CA Professional Corporations

Professional Corporations in California

CA professional corporations are a little different than other areas. In most states, professionals who want to incorporate their practice must form a special type of corporation called a professional corporation or professional services corporation. These professional corporations are usually similar to regular corporations but have certain special requirements. California requires certain professionals, which include lawyers, dentists, optometrists, doctors, certified public accountants, psychologists, and psychiatrists, to create a professional corporation rather than the traditional corporation. Unlike many other states, California does not allow professionals to form a limited liability company or professional limited liability company. In California, professionals must form either a professional corporation. work as a sole proprietorship, form a General Partnership or if an Attorney, Architect or an Accountant, use a registered Limited Liability Partnership.

Single Profession Only Requirement
CA professional corporations are governed by the Moscone-Knox Professional Corporation Act (Ca. Corp. Code Sections 13400-13410). Unless an exception applies, California professional corporations can be formed only to provide professional services (including secondary services) within a single profession. A professional service is defined as any service that requires a license issued by a California state regulatory licensing board, state court, or similar agency. To provide services, all California professional corporations must have a currently effective certificate of registration issued by the governmental agency regulating their profession.

Professional corporations are also governed by the governmental agency that is responsible for overseeing the profession they engage in. For example, the agency may have limitations on the professional corporation’s choice of name and require the professional corporation’s bylaws to specify who can be officers and own shares of the professional corporation.

Shareholder Requirements
Professional corporations must comply with applicable rules in the California Business and Professions Code. These rules vary by profession, but they all require that only licensed persons can be shareholders of a professional corporation. Check for any other applicable rules for your profession in the California Business and Professions Code.

Unless an exception applies, a shareholder must be licensed in the profession that the professional corporation is engaged in. However, other licensed professionals may be officers, shareholders, directors, or professional employees in specified professions, as long as the total number of shares owned by these other licensed professionals is not more than 49 percent of the corporation’s total shares. To see a complete list of licensed individuals who may own shares in any type of professional corporation, see Ca. Corp. Code Section 13401.5.