Watch an Attorney Help You Learn About Professional Corporation Ownership Requirements in California 

As a business owner and entrepreneur, you know an opportunity when you see one. You may not be a licensed

medical professional, but you understand that working with one just makes sense. They take care of the medical aspects and you take care of the business side. You both get to focus on what you enjoy and want to do—it just makes sense, right? 

Not in California. Simply, it just doesn’t work like that. You can’t retain full ownership of a therapy professional corporation if you aren’t a licensed therapist. 

When a Business Professional Finds Out Not Being a Therapist Really Does Matter 

We recently worked with a business professional who owned an early start agency. Their agency hires interventionists, occupational therapists, and physical therapists, that could help fulfill their home-based therapy programs.

Everything was looking on the up and up: the business was funded by the State-Regional Center and were looking to expand. They submitted their paperwork to Blue Shield and waited. That is when trouble hit. 

California Insurance Companies Require Therapists to Be a Professional Corporation to Become Credentialed 

The business owner’s paperwork showed that his company was an LLC. “Well that’s correct!” thought the business professional. They wanted an LLC to create some protection in their business structure. But Blue Shield came back and told them they needed to be a corporation. Specifically, a professional corporation. 

The LegalZoom Let Down: A NOT So Simple or Accurate Process 

As any entrepreneur would, our client acted. He jumped online and went straight to LegalZoom to set-up a corporation. A business entity change was the obvious next step to growth within their early start agency. 

LegalZoom advertised an “easy and quick” process and it all seemed as simple as filling in a few forms. That was not the case when our client got to the naming portion of his corporation. 

They wanted a specific Pediatric Therapy name, associated with one of their hired medical professionals. LegalZoom told them no. The reasoning was that he wasn’t a licensed medical professional, and at least 51% of the owners needed to licensed if they wanted to use that specific name. That was it. 

Naturally the client came to us at that point with their more complex questions (which LegalZoom couldn’t and wouldn’t answer): 

• If I change my business name, will I still have the same issue since I am not the one holding the license as an owner of the clinic? 
• Can a non-licensed person even own and operate a clinic if the hired medical professionals are licensed? 

Luckily, we were here to answer his questions and give him the right guidance. 

 

What LegalZoom Got Wrong: Ownership of a Therapy Professional Corporation in California 

LegalZoom was wrong about the ownership. The problem is they do not understand that each Professional Corporation has slightly different requirements and rules. In this scenario for a Professional Therapy Corporation, 100% of the owners are required to be licensed.  

In our client’s case, LegalZoom seemed to indicate the name was the issue. It was in a sense, but they did not explain

this was because of the larger issue: the company ownership. And not only did they not explain the ownership issue, they even provided inaccurate information about the required ownership. 

Again, for a Professional Therapy Corporation, 100% of the owners are required to be licensed. For other Professional Corporations, ownership percentages and requirements can vary.  

 

Naming Requirements Are Different for a Therapy Professional Corporation in California 

Another aspect of professional corporations is the naming conventions. Each type of professional corporation has very specific naming requirements.  

For various therapy and medical professional corporations, the name is often tied into the owner and licensed professional’s actual name. 

This means, if our client was to change the business name to a different one, he is still going to have the same issue because he is not the licensed professional. 

How Can I Run a Medical Professional Corporation as a Non-licensed Business Individual? 

Naturally, this is one of the top questions we get from business owner’s: how can I keep my business (that I have invested so much into) and still legally run it? The answer is to move away from ownership of the Professional Corporation, and instead focus on the service YOU provide to the licensed professionals: management services.

 

In order to achieve your goal, you will need two corporations. You need a management corporation to run the administrative aspects of the clinic. You need a professional corporation (one owned 100% by licensed professionals) that actually provides the treatment to the patients. You cannot control the professional corporation and/or the services that are provided. You need to draft a management services agreement wherein the professional corporation can pay the management corporation to provide management and administrative services to the professional corporation.

 

The Risk to Your Professionals Working Under the Former Business Structure 

Where you may not have thought about your illegal business structure hurting is the people you have hired. Any professional that works with you under a structure like the client’s Early Start Agency—is putting their own license at risk! 

That business structure is illegal, and means those professionals are operating illegally. And for professionals who have worked for years in schooling and training to get their license—most won’t be willing to set themselves up for career suicide. 

Get Help Setting Up a Professional Corporation or a Management Corporation—With the Correct Ownership Requirements 

There are many risks to not operating a legal business entity, but there are even more rules and liability when involved in a medical or therapy-based professional corporation. 

Just because you are not a licensed medical professional, does not mean you can’t find a way to work with other licensed professionals in a way that makes sense. Do not let your management skills go to waste, and do not set-up your business for problems and failure. 

Experts should not only know what you need to do but should also be able to provide active guidance to solve your problems. An expert should be a consultant. 

Move beyond the ownership struggles and Professional Corporation requirements and start focusing on where you can grow your business. Work with the Professional Corporation experts of California today! Get started here or call us at +1 (714) 634-4838 .