California Healthcare Law Resources

If I’m providing professional services (including healthcare) am I permitted to provide them as an LLC?

TITLE 2.6. CALIFORNIA REVISED UNIFORM LIMITED LIABILITY COMPANY ACT [17701.01 - 17713.13] 
( Title 2.6 added by Stats. 2012, Ch. 419, Sec. 20. )

”(e) Nothing in this title shall be construed to permit a domestic or foreign limited liability company to render professional services, as defined in subdivision (a) of Section 13401 and in Section 13401.3, in this state.”

What does this mean?

For individuals providing professional services, you’ll want to consider either a sole-proprietorship or a professional corporation. A professional corporation can be taxed as an S-Corp if you decide the tax advantages are worth it based on your size, and you meet other criteria for number of shareholders (less than 100, shareholders being US-based, and single stock class.

What are considered professional services?

In a healthcare context, most things you think of count if you have to have a license to do it. The specific criteria and list is outlined below.

TITLE 1. CORPORATIONS [100 - 14707]  ( Title 1 enacted by Stats. 1947, Ch. 1038. )

DIVISION 3. CORPORATIONS FOR SPECIFIC PURPOSES [12000 - 14707] 
( Division 3 enacted by Stats. 1947, Ch. 1038. )

PART 4. PROFESSIONAL CORPORATIONS [13400 - 13410] 
( Part 4 added by Stats. 1968, Ch. 1375. )

13401

(a) “Professional services” means any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act.

(b) “Professional corporation” means a corporation organized under the General Corporation Law or pursuant to subdivision (b) of Section 13406 that is engaged in rendering professional services in a single profession, except as otherwise authorized in Section 13401.5, pursuant to a certificate of registration issued by the governmental agency regulating the profession as herein provided and that in its practice or business designates itself as a professional or other corporation as may be required by statute. However, any professional corporation or foreign professional corporation rendering professional services by persons duly licensed by the Medical Board of California or any examining committee under the jurisdiction of the board, the Podiatric Medical Board of California, the Osteopathic Medical Board of California, the Dental Board of California, the Dental Hygiene Board of California, the California State Board of Pharmacy, the Veterinary Medical Board, the California Architects Board, the Court Reporters Board of California, the Board of Behavioral Sciences, the Speech-Language Pathology and Audiology and Hearing Aid Dispensers Board, the Board of Registered Nursing, the State Board of Optometry, or the California Board of Occupational Therapy shall not be required to obtain a certificate of registration in order to render those professional services.

(c) “Foreign professional corporation” means a corporation organized under the laws of a state of the United States other than this state that is engaged in a profession of a type for which there is authorization in the Business and Professions Code for the performance of professional services by a foreign professional corporation.

(d) “Licensed person” means any natural person who is duly licensed under the provisions of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act to render the same professional services as are or will be rendered by the professional corporation or foreign professional corporation of which the person is, or intends to become, an officer, director, shareholder, or employee.

Who specifically is allowed/required to use a Professional Corporation Structure?

Section 13401.5

Notwithstanding subdivision (d) of Section 13401 and any other provision of law, the following licensed persons may be shareholders, officers, directors, or professional employees of the professional corporations designated in this section so long as the sum of all shares owned by those licensed persons does not exceed 49 percent of the total number of shares of the professional corporation so designated herein, and so long as the number of those licensed persons owning shares in the professional corporation so designated herein does not exceed the number of persons licensed by the governmental agency regulating the designated professional corporation. This section does not limit employment by a professional corporation designated in this section to only those licensed professionals listed under each subdivision. Any person duly licensed under Division 2 (commencing with Section 500) of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act may be employed to render professional services by a professional corporation designated in this section.

(a) Medical corporation. (1) Licensed doctors of podiatric medicine. (2) Licensed psychologists. (3) Registered nurses. (4) Licensed optometrists. (5) Licensed marriage and family therapists. (6) Licensed clinical social workers. (7) Licensed physician assistants. (8) Licensed chiropractors. (9) Licensed acupuncturists. (10) Naturopathic doctors. (11) Licensed professional clinical counselors. (12) Licensed physical therapists. (13) Licensed pharmacists. (14) Licensed midwives. (15) Licensed occupational therapists.

(b) Podiatric medical corporation. (1) Licensed physicians and surgeons. (2) Licensed psychologists. (3) Registered nurses. (4) Licensed optometrists. (5) Licensed chiropractors. (6) Licensed acupuncturists. (7) Naturopathic doctors. (8) Licensed physical therapists.

(c) Psychological corporation. (1) Licensed physicians and surgeons. (2) Licensed doctors of podiatric medicine. (3) Registered nurses. (4) Licensed optometrists. (5) Licensed marriage and family therapists. (6) Licensed clinical social workers. (7) Licensed chiropractors. (8) Licensed acupuncturists. (9) Naturopathic doctors. (10) Licensed professional clinical counselors. (11) Licensed midwives.

(d) Speech-language pathology corporation. (1) Licensed audiologists.

(e) Audiology corporation. (1) Licensed speech-language pathologists.

(f) Nursing corporation. (1) Licensed physicians and surgeons. (2) Licensed doctors of podiatric medicine. (3) Licensed psychologists.

(4) Licensed optometrists. (5) Licensed marriage and family therapists. (6) Licensed clinical social workers. (7) Licensed physician assistants. (8) Licensed chiropractors. (9) Licensed acupuncturists. (10) Naturopathic doctors. (11) Licensed professional clinical counselors. (12) Licensed midwives.

