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How to Form a Professional Corporation in California! (FAST SERVICE)

Are you a professional looking to start your corporation in California?

In California, professionals such as lawyers, doctors, and accountants cannot form LLCs or standard corporations to operate their practices. Instead, they must establish a Professional Corporation (PC), which complies with state regulations and may be taxed as an S-Corporation to maximize tax benefits.

Each profession has unique requirements when forming a Professional Corporation. If done incorrectly, the Secretary of State may reject it, risking you to lawsuits and fines. You may even face discipline from the professional regulatory board.

Here’s a step-by-step guide on what a California Professional Corporation is and how to form it. We can help you with our Done-For-You Professional Corporation Registration Service.

I’ve assisted hundreds of professionals just like you to start their professional corporation quickly and correctly.

What is a California Professional Corporation?

A California Professional Corporation (PC) is a specialized business entity created specifically for professionals like lawyers, doctors, accountants, and others who are required to have a state-issued license to practice. Unlike traditional corporations or LLCs, a PC allows licensed individuals to offer services under the legal protections of a corporation, while ensuring compliance with state regulations governing their profession.

Forming a Professional Corporation (PC) is essential in California, as many professionals are prohibited from using an LLC or standard corporation for their business.

According to the Moscone Knox Professional Corporation Act, you can only form California professional corporations for PROFESSIONAL services within a single profession requiring a license. For more info, click HERE.

A California Professional corporation can only lawfully render professional services through employees who are licensed to perform such services by the State.

The owner of the corporation usually requires a license for their profession. The State usually regulates them in some way.

The articles of incorporation of a professional service corporation must contain a specific statement that the corporation is a professional corporation within the Moscone Knox Professional Corporation Act.

No professional service corporation can render professional services in this California without a currently effective certificate of registration issued by the governmental agency regulating the profession in which such corporation is or proposes to be engaged.

Why Be a Professional Corporation Taxed as an S-Corporation?

Professional corporations default to C-Corporation status unless an S-Corporation election is made. This choice impacts your tax obligations, so it’s crucial to decide early on whether to file for S-Corp status based on your specific business and tax needs.

You SHOULD elect to have your corporation to be taxed as an S-Corporation. More on this below….

Requirements of a California Professional Corporation

Under the California Business and Professions Code, only individuals who hold valid professional licenses for their respective fields may serve as shareholders in a Professional Corporation.

This ensures that all ownership is directly tied to qualified professionals. If you’re forming a Professional Corporation, each shareholder must hold a license for the specific profession that the corporation is engaged in, aligning with state regulations to prevent unqualified ownership.

Name Requirements of Professional Corporations

Choosing a name for your Professional Corporation in California comes with specific rules that vary by profession. Your corporate name must meet the guidelines set by both the California Secretary of State and your professional licensing board. It should clearly indicate the type of professional services offered and often must include specific terms like “Professional Corporation” or “PC.”

Additionally, it’s important to ensure the name is distinguishable from any existing businesses registered with the Secretary of State.

It is essential to check the name availability with the California Secretary. It should be DISTINGUISHABLE from any other businesses on the California Secretary of State.

Each specific profession has its own name requirement, like particular words. Lastly, each domain has special suffix requirements; psychology will accept “P.C.” as the corporate ending.

Which Professions Need to Form a California Professional Corporation?

Unlike many other states, California does not allow professionals to form a registered limited liability company or professional limited liability company. In California, professionals must include either a professional services corporation or a registered limited liability partnership.

A professional service corporation qualified to render professional services in California must acquire all of the shares of a shareholder who is disqualified from rendering professional services in California or of a deceased shareholder licensed to render professional on their date of death services in this state.

Keep in mind that before forming a professional corporation, you should consider whether forming a professional service corporation (as opposed to other possible business entities such as LLC, LLP, etc.) is the best fit for your business.

A group of individuals interested in establishing a business together may have differing views on operating the company.

It may be worth it in the long run when you consider the necessity of protecting your personal and corporate assets and the potential profitability of your business.

To conclude, you should determine your particular business needs before forming a professional service corporation.

California Professional corporations formed outside California but intend to do business in the state must register with the California Secretary of State.

A Statement and Designation by Foreign Professional Corporation form must be completed and filed with the associated fees.

Foreign professional corporations must file a Certificate of Good Standing from the state where they were formed.

