We, at Incorporation Attorney, take pride in our pristine reputation of helping professionals build successful businesses. Our expert corporate lawyers specialize in starting medical practices in California. Among the most common questions that medical professionals ask when starting their company is what business structure is best for them. Is it LLC? Or is it S corporation? We recently had a doctor email us asking us tips in forming an LLC with his colleague.  

Client Question: What is the Legal Structure of Medical Practice in California? 

Our corporate lawyers have assisted many physicians with starting a business in California. Our experts helped these entrepreneurs every step of the way — from the nitty-gritty preparation of legal documents to the selection of a business name. In a recent case, a doctor who was planning to start up his private practice emailed us a question. His inquiry is actually a very common one. He wrote: 

“Hi! I’m a licensed physician located in the East Bay area. I would like to discuss a limited liability partnership versus an S corporation with you because I have been considering forming an LLP with another physician. Is it possible to be S corp in my name and put my s corp into the LLP entity? I originally was based in Chicago. I have sold my s corp medical practice there and I plan to start practice over in California. I need the help of an expert business attorney. Thank you!” 

Incorporation Attorney Responds: LLP Medical Practice is Not Allowed in California 

“Hello! Thanks for emailing us. A medical doctor cannot form a limited liability partnership in the State of California. A professional corporation is the business structure of choice for medical practice. We specialize in helping medical professionals form a corporate structure. You may schedule an appointment with us so that we can discuss more.” 

Many times, the follow-up question is whether or not I can set up a limited liability company. Unfortunately, the answer is the same for that type of entity. The only option available to a medical professional is a professional corporation.

Medical Professionals are Permitted to Form Corporations in California 

The State of California does not permit physicians to form limited liability partnerships. Professional limited liability partnerships are restricted to the practice of architecture, law, engineering, public accountancy, and land surveying.  

Licensed medical professionals who want to start a business with their colleagues in the field need to form a professional medical corporation. Medical doctors can become the shareholders of the professional corporation. Most commonly, the shareholders in the corporation choose to be taxed as an S corporation versus a C corporation.

Need help in forming an S corporation? Consult with a corporate lawyer today! Click here! 

What is the Difference Between an S Corp and a C Corp? 

All corporations begin their existence taxed by the Internal Revenue Code under subchapter C. Hence, the name “C” corporation. The biggest complaint about C corporations is the issue of double taxation. When the corporation earns money, it pays taxes on the profits. When the corporation distributes profits to the shareholders, the shareholders pay a second level of tax.

Most medical doctors, and everybody else for that matter, hate the notion of paying tax twice.

Most medical practices prefer to have their corporations taxed under subchapter “S” of the Internal Revenue Code. Hence, the name “S” corporation. The major advantage to S election of taxation is that the corporation itself does not pay any federal taxes. All of the income of the corporation after expenses are deducted, is passed through to the individual shareholders thereby resulting in one level of tax.

Learn more about the differences between C corps and S corps! Talk to an expert by clicking here! 

How to Start a Medical Practice Professional Corporation in California? 

A medical corporation is a type of professional corporation. In general, forming a medical corporation is the same as forming any other corporation with some additional requirements placed upon the corporation by state law and the medical board. Articles of Incorporation are prepared and filed with the California Secretary of State along with the applicable fees. The corporate bylaws and stock certificates are all specifically drafted to comply with the state law and the rules and regulations of the medical board. 

Read about the basics of forming a professional corporation! Click here! 

Do You Need to Hire a Corporate Lawyer When Forming a Professional Corporation Medical Practice in California? 

There is no requirement to hire a lawyer when starting any business. However, not having an attorney assist you could make you prone to mistakes in the formation of your professional corporation. Documents might be missing, by-laws might be flawed, an inappropriate business structure might be formed, and many more blunders may happen!  

It’s not uncommon for us to work with doctors who have attempted to form their own corporations. Many have told me, how difficult could it be? Just filing a few forms, correct?

Preparing your own corporate documents would be the same as a lawyer diagnosing a medical illness such as an infection. Sure I can go on to WebMD and do my Google research to figure out what is wrong with me. I might just get it right.

However, there are 100 things that could go wrong. Misdiagnosing an infection could lead to death (or seriously close thereto). And, unless you have the proper training and experience, you may end up in a far worse position doing it yourself than if you had proper advice and guidance in the drafting of the legal documents from the beginning.

The formation of any corporation can be a tedious task. Any error in the paperwork can mean a ton of costly legal issues in the future. It is best to seek the counsel of an expert so that you can be sure your medical practice business is formed the correct way. 

California Attorneys that Specialize in Forming a Professional Corporation Medical Practice 

Incorporation Attorney specializes in forming S corporations in California, specifically for medical practice. We’ve helped countless medical professionals form successful companies through the years. We’d be very happy to add you to our list of businesses we’ve helped succeed! Call us today at +1 (714) 634-4838!