Discover the intricacies of forming a California professional medical corporation, from ownership restrictions to dissolution procedures. Learn the benefits, taxation nuances, and essential operational requirements to ensure your medical corporation meets all legal standards.
by LawInc Staff
September 11, 2023
A California Professional Medical Corporation is a specific type of corporate structure available to licensed medical professionals in the state of California. Here’s a brief overview of its key characteristics:
Purpose |
The primary purpose of a California Professional Medical Corporation is to provide medical services. It’s intended for use by individuals who hold specific professional licenses, such as physicians, surgeons, and certain other healthcare providers. Medical corporations can provide certain legal and financial benefits. This can include limited liability protection, tax advantages, and potential business and operational efficiencies. |
Ownership Restrictions |
The majority of the shares (generally, at least 51%) of a professional medical corporation must be owned by licensed physicians or other medical professionals. The remaining shares can be owned by certain other licensed healthcare professionals, but there are specific restrictions on this. |
Naming |
The name of the corporation must include specific words or abbreviations to indicate its status as a professional corporation, such as “Professional Corporation” or “Inc.” If the name of the corporation does not correspond to the physician’s first and last name, or last name only, as it appears on their medical license, a Fictitious Name Permit must be obtained from the California Medical Board. |
Formation |
To form a medical corporation in California, one would file the Articles of Incorporation with the California Secretary of State. Additionally, the corporation must draft and adopt bylaws, obtain an Employer Identification Number (EIN) from the IRS, and register with the Medical Board of California. |
Operation |
The medical corporation must adhere to all California and laws pertaining to professional corporations. This includes maintaining proper records, holding regular meetings, and ensuring that all active shareholders, officers, and directors are appropriately licensed. |
Taxation |
A professional medical corporation can be taxed as an S-corporation or a C-corporation. by default, professional corporations are taxed as C-corporations. This means the corporation itself pays corporate taxes, and then shareholders also pay taxes on dividends. However, many professional corporations elect to be taxed as S-corporations, which allows income and losses to flow through directly to the shareholders’ individual tax returns, avoiding the double taxation issue. |
Liability |
One of the primary reasons for forming a corporation is to limit liability. In a professional medical corporation, the corporation itself can shield individual shareholders from personal liability for the corporation’s debts or liabilities. However, it does not protect individual practitioners from malpractice or negligence claims. |
Dissolution |
If a medical corporation is dissolved, it must follow specific procedures laid out by California law. This includes filing the necessary documents with the California Secretary of State, settling outstanding debts, distributing any remaining assets to shareholders and filing final tax returns. |
LawInc Can Help You Form a CA Professional Medical Corporation
If you are a licensed California medical doctor and need help starting a medical corporation, LawInc is here to help.