The following professions need to form a Professional Corporation in California:

• Lawyers
• Doctors
• Dentists
• Accountants
• Veterinarians
• Pharmacists
• Audiologists
• Speech Language Pathologists
• Psychologists
• Marriage and Family Therapists
• Clinical Social Workers
• Dental Hygienists
• Optometrists
• Nurses
• Licensed Physician Assistants
• Podiatrists
• Chiropractors
• Psychiatrists
• Acupuncturists

Eligible professionals must have a degree from any of the following graduate schools:

• Medical Board of California
• The State Bar of California
• The Dental Board of California
• California Board of Accountancy (CBA)
• The Veterinary Medical Board
• The California State Board of Pharmacy
• Speech-Language Pathology and Audiology Board
• Osteopathic Medical Board of California
• California Architects Board
• Court Reporters Board of California
• The Board of Behavioral Sciences (BBS)
• California Board of Registered Nursing
• California State Board of Optometry
• California Board of Psychology

Can a Professional Corporation Be an S Corporation?

es, a Professional Corporation can choose to be taxed as an S Corporation, and in most cases, this is a recommended strategy for maximizing tax benefits. By electing S Corporation status, the company can avoid the “double taxation” that C Corporations face, where both the corporation and the individual owners are taxed on income.

Instead, an S Corporation allows profits (and certain losses) to pass directly to the shareholders’ individual tax returns, thus avoiding corporate tax rates and potentially reducing your overall tax burden.

You may avoid self-employment tax, saving you around 15.3%. You SHOULD have a business lawyer to prepare and file your Form 2553 with the IRS to get taxed as an S Corporation.

Unless you make this tax election and properly file the paperwork, your professional service corporation will default taxed as a C Corporation.

Email me at sam@mollaeilaw.com for any questions about the S-Corp election process.

S Corporation Advantages for Professional Corporations

Enjoy the following:

• Avoid self-employment tax
• Avoid double taxation
• Being taxed as a pass-through entity like LLCs
• Pass losses from the business to offset your income tax liability

When in doubt, contact me at sam@mollaeilaw.com so I can walk you through it.

Can I Form an LLC For My Professional Business?

Most states allow professionals to open Professional LLC (PLLCs) to practice their professions, but California does NOT permit licensed professionals to form any LLC.

California Revised Uniform Limited Liability Company Act rules that companies offering professional services must be registered as Professional Corporations or Limited Liability Companies.

Can A Disqualified Person Form A Professional Corporation?

If you’re licensed but disqualified, you cannot create a professional service corporation or be its director, officer, or shareholder.

Below is the guide to starting your professional corporation.

Step 1: Define Your Corporation

You may ask first:

• What legal entity my professional corporation will be considered?
• What is the tax regime for my entity in California?

While most states allow professionals to open PLLCs, California is otherwise. California Revised Uniform Limited Liability Company Act requires your company to register as a Corporation for a professional service. Source

By default, your corporation will be taxed as a C-Corp. Alternatively, you may opt for a tax election so that it will be taxed as an S-Corp instead.

Your Professional Service Corporation can and should be an S-Corp. by filing Form 2553 with the IRS through a business lawyer. Your company needs an identity.

You need a name, an address, a strategic location, and a clear business goal.

To legally form Your Professional Corporation in California, the first step is to file Articles of Incorporation with the Secretary of State. This document must include the corporation’s name, address, purpose, and the names of shareholders and directors, along with other critical details.

This document must include key information like your corporation’s name, physical business address, number of authorized shares, and the primary purpose of your corporation (which should reference the type of professional services you provide).

Additionally, ensure you designate an agent for service of process, who will receive any legal documents on behalf of your corporation.

The requirements for each category depend on the professional service your corporation specializes in, and failure to comply may result in fines or rejection.

• The corporation’s name must be distinguishable from any other business. Check it here.
• Each profession will have its own name requirement.
• It should have special suffix requirements as the corporate ending.

Follow the instructions provided with the form for completing and filing your articles of incorporation.

Bonus Material: Check our easy Done-For-You Professional Corporation Registration service. Email me at sam@mollaeilaw.com or call us here.

Step 2: Appoint Directors

Let’s talk about who’s in charge. Appoint the directors of your corporation.

A California Professional Corporation is required to appoint at least three directors, unless there are fewer than three shareholders in the company. Each director will be responsible for overseeing the corporation’s operations and governance.

