Last updated: October 2026
If you hold a California professional licence and want to incorporate your practice, a professional corporation is not one option among several — it is the only one. California prohibits licensed professionals from rendering professional services through an LLC, which is why most people arrive at this page after an online formation service has already filed the wrong entity for them. Bay Legal, P.C. forms professional corporations for licensed practitioners across California and handles the licensing-board side, which is where most of the work actually is.
Definition: A professional corporation is a California corporation formed under the Moscone-Knox Act to render services that may lawfully be provided only by holders of a specified professional licence.
Why can’t a licensed professional use an LLC?
Because the statute says so. Corporations Code section 17701.04 permits an LLC to be formed for any lawful purpose except the rendering of professional services requiring a licence, certification, or registration. There is no workaround, no exception for solo practitioners, and no relevance to what other states permit — an out-of-state LLC cannot practise a licensed profession here either.
The consequences of getting it wrong are real rather than theoretical. The entity may be unable to enforce its contracts or collect from payers, the professional’s own liability protection is doubtful, and the licensing board can treat operating through an impermissible entity as a disciplinary matter. Unwinding an incorrectly formed LLC costs considerably more than forming the right entity would have.
The correct vehicle is a professional corporation under the Moscone-Knox Professional Corporation Act, Corporations Code section 13400 and following — ten sections that govern who may own the corporation, who may run it, what it may be called, and what happens when a shareholder loses their licence.
Who can own a California professional corporation?
Licensed persons only, as a general rule. Corporations Code section 13401 limits shareholders to those licensed to render the same professional service the corporation provides. A corporation may not take investment from someone outside the profession, however passive the money would be.
There is one significant exception, and it is the provision most professionals have never heard of. Section 13401.5 permits multidisciplinary ownership on a 51/49 framework: shareholders of the primary profession must hold a majority, and a defined list of allied professions may hold the balance. Which allied professions qualify differs by corporation type — the list for a medical corporation is not the list for a chiropractic corporation — and in each case the allied shareholders may not outnumber the primary-profession shareholders.
A third provision catches practices out later. Under section 13407, where a shareholder dies, loses their licence, or otherwise becomes disqualified, their shares must be transferred back to the corporation or to another qualified person within statutory time limits. A professional corporation with no buy-sell mechanism in its bylaws will discover this at the worst possible moment, and the deadline runs whether or not anyone has noticed it.
Which board regulates your profession?
This is the half of the work the Secretary of State filing does not cover, and it differs by profession. Some boards require the corporation itself to register before it may render services. Others do not, but impose naming rules that will get a filing rejected.
| Profession | Corporation type | Regulating board | Board registration of the corporation |
|---|---|---|---|
| Physicians and surgeons | Medical corporation | Medical Board of California | Not required; fictitious name permit needed to trade under a practice name |
| Registered nurses and nurse practitioners | Nursing corporation | Board of Registered Nursing | Not required; name must contain “nursing” or “registered nursing” |
| Physician assistants | Physician assistant corporation | Physician Assistant Board | Not required; naming rules apply |
| Chiropractors | Chiropractic corporation | Board of Chiropractic Examiners | Required — Certificate of Registration before rendering services |
| Attorneys | Law corporation | State Bar of California | Required — registration and security for claims |
| Dentists | Dental corporation | Dental Board of California | Not required; naming rules apply |
| Accountants | Accountancy corporation | California Board of Accountancy | Required — registration |
| Marriage and family therapists, clinical social workers, professional clinical counsellors | Corresponding professional corporation | Board of Behavioral Sciences | Not required; naming rules apply |
| Veterinarians | Veterinary corporation | Veterinary Medical Board | Naming and premises requirements apply |
Professions not listed are covered on the same basis, including optometrists, pharmacists, physical therapists, psychologists, architects, professional engineers, land surveyors, acupuncturists, naturopathic doctors, and speech-language pathologists. Each has a board, and each board has its own rules.
What are the naming rules, and why do they matter so much?
Because a name that does not comply gets the filing rejected, and because the rules are more restrictive than most practitioners expect.
Every professional corporation must carry a corporate designator such as “Professional Corporation,” “A Professional Corporation,” “P.C.” or “APC.” Beyond that, individual boards add requirements. A nursing corporation’s name must contain “nursing” or “registered nursing.” A law corporation’s name is governed by State Bar rules.
Chiropractic corporations are the strictest, and worth setting out because the position surprises people. Under Business and Professions Code section 1050 and following, a chiropractic corporation’s name must include a shareholder’s name together with the word “chiropractic” and a designator — and it may not use a fictitious name or DBA at all. The Board of Chiropractic Examiners issues no fictitious name permits. A medical corporation, by contrast, can obtain a fictitious name permit from the Medical Board and trade under a practice name, so chiropractors reasonably assume the same route is open to them. It is not.
How is a professional corporation formed?
- Confirm eligibility. Which corporation type your licence supports, whether any co-owners qualify under the 51/49 rule, and what your board requires.
- Clear the name. Against both Secretary of State availability and your board’s naming rules, before anything is filed.
- File Articles of Incorporation with the California Secretary of State, using the professional corporation form and stating the specific professional purpose.
- Adopt bylaws with the required restrictions. Including the share transfer provisions that satisfy section 13407 on disqualification, death, or loss of licence.
- Hold the organisational meeting and issue shares, with certificates carrying a restrictive legend referencing the Moscone-Knox ownership limits.
- Register with the licensing board where required, and obtain a fictitious name permit if you intend to practise under a trade name and your board issues them.
- File the Statement of Information within 90 days, then annually.
Steps one, four, and six are where online formation services routinely fall down. They file the Articles competently and leave the practitioner with a corporation that is not compliant with their board and has no mechanism for what happens when a shareholder leaves.
What does a professional corporation not protect you from?
Your own malpractice. This is the most important limitation and the one worth stating plainly rather than softening: incorporating does not shield a licensed professional from liability for their own professional negligence or ethical violations. It never has, in any state, and no entity structure changes it. Malpractice insurance is what addresses that exposure.
What the corporation does separate is business liability — commercial leases, vendor contracts, equipment financing, and many employment obligations. It also limits your exposure to a co-shareholder’s malpractice, which is a genuine benefit in a multi-practitioner practice and one of the main reasons group practices incorporate.
The protection is also conditional on the corporation being maintained as a real entity: separate bank accounts, adopted bylaws actually followed, minuted meetings, current filings, and no commingling. A professional corporation run as a personal chequing account with letterhead offers very little.
Who forms professional corporations at Bay Legal?
Managing attorney Jayson R. Elliott leads the firm’s business practice, covering entity selection, formation, governing documents, and board compliance for licensed professionals. Where a practice later faces a shareholder dispute or a board matter, the firm’s litigation group supports it under lead litigation attorney Evan Livingstone.
Bay Legal, P.C. serves licensed professionals statewide from offices in Palo Alto and Los Angeles, including practices across San Francisco and the wider Bay Area. Formation is quoted as a flat fee inclusive of state filing fees, and eligibility is confirmed before any quote is given.
Frequently Asked Questions
Can a licensed professional form an LLC in California?
No. Corporations Code section 17701.04 permits an LLC to be formed for any lawful purpose except rendering professional services requiring a licence. There is no exception for solo practitioners, and an out-of-state LLC cannot practise a licensed profession here either. The correct entity is a professional corporation under the Moscone-Knox Act.
Who can be a shareholder in a California professional corporation?
Generally only persons licensed in the same profession, under Corporations Code section 13401. Section 13401.5 permits limited multidisciplinary ownership on a 51/49 basis, with the primary profession holding the majority and a defined list of allied professions holding the balance. Which allied professions qualify differs by corporation type.
Does my professional corporation have to register with my licensing board?
It depends on the profession. Chiropractic corporations must obtain a Certificate of Registration from the Board of Chiropractic Examiners before rendering services. Law corporations must register with the State Bar. Medical, nursing, and physician assistant corporations do not require a separate certificate but must comply with naming rules.
What happens if a shareholder loses their licence or dies?
Corporations Code section 13407 requires the disqualified shareholder’s shares to be transferred back to the corporation or to another qualified person within statutory time limits. If the bylaws contain no mechanism for this, the practice discovers the problem at the worst moment. Build the buy-sell terms in at formation.
Can I practise under a trade name instead of my own?
Sometimes. A medical corporation can obtain a fictitious name permit from the Medical Board and trade under a practice name. A chiropractic corporation cannot use a fictitious name at all — the Board of Chiropractic Examiners issues no such permits, and the corporate name must include a shareholder’s name plus the word “chiropractic”.
Does incorporating protect me from a malpractice claim?
No. A professional corporation does not shield you from liability for your own professional negligence, and no entity structure does. It does separate business liabilities such as leases and vendor contracts from your personal assets, and it can limit your exposure to a co-shareholder’s malpractice. Insurance addresses the rest.
Related Questions
Can a professional corporation elect S corporation status?
Yes, subject to the same federal eligibility rules as any corporation. Many owner-operated practices do, taking a reasonable salary and distributions. It is a calculation to run with a CPA rather than a default.
Can two professions share one corporation?
Only within the 51/49 framework in section 13401.5, and only where the allied profession appears on the list for that corporation type. A medical corporation may have a chiropractor as a minority shareholder, but the medical corporation renders medical services, not chiropractic services.
What if I already formed an LLC by mistake?
It can be corrected, usually by forming the correct professional corporation and winding down or converting the LLC. Move promptly — the longer the practice operates through an impermissible entity, the more exposure accumulates on contracts, payer relationships, and the licence itself.
Do I need a professional corporation if I am the only practitioner?
Not necessarily, but if you want to incorporate at all, it is the only form available to you. The alternative is operating as a sole proprietor, which offers no separation between your practice liabilities and your personal assets.
Can a professional corporation own a medical practice with outside investors?
Not through share ownership — outside capital cannot hold shares in a professional corporation. Clinics seeking investment typically use a management services organisation alongside the professional corporation, a structure with its own regulatory constraints in California.
Talk to a California professional corporation attorney
Eligibility, ownership, naming, and board registration are all decided before anything is filed, and all four are cheaper to get right than to fix. To discuss forming a professional corporation, or correcting a structure that was filed incorrectly, call the office nearest you or email intake.
Bay Legal, P.C. — serving California statewide
Northern California office
667 Lytton Ave Ste 3, Palo Alto, CA 94301
(650) 668-8000
Southern California office
3211 Cahuenga Blvd W Ste 212, Los Angeles, CA 90068
(213) 668-8000
Intake: intake@baylegal.com
Fax: (650) 963-0041
Website: https://baylegal.com
This page is general information about California law and does not constitute legal advice or create an attorney-client relationship. Bay Legal, P.C. does not provide tax advice. For advice on your specific situation, contact a licensed California attorney and a qualified tax professional.