Key Takeaways

• The Moscone-Knox Professional Corporation Act (Cal. Corp. Code §§ 13400–13410) is the California statute that lets licensed professionals — doctors, nurses, chiropractors, psychologists, dentists, and others — practice through a corporation.
• The Act sets a 51/49 ownership rule under Corp. Code § 13401.5: at least 51% of shares must be held by licensees in the corporation’s primary profession; up to 49% can be held by listed allied licensed professionals.
• No lay (unlicensed) owners can hold shares in a professional corporation, with one narrow exception for assistant secretary or assistant treasurer roles under Corp. Code § 13403.
• LLCs are off the table for nearly all California licensed health professions under Corp. Code § 17701.04. The “PLLC” used in other states is not available in California.
• Violating Moscone-Knox is treated as unprofessional conduct by the relevant licensing board — separate from any consequences under the Corporate Practice of Medicine doctrine, which addresses who can practice medicine, not who can own the corporate vehicle.

What Is the Moscone-Knox Act?

The Moscone-Knox Professional Corporation Act is California’s framework for how licensed professionals can practice through a corporation. Enacted in 1968 and codified at California Corporations Code §§ 13400–13410, the Act exists because California — like most states — won’t let a doctor, nurse, lawyer, or chiropractor just form a regular business corporation to deliver licensed services. The legislature carved out a specific entity type, the “professional corporation,” and laid down the rules for who can own it, who can manage it, and what happens when ownership eligibility changes.

Two ideas drive Moscone-Knox:

1. The corporate vehicle should track the licensing scheme. If only licensed nurses can practice nursing, only licensed nurses (and a defined set of allied professionals) should own the corporation that delivers nursing services. Otherwise the licensing scheme becomes meaningless — anyone could open a clinic and hire licensees as employees.
2. Lay control over clinical decisions is dangerous and is bad policy. The Act keeps clinical professionals in control of clinical entities. This idea is closely related to (but legally distinct from) the Corporate Practice of Medicine doctrine, which we’ll come back to below.

[suggested internal link: practice area page on Healthcare Entity Formation]

Quick CTA: If you’re forming a California professional corporation — or you’re already operating one and you’ve started wondering whether your ownership structure is compliant — the Moscone-Knox rules are exacting and the consequences of getting them wrong can include licensing-board discipline. Bay Legal, PC handles professional corporation formations, restructurings, and ownership disputes across California. Call (650) 668-8000 or schedule a consultation at baylegal.com/contact.

What the Act Actually Regulates

Moscone-Knox is short — ten sections — and does five practical things:

• Defines “professional corporation” (§ 13401(b)) as a corporation engaged in rendering professional services in a single profession (with the multidisciplinary exception in § 13401.5).
• Restricts ownership (§ 13401(d)) to “licensed persons” — those licensed under the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act to render the same professional service.
• Permits multidisciplinary ownership (§ 13401.5) on the 51/49 framework — primary-profession majority, allied-profession minority.
• Requires share transfer on disqualification (§ 13407) — if a shareholder loses their license, dies, or otherwise becomes disqualified, the shares have to be transferred back to the corporation or to another qualified person within statutory deadlines.
• Exempts most healthcare PCs from a separate board “registration” (§ 13401) — but specific licensing boards (notably the Board of Chiropractic Examiners) still require their own certificates by separate statute.

A professional corporation is formed by filing Articles of Incorporation of a Professional Corporation (Form ARTS-PC) with the California Secretary of State. The Articles must include a specific statement that the corporation is a professional corporation under the Act (Corp. Code § 13404).

Why California Has No PLLCs

Some states (Texas, Florida, New York, many others) allow licensed professionals to use a “professional limited liability company” or PLLC. California doesn’t.

Cal. Corp. Code § 17701.04(b) and (e) bars LLCs from rendering professional services unless a California licensing statute expressly authorizes it. There are very narrow exceptions — for example, some title-insurance and surveying contexts — but for the major healthcare professions (medicine, nursing, chiropractic, dentistry, psychology, optometry, podiatry, and so on), there is no authorization. A health professional in California either practices as a sole proprietor or organizes a professional corporation. There is no third entity option for licensed practice.

This trips up clinicians who relocate to California from PLLC-friendly states. The “LLC for liability protection” assumption doesn’t survive the move.

The 51/49 Ownership Rule (Corp. Code § 13401.5)

Corp. Code § 13401.5 is the core operational rule. Its general structure:

“…the following licensed persons may be shareholders, officers, directors, or professional employees of the professional corporations designated in this section so long as the sum of all shares owned by those licensed persons does not exceed 49 percent of the total number of shares of the professional corporation so designated herein, and so long as the number of those licensed persons owning shares in the professional corporation so designated herein does not exceed the number of persons licensed by the governmental agency regulating the designated professional corporation.”

Translated to plain language: a California professional corporation can be multidisciplinary, but two limits apply.

• The 49% cap. Allied minority owners (combined) can’t hold more than 49% of the shares.
• The headcount cap. The number of allied owners can’t exceed the number of owners licensed in the corporation’s primary profession.

So a medical corporation with two physician owners can have up to two allied owners. A nursing corporation with one RN owner can have only one allied owner.

Who Can Co-Own What: A Cross-Profession Map

Section 13401.5 enumerates 19 different corporation types from subsection (a) through (s) and lists the allied professions permitted in each. The pairings get specific. Here are the most common configurations the writing team’s readers will encounter:

The cross-profession allied-owner table above is illustrative only; § 13401.5 has been amended multiple times and the precise allied-profession list for each subsection should be confirmed against the current text of the statute before relying on it for entity formation. Counsel can confirm the current text for any specific entity type.

A couple of patterns worth highlighting:

• Physicians can be minority shareholders in almost every other healthcare PC — they appear on the allied list for nursing, psychology, optometry, chiropractic, acupuncture, and most others. (They are the majority in medical corporations.)
• Some pairings don’t work in both directions. A physician assistant can hold a minority stake in a medical corporation (§ 13401.5(a)(7)). But the list of allied owners in a PA corporation (§ 13401.5(i)) does not include LMFTs or psychologists. The legislature has thought through each profession’s professional-judgment ecosystem and built different bridges accordingly.
• Dental corporations work differently. The dental corporation list in § 13401.5(n) names dental assistants, RDAs, RDHs, and their extended-function variants — reflecting the dental-team workflow — rather than the typical mix of allied professions.

Hard Prohibitions

Three rules apply to virtually every healthcare professional corporation:

1. No lay ownership. An unlicensed person — a non-licensed spouse, an MBA, an investor, a clinic manager — cannot hold any shares.
2. One narrow officer exception. Under Corp. Code § 13403, an unlicensed person can serve as assistant secretary or assistant treasurer Not as a primary officer. Not as a director. Not as a shareholder.
3. The corporation can render only one professional service. A multidisciplinary corporation under § 13401.5 still operates within one primary professional service category. A medical corporation can have a chiropractor minority shareholder, but the medical corporation renders medical services — not chiropractic services. The chiropractor would render chiropractic services through a separate chiropractic corporation, or through individual licensure with the chiropractic services delivered separately.

[suggested internal link: practice area page on Healthcare MSO and Management Structures — for clinics that want to bring in lay capital, the MSO/PC structure is the standard workaround]

How Moscone-Knox Interacts With the Corporate Practice of Medicine Doctrine

These two frameworks get conflated, and they shouldn’t be. They’re related but distinct.

• Moscone-Knox is about who can own the corporate vehicle. It governs entity formation, share ownership, officer composition, and share-transfer rules.
• The Corporate Practice of Medicine doctrine is about who can practice medicine. Rooted in B&P Code § 2400 and California Supreme Court cases like People ex rel. State Board of Medical Examiners v. Pacific Health Corp., 12 Cal. 2d 156 (1938), CPOM bars non-physicians and unlicensed entities from practicing medicine, employing physicians, or controlling clinical decisions.

The two frameworks overlap in healthcare contexts because both reach the question “who can own a medical practice.” But they answer slightly different questions:

• Moscone-Knox says what kind of entity the practice must be (a § 13401.5(a) medical corporation, owned according to the 51/49 rule).
• CPOM says who actually has clinical authority inside that entity (physicians, period — not the MSO, not the lay investor, not even a non-physician licensee).

A compliant California medical practice has to satisfy both. The 2025 California legislation — SB 351 (Cortese, Ch. 409, Stats. 2025) — codified CPOM principles further by restricting private equity and hedge-fund involvement in physician and dental practices, effective January 1, 2026. AB 1415 (Bonta, Ch. 641, Stats. 2025) added OHCA pre-transaction notice obligations for MSOs and other “noticing entities” in healthcare transactions, also effective January 1, 2026. Neither bill changed the Moscone-Knox ownership framework, but both bills tightened the CPOM rules that operate alongside it.

[suggested internal link: practice area page on Corporate Practice of Medicine]

What Happens If Ownership Rules Are Violated

The consequences of forming or operating a professional corporation outside the Moscone-Knox framework can hit on multiple fronts simultaneously.

1. Unprofessional conduct under the licensing board. Each profession’s licensing statute treats Moscone-Knox violations as unprofessional conduct — see, for example, B&P § 2776 for nursing or the BCE’s authority over chiropractic corporations under B&P §§ 1051–1058. The penalty range is the full licensing-board enforcement toolkit: citation, fine, probation, suspension, revocation.
2. Secretary of State rejection or dissolution. Articles of Incorporation that don’t comply with the Act can be rejected at filing. Existing entities that drift out of compliance — by adding a non-permitted shareholder, for example — can face dissolution proceedings.
3. Loss of the corporate liability shield. Courts can pierce the veil of an entity that is statutorily unauthorized to render its services. Contracts with patients or payors may be voidable.
4. Mandatory share transfer (Corp. Code § 13407). If a shareholder loses their license, dies, or otherwise becomes disqualified, the shares have to be transferred back to the corporation or to another qualified person. In general terms, § 13407 sets the deadlines at six months for death and 90 days for disqualification, though counsel should confirm the specific statutory deadlines (and any profession-specific provisions such as B&P § 2781 for nursing or B&P § 1625.3 for dental) for the situation at hand.
5. Insurance coverage problems. Many professional liability carriers will not defend claims arising out of services rendered through a non-compliant entity.
6. Tax problems — particularly for entities that elected S-Corp status under defective formation.

The good news is that most Moscone-Knox problems are fixable. The standard remedies are share repurchase, share transfer, entity amendment, or — in the most serious cases — dissolution and re-formation as a compliant entity.

Mid-content CTA: If you’re not sure whether your existing professional corporation is fully compliant — or you’re thinking about bringing in a new shareholder, opening a second location, or selling the practice — a structural review is straightforward to handle before a problem becomes a board investigation. Bay Legal, PC reviews California professional corporation structures and handles restructurings across the state. Call (650) 668-8000 or schedule a consultation at baylegal.com/contact.

Professional Corporations Outside Healthcare

Moscone-Knox applies to most California healthcare professions, but it isn’t the only professional-corporation statute in California. Three big examples:

• Law corporations are formed under Corp. Code § 13401(b) plus the State Bar Act (B&P §§ 6160–6172). The State Bar issues a separate certificate of registration; ownership and officer rules are specific to law corporations.
• Accountancy corporations are formed under Corp. Code § 13401(b) plus the Accountancy Act. The California Board of Accountancy issues a certificate of registration.
• Architectural corporations are formed under Corp. Code § 13401(b) plus the Architects Practice Act (B&P §§ 5500.1 et seq.). The California Architects Board administers the registration.

The Moscone-Knox 51/49 ownership rule isn’t directly imported into these regimes. Each has its own ownership and registration framework. For healthcare professional corporations, though, Moscone-Knox is the controlling statute.

Recent Developments Worth Tracking

• SB 351 (Cortese, Ch. 409, Stats. 2025) — codifies CPOM principles in the context of physician and dental practices, restricting clinical control by private equity groups and hedge funds; voids certain non-compete and non-disparagement clauses. Effective January 1, 2026.
• AB 1415 (Bonta, Ch. 641, Stats. 2025) — expands OHCA pre-transaction notice obligations to MSOs, PE groups, hedge funds, and certain other “noticing entities.” Effective January 1, 2026, with implementing regulations being developed by HCAI; confirm current status at hcai.ca.gov before relying on specific procedural steps.
• AB 890 (Wood, Ch. 265, Stats. 2020) and SB 1451 (Ashby, Ch. 481, Stats. 2024) — created and refined the 103 NP and 104 NP independent-practice categories. Doesn’t change Moscone-Knox ownership rules but affects what NP-owned PCs can deliver.

None of these bills changed the core 51/49 ownership framework. They tightened the related CPOM and oversight rules that healthcare professional corporations have to operate alongside.

Talk to a California Healthcare Business Attorney

The Moscone-Knox Professional Corporation Act is a foundational statute for every California healthcare entrepreneur — but it’s not a self-executing one. Getting the ownership structure, share-transfer mechanics, multidisciplinary configurations, and licensing-board registrations right requires walking through each profession-specific rule and matching it to the specific business you’re trying to build.

If you’re forming, restructuring, or selling a California professional corporation, attorneys at Bay Legal, PC handle Moscone-Knox compliance, multidisciplinary ownership structuring, share-transfer disputes, and CPOM-related questions across the state. Call (650) 668-8000 or schedule a consultation at baylegal.com/contact to talk through your situation.

[suggested internal link: contact / schedule a consultation page] — anchor in closing CTA

Frequently Asked Questions

What is the Moscone-Knox Act in California?

The Moscone-Knox Professional Corporation Act (Cal. Corp. Code §§ 13400–13410), enacted in 1968, is the California statute that authorizes licensed professionals to practice through a professional corporation and sets the ownership, governance, and share-transfer rules for those corporations.

What is the 51/49 ownership rule for California professional corporations?

Under Cal. Corp. Code § 13401.5, at least 51% of shares in a California professional corporation must be owned by licensees in the corporation’s primary profession. Up to 49% of shares can be owned by listed allied licensed professionals, with the number of allied owners capped at the number of primary-profession owners.

Can a non-licensed person own part of a California professional corporation?

No. A lay (non-licensed) person cannot hold shares in a California professional corporation. The only narrow exception is Corp. Code § 13403, which permits an unlicensed person to serve as assistant secretary or assistant treasurer — not as a primary officer, director, or shareholder.

Can a California licensed professional use an LLC instead of a professional corporation?

For the major healthcare professions — medicine, nursing, chiropractic, dentistry, psychology, optometry, podiatry, and others — no. Cal. Corp. Code § 17701.04 prohibits LLCs from rendering professional services unless a licensing statute expressly authorizes it, and no California licensing statute authorizes LLCs for these professions. California has no PLLC equivalent.

What happens if my professional corporation violates the Moscone-Knox Act?

Consequences can include unprofessional conduct discipline from the relevant licensing board, Secretary of State rejection or dissolution, loss of the corporate liability shield, mandatory share-transfer obligations under Corp. Code § 13407, insurance coverage problems, and tax issues. Most violations are fixable through entity amendments or restructuring if caught early.

This article provides general information about California law and is not legal, tax, or financial advice. Reading this article, contacting Bay Legal, PC, or sending information through baylegal.com does not create an attorney-client relationship. The information here focuses on California law and may not reflect the law of other jurisdictions. Statutes, regulations, agency guidance, and case law change; this article reflects the authors’ understanding as of the date of publication and may not reflect later developments. For advice about your specific situation, consult a licensed California attorney.