This structure ensures that the corporation meets its legal obligations under California Corporations Code section 13403. Be sure to document this decision in your corporate minutes, as these are required for proper corporate governance.

A professional service corporation is a corporation for business owners who work in specialized fields. In California, professional corporations are established under the Moscone-Knox Professional Corporation Act, California Corporations Code section 13400-13410.

Step 3: Draft Corporate Bylaws

Create detailed corporate bylaws that establish the rules and guidelines for your Professional Corporation’s day-to-day operations.

Corporate bylaws  are essential for outlining how the corporation will be managed.

These bylaws are critical for ensuring the smooth operation of your corporation and must comply with state law. Having thorough and clear bylaws will also protect your corporation in the event of a legal dispute or audit.

Professional Corporations should use specific language in their bylaws and abide by certain criteria and standards. They need a business lawyer’s advice in drafting laws.

Step 4: Get Your EIN

Back to taxes! Much like a Social Security number, an EIN (Employer Identification Number), or Tax ID, is a reference number that’s unique to your company.
You need an EIN when:

• Hiring employees;
• Filing federal taxes;
• Applying for local permits/licenses;
• Applying for loans/federal financial assistance programs.

You can do this online, by fax, or post, provided you have a Social Security Number (SSN). Learn more on the IRS website here.

Step 5: File a Statement of Information

Every professional corporation must file a Statement of Information with the California Secretary of State within 90 days of formation.

This document includes updated details about the corporation’s officers, directors, and agent of process, and it must be renewed annually.

Be careful with the deadlines and remember to resubmit it yearly. It must be filed within the first 90 days of registration. Then, file it annually if there are changes. Use this link to register online.

Step 6: File Form 2553 for S-Corporation Tax Election

To elect S-Corporation status for your professional corporation, file IRS Form 2553 within 75 days of incorporation. This allows for pass-through taxation, avoiding the double taxation that applies to C-Corporations.

Let an attorney help you with this. Check our Done-For-You Professional Corporation Registration service. Email me at sam@mollaeilaw.com or call me today here.

Bonus Material: You can read more about this topic here.

Step 7: Pay Your Taxes and Fees to the California Franchise Board

All professional corporations in California are required to pay a minimum annual tax of $800 to the California Franchise Tax Board (FTB), starting in the first year of formation. Your first payment is due by the 15th day of the fourth month after filing, and subsequent payments are due each April 15th. Failing to make this payment on time can result in penalties, so it’s crucial to stay on top of your corporation’s tax obligations. Consulting a tax professional can help ensure you meet all requirements and avoid unnecessary fines.

Your first Franchise Tax payment is due by the 15th day of the 4th month after filing. Then, every year after your first payment, it is due by April 15th, and failure to pay before the deadline can have serious consequences.

Hire an accountant to help you out. You can contact the California Franchise Tax Board (FTB) for any taxation-related questions.

Bonus Material: Consult the FTB website for more information.

Step 8: Register With the EDD

Do you plan on hiring any employees? Source

Register as an employer with the California Employment Development Department (EDD). You have to pay payroll tax even if your corporation only has a president without other employees and is paid over $100.

Register your EDD payroll tax account number here.

9. Apply for Local Business Registration and Licenses

Get your corporation registered with the city or county where you’re operating business. Get all the federal and local permits to work legally. The requirements can vary, depending on your business location and services.

Bonus Material: Email me at sam@mollaeilaw.com or contact us here to ensure you meet the requirements.

10. MORE LEGAL PAPERWORK! (or maybe not…)

The process of forming a professional corporation can involve numerous forms and deadlines.

Rather than navigating these complexities on your own, consider working with a legal professional who can guide you through each step efficiently.

Take the complicated, time-consuming steps detailed in this article to form your California Professional Corporation yourself properly, or you can hire me to do it for you. So, sit back, relax, focus on your passion and let us take care of everything for you.

To be successful, you need:

1. Residency in California. This guide aims at professionals who want to start a corporation in this state. Otherwise, you may try in Wyoming.
2. Be a licensed professional.
3. Openness to collaborate. Collaboration is key.

CA Corporations Code Section 13401.5 contains the list of licensed professionals who may be shareholders of certain specified Professional corporations, as long as such people’s total share in the professional service corporation does NOT exceed 49% of the total number of shares of the professional service corporation.

If you meet the above criteria and are serious about starting your corporation in California, contact us here to start! We have helped many professionals with our easy Done-For-You Professional Corporation