3 Steps to Forming Your Medical Professional Corporation (2022) (2023)

3 Steps to Forming Your Medical Professional Corporation (2022) (1)

If you are a medical doctor in California, you SHOULD incorporate a medical professional corporation that is taxed as an S corporation since you cannot open like a traditional LLC.

California law prohibits physicians from forming LLCs or traditional corporations for their medical practices. Instead, you must register asprofessional company.

If done incorrectly, your Professional Corporation may be disapproved by the Secretary of State, exposing you to potential lawsuits and fines from various government agencies. You may even face disciplinary action from the Medical Board of California.

As a business attorney for professionals, I have assisted hundreds of physicians on how to set up their Professional Corporation and I can definitely help you set up your own.

If you are a doctor and need help opening a doctor's office, email me at sam@mollaeilaw.comor contact me directly818-925-0002

California Professional Medical Corporation Benefits

A Professional Medical Corporation is specialtype of societywhich doctors have to form if they offer a freelance service (in principle to work as a doctor or to open a medical practice).

There are numerous benefits to starting a professional medical business in California.

Properly incorporating a medical professional corporation in California will limit your personal liability to creditors and legal proceedings, minimize shareholder taxes on self-employment, pass profits and losses on to shareholders to avoid double taxation, allow you to build business credit, and much more .

3 Steps to Forming a Medical Professional Corporation

The 3 steps to forming a Medical Professional Corporation are:

  1. Submit the Articles of Association of a Professional Corporation to the Secretary of State to incorporate the Professional Corporation
  2. Notify the state agency of your profession that administers your profession, hold a board meeting and appoint directors, have the California Professional Medical Corporation bylaws drafted, apply for your EIN, file your Statement of Information, submit form 2553 for the S corporation tax election, pay California corporate taxes to the California Franchise Tax Board, file with the EDD if hiring employees, and apply for local business registration and licenses.
  3. Do all of the above steps yourself or hire a business lawyer to do it all for you.

If you are a doctor or medical doctor and you want to start your professional corporation, email mesam@mollaeilaw.comor contact me directly818-925-0002

Requirements for professional medical companies

According to the California companyCode 13401(b)all professional bodies must be registered with the appropriate government body charged with administering their profession.

A professional medical body must be officially registered with the Medical Board of California. California Medical Corporations must also comply with Title 16 of the California Code of Regulations relating to MedicalProfessional companies.

Professional Medical Corporation naming requirements

The name of the Medical Professional Corporation must include the first or last name of one or more of the corporation's current prospective or former shareholders.

Who can be a shareholder in a Professional Medical Corporation?

Licensed individuals in the following professions may receive shares in a professional medical body:

  1. Licensed paediatricians
  2. Licensed Psychologists.
  3. registered
  4. Licensed opticians.
  5. Licensed marriage and family
  6. Licensed clinical social
  7. Licensed Medical Assistants.
  8. Licensed Chiropractor.
  9. Licensed Acupuncturists.
  10. naturopathy
  11. Licensed Professional Clinical
  12. Licensed Physiotherapists.
  13. Licensed pharmacist.

Any of the professionals listed above may be issued shares in the medical professional association so long as they do not own more than 49% of the total shares in the medical association.

In addition, the number of shareholders who are not physicians must not exceed the number of persons licensed by the Medical Board of California.

Can a professional medical company in California use a fictitious company name?

Yes, pursuant to Section 2415 of the California Code of Regulations, if you open your medical entity under a fictitious name, you must file a fictitious name permit with the Medical Board of California. Here you can apply for the dummy name permit and learn more about it:http://www.mbc.ca.gov/Applicants/Fictitious_Name/

The proposed name must not be misleading, deceptive, confusing or similar to any previously used name.

When is it required to obtain a fictitious name permit?

Fictitious name permission is required if you are a licensed physician and surgeon or podiatrist and practice under a fictitious, false, or false name in any public communication, advertisement, sign, or announcement.

Do you always need a fictitious name permit for a medical body?

No, you do not always need a dummy name permit for a medical association. The doctor or podiatrist's first and last name is used, followed by Medical Doctor, M.D., Podiatrist, Doctor of Pediatric Medicine, D.P.M., Medical Corporation, Medical Corp., Podiatry Corporation, Podiatry Corp., Professional Corporation, Prof. Corp. , Corporation, Corp., Incorporated or Inc.

Examples: "John Doe Medical Corporation" or "John Doe, M.D. Inc.", then no fictitious name permission is required. However, the doctor's name must match the legal name on the medical license.

Are there specific naming requirements for fictitious name approval?

Yes. The proposed name must not be misleading, deceptive, confusing or similar to any previously used name. Also, a podiatrist doctor must include the designation “pediatric,” “podiatrist,” “podiatrist,” “foot,” or “ankle.”

Do you have to register with the Secretary of State before applying for fictitious name approval?

Yes, the Medical Board of California requires a copy of the articles of incorporation to ensure the corporation is active and a professional medical corporation.

If a business name is issued by the Secretary of State and is not available as a fictitious name, the physician has the option to change the business name to match the fictitious name.

This change was to be made after the fictional name was assigned by the board. The company name may differ from the fictitious name. Also, approving the company name does not entitle you to publicly promote that name if it is a fictitious name.

Do you need to notify the Medical Board if you decide to change the name of the Medical Corporation?

No, the medical association would only have to be informed in the event of a complete change of medical association. This would only apply to doctors who have a fictitious company name with the medical association. All other corporate matters should be directed to the Secretary of State.

How to Form a California Professional Medical Corporation

Here are the 9 steps you need to take to form a California Professional Medical Corporation:

  1. Submit the Articles of Association to the Secretary of State and pay the filing fee. The registration fee is currently $100. You must also state in its articles of association that its purpose is “medicinal”.
  2. Conduct a corporate meeting where you issue stock and elect officers and directors for the Professional Medical Corporation
  3. Create custom California Professional Medical Corporation bylaws
  4. Apply for an EIN
  5. Submit the information statement to the Secretary of State
  6. File Form 2553 for the S Corporation Tax Election for the Professional Medical Corporation
  7. Pay California corporate taxes and California Franchise Tax dues
  8. Register with the EDD when hiring employees
  9. Apply for local business registration and licenses

If you are interested in starting your California Professional Medical Corporation email me atsam@mollaeilaw.comor contact me directly818-925-0002

Can a California Medical Corporation be owned by a single shareholder?

Yes. A California Medical Corporation can be owned by a single shareholder.

If so, the shareholder must be a California medical practitioner and serve as both President and Treasurer of the corporation. The other officers of the corporation need not be licensed physicians.

What happens if a Professional Medical Corporation shareholder is disqualified or dies?

If a shareholder of Professional Medical Corporation is barred from providing professional services in California or dies, the corporation must acquire all of the shareholder's stock. If the excluded shareholder or the representative of the deceased shareholder does not cede within 90 days of the date of exclusion or within six months of the death of the shareholder, the certificate of registration of the Medical Association may be suspended or revoked.

Are the shareholders of Professional Medical Corporation liable for the debts and obligations of the corporation?

Generally, a shareholder of the medical professional association is not liable for the debts and obligations of the corporation unless the shareholder:

  1. personally guarantees a debt or obligation,
  2. commits unlawful conduct,
  3. receives inadmissible distributions of the assets of the trade association,
  4. Mixes personal and business matters (alter ego; penetrating the corporate veil) or
  5. Breaches a duty owed to others

How Are Professional Medical Businesses Taxed in California?

California Medical Corporations are generally taxed as a C-Corp, which means their combined income must be taxed at both federal and state government corporate income tax rates. If the medical corporation pays dividends to shareholders, the shareholders must report the dividends as income that is taxable at both the federal and state levels. This is known as "double taxation".

S-Corporation Tax Choice for Medical Professional Corporations

To avoid double taxation, California medical corporations are encouraged to file Form 2553 for the S Corporation Tax Election. By being treated as an S Corporation rather than a C Corporation, the Medical Corporation is treated as a pass-through entity.

The doctor pays himself a salary and takes the rest as an owner distribution or draw.

What do you do next

While the following steps may seem simple, making a mistake in incorporating your medical corporation can result in your corporation being rejected by the Secretary of State.

As a corporate attorney for professionals, I have assisted hundreds of Physicians just as you form their California Medical Corporations and I can definitely help you with yours.

Call me directly at818-925-0002or email mesam@mollaeilaw.comto get started NOW

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