delivered.
California Medical Corporation — $2,495. Flat-fee California professional medical corporation formation. Standard California state filing fees included.
Not sure a medical corporation fits? Talk to the attorney or call (310) 765-2525.
LawInc since 2005 · 5,000+ businesses formed · A California law firm
Attorney advertising, engagement limits and sources
Attorney Advertising. Legal services described on this page are provided by Javdan Law Group, A Professional Corporation, 30765 Pacific Coast Hwy., #260, Malibu, CA 90265. LawInc is not a government agency and is not affiliated with the California Secretary of State or any licensing board. General information, not legal or tax advice; no attorney-client relationship is formed by this page.
The formation engagement is limited to forming the corporation and its initial setup. It does not include tax advice, shareholder or buy-sell agreements, ongoing compliance or annual filings, Medical Board fictitious-name permit applications or other Medical Board filings, or healthcare regulatory matters. S corporation treatment takes effect only if the IRS accepts the election.
Sources: Cal. Corp. Code §§13401, 13401.5, 13403, 13406, 13407, 17701.04, 25102(f); Cal. Bus. & Prof. Code §§2285, 2406, 2408, 2415; Medical Board of California fictitious-name permit guidance.