More About Professional Corporations
More About Professional Corporations
Many professionals in California opt to practice their profession by being their own boss. Instead of being an employee in a clinic or hospital, many physical therapists have ventured into business and started their own private practice. While most states in America allow businesses to form their company in the form of an LLC, the state of California only allows the formation of professional corporations for physical therapy businesses. Find out more as we answer some questions from our clients that we find relevant information needed to start your physical therapy business.
What is a Physical Therapy Business?
When a physical therapist pursues his/her practice independently, they are most likely required by law to form either an LLC, PLLC, or professional corporation. In California, licensed physical therapists are only allowed to form their business through a professional corporation.
The state of California believes in providing higher standards and responsibilities for licensed professionals to uphold public safety by only allowing medical businesses to form a professional corporation. While an LLC or PLLC provides a less complicated business structure, professional corporations hold more regulations to endorse more responsibility and safety in conducting physical therapy services.
The California Corporations Code is one of the jurisdictions that require physical therapy businesses to register with the designated government agency handling their profession. Other state laws you need to abide by are the Business and Professions Code and California Code of Regulations. If you read more into it, you will find more details and requirements such as name formalities and by-laws that you need to follow in order to form the right professional physical therapy corporation in California.
Is Everyone Allowed to Open a Physical Therapy Business?
For most medical professional corporations, only licensed physical therapists are allowed to become shareholders of their corporation. For non-licensed holders, our incorporation attorney advises putting them in other officer positions.
Our client, who we will call Mrs. L, owns a physical therapy corporation in California and is a licensed physical therapist, consulted with us regarding her concern because she wanted to include her husband as part of their shareholders. However, since he was not a licensed physical therapist, our incorporation attorney placed him as secretary of the corporation. This allowed him to take part in the business as an employee.
Who Are Allowed to Make Draws and Distributions in a Physical Therapy Business?
While it’s best to consult your CPA for finance and tax-related concerns in a physical therapy corporation, our incorporation attorneys do know that only shareholders are allowed to make draws and distributions.
In the case of Mrs. L, her husband was registered as an employee and took part in the business as a secretary. He was able to make money by being paid as an employee. This can be applied to any physical therapy business that encounters these concerns in California.
Incorporating Your Physical Therapy Practice to Shield Against AB5
Being employed as a physical therapist in a clinic, hospital or organization has responsibilities limited to the employment stipulated in a contract. This means that any physical therapist employed is subject to the rules of the AB5 which is the labor code section between employers and employees of a business. Moreover, if you own a professional physical therapy corporation, you are shielded from this rule through business-to-business contracting relationships between you, a private business entity, and other private companies in need of your services.
Going back to our client who decided to practice her profession independently, she would tap into hospitals and other businesses and corporations as a contractor to provide her physical therapy services.
Business contractual relationships are written down and serve as a form of agreement that a physical therapy business provides the needed services for another company without being employed in their organization. You can read more into this through AB 5 (Labor Code Section 2750.3 which states the rules and exceptions on a business-to-business contracting relationship.
Form Your Physical Therapy Corporation in California Today!
Using your licensed profession to engage in business is like multitasking because it requires a lot of duties and responsibilities both as a physical therapist and a business owner. Our incorporation attorneys provide an easy solution by aiding you to start and form your business the right way, without having to deal with all the hassle of processing all the rules and regulations mandated by the government and state.
If you are a physical therapist and you are searching for how to start a physical therapy business in California, you are now closer to your goals as we are always keen to provide the best legal services in forming a professional corporation. Give us a call today at +1 (714) 634-4838 and let’s talk about starting that business of yours and making it into a reality!
