The California
Professional Corp. Guide
An attorney-led guide to the Moscone-Knox Act, shareholder rules, and state licensing board requirements for California’s licensed professionals.
What is a Professional Corporation?
A Professional Corporation (PC) is a special type of corporation created specifically for licensed professionals. In California, individuals in certain professions are prohibited by law from forming a standard corporation or LLC to render their professional services. The PC structure is their only path to incorporation.
Why PCs Exist: The Core Purpose
The primary purpose of a Professional Corporation is to allow licensed professionals to gain the liability protection and tax advantages of a corporation while ensuring that the state’s professional licensing boards can maintain oversight. The law is designed to uphold professional standards and protect the public by restricting ownership and management to licensed individuals within that specific profession.
Who is Required to Form a Professional Corporation?
If your profession is regulated by a state licensing board, you are generally required to form a Professional Corporation instead of a standard business entity. This is a non-negotiable legal requirement in California.
- Accounting (CPAs)
- Acupuncture
- Architecture
- Audiology
- Chiropractic
- Clinical Social Work
- Dentistry
- Law
- Marriage and Family Therapy
- Medicine (Physicians)
- Nursing
- Optometry
- Pharmacy
- Physical Therapy
- Psychology
- Veterinary Medicine
- And several others…
The Moscone-Knox Professional Corporation Act
The Moscone-Knox Act is the cornerstone of California law governing Professional Corporations. It sets forth the specific rules, restrictions, and requirements that differentiate a PC from a general stock corporation. Its primary goal is to ensure that professional services are always under the control of licensed professionals.
Key Provisions of the Act
- Purpose Limitation: A PC can only render professional services for which its shareholders are licensed. It cannot engage in other unrelated business activities.
- Shareholder Licensing: All shareholders, directors, and officers must be licensed in the profession the corporation practices.
- Name Restrictions: The corporate name must comply with both Secretary of State rules and the specific naming conventions of the relevant state licensing board.
- Liability for Malpractice: While the PC protects owners from business debts, it does *not* shield a professional from their own malpractice or negligence.
Special Naming Requirements for PCs
The name of a Professional Corporation must not only be unique but also signal to the public that it is a professional practice. Each licensing board has its own specific rules.
Common Naming Conventions
- The name must contain the last name of one or more of the shareholders.
- It must include a corporate designator like “Professional Corporation,” “A Professional Corporation,” “Corp.,” or “Inc.”
- Words like “Medical,” “Law,” “Dental,” etc., are often required or restricted by the specific licensing board.
We handle the entire name clearance process, ensuring your proposed name complies with both the Secretary of State and your specific licensing board’s regulations.
Liability: Protection and Its Limits
A Professional Corporation provides significant liability protection, but it’s crucial to understand what it does—and does not—protect against.
| Type of Liability | Are You Personally Protected? |
|---|---|
| Business Debts (e.g., office lease, loans) | ✅ Yes |
| Malpractice of Another Shareholder | ✅ Yes |
| Your Own Professional Malpractice | ❌ No |
| Personal Guarantees | ❌ No |
Getting Started: The Right Way
Forming a Professional Corporation is more complex than a standard incorporation. It requires careful coordination between the Articles of Incorporation filed with the Secretary of State and the registration and compliance requirements of your professional licensing board.
Frequently Asked Questions
Incorporate Your Practice
The Right Way
Navigating the Moscone-Knox Act and state board regulations is complex. We provide the expert legal guidance necessary to form and maintain a compliant Professional Corporation.