(g) Marriage and family therapist corporation. (1) Licensed physicians and surgeons. (2) Licensed psychologists. (3) Licensed clinical social workers.(4) Registered nurses. (5) Licensed chiropractors. (6) Licensed acupuncturists. (7) Naturopathic doctors. (8) Licensed professional clinical counselors.(9) Licensed midwives.

(h) Licensed clinical social worker corporation. (1) Licensed physicians and surgeons. (2) Licensed psychologists. (3) Licensed marriage and family therapists. (4) Registered nurses. (5) Licensed chiropractors. (6) Licensed acupuncturists. (7) Naturopathic doctors. (8) Licensed professional clinical counselors.

(i) Physician assistants corporation. (1) Licensed physicians and surgeons. (2) Registered nurses. (3) Licensed acupuncturists. (4) Naturopathic doctors.(5) Licensed midwives.

(j) Optometric corporation. (1) Licensed physicians and surgeons. (2) Licensed doctors of podiatric medicine. (3) Licensed psychologists. (4) Registered nurses. (5) Licensed chiropractors. (6) Licensed acupuncturists. (7) Naturopathic doctors.

(k) Chiropractic corporation. (1) Licensed physicians and surgeons. (2) Licensed doctors of podiatric medicine. (3) Licensed psychologists. (4) Registered nurses. (5) Licensed optometrists. (6) Licensed marriage and family therapists. (7) Licensed clinical social workers. (8) Licensed acupuncturists. (9) Naturopathic doctors. (10) Licensed professional clinical counselors. (11) Licensed midwives.

(l) Acupuncture corporation.(1) Licensed physicians and surgeons.(2) Licensed doctors of podiatric medicine. (3) Licensed psychologists. (4) Registered nurses. (5) Licensed optometrists. (6) Licensed marriage and family therapists. (7) Licensed clinical social workers. (8) Licensed physician assistants. (9) Licensed chiropractors. (10) Naturopathic doctors. (11) Licensed professional clinical counselors. (12) Licensed midwives.

(m) Naturopathic doctor corporation. (1) Licensed physicians and surgeons. (2) Licensed psychologists. (3) Registered nurses. (4) Licensed physician assistants. (5) Licensed chiropractors. (6) Licensed acupuncturists. (7) Licensed physical therapists. (8) Licensed doctors of podiatric medicine.(9) Licensed marriage and family therapists. (10) Licensed clinical social workers. (11) Licensed optometrists. (12) Licensed professional clinical counselors.(13) Licensed midwives.

(n) Dental corporation. (1) Licensed physicians and surgeons. (2) Dental assistants. (3) Registered dental assistants. (4) Registered dental assistants in extended functions. (5) Registered dental hygienists. (6) Registered dental hygienists in extended functions. (7) Registered dental hygienists in alternative practice.

(o) Professional clinical counselor corporation. (1) Licensed physicians and surgeons. (2) Licensed psychologists. (3) Licensed clinical social workers. (4) Licensed marriage and family therapists. (5) Registered nurses. (6) Licensed chiropractors. (7) Licensed acupuncturists. (8) Naturopathic doctors.(9) Licensed midwives.

(p) Physical therapy corporation. (1) Licensed physicians and surgeons. (2) Licensed doctors of podiatric medicine. (3) Licensed acupuncturists. (4) Naturopathic doctors. (5) Licensed occupational therapists.(6) Licensed speech-language therapists.(7) Licensed audiologists. (8) Registered nurses. (9) Licensed psychologists. (10) Licensed physician assistants. (11) Licensed midwives.

(q) Registered dental hygienist in alternative practice corporation. (1) Registered dental assistants. (2) Licensed dentists. (3) Registered dental hygienists.(4) Registered dental hygienists in extended functions.

(r) Licensed midwifery corporation. (1) Licensed physicians and surgeons. (2) Licensed psychologists. (3) Registered nurses. (4) Licensed marriage and family therapists. (5) Licensed clinical social workers. (6) Licensed physician assistants. (7) Licensed chiropractors. (8) Licensed acupuncturists. (9) Licensed naturopathic doctors. (10) Licensed professional clinical counselors. (11) Licensed physical therapists.

(s) Occupational therapy corporation. (1) Licensed physicians and surgeons. (2) Licensed doctors of podiatric medicine. (3) Licensed acupuncturists. (4) Naturopathic doctors. (5) Licensed physical therapists. (6) Licensed speech-language therapists. (7) Licensed audiologists. (8) Registered nurses. (9) Licensed psychologists. (10) Licensed physician assistants. (11) Licensed midwives. (12) Licensed clinical social workers.(13) Licensed marriage and family therapists.(14) Licensed occupational therapy assistants.

What are the advantages of a Professional Corporation?

A Professional Corporation is actually a very good thing if you have multiple professionals working together. While an LLC is designed, when used properly, to protect individual member liability and general corporations offer than and other protections, individuals’ with professional licenses will would want a professional corporation even if you weren’t required. If one provider in a group commits malpractice or misconduct, corporations can limit liability. You get 401k contributions, asset protection, and tax benefits while adding this feature. And, the government helps insure that corporate structures aren’t used to avoid responsibility or run by people without the ethical guidelines that professional licenses ensure.

Are there disadvantages to a Professional Corporation?

Yes - the additional paperwork requirements, costs, regulations, and other mean that if you’re an individual therapist, for example, you may decide to continue operating as a sole proprietorship until you’re ready to take on other providers at which point you’ll want to form a professional corporation.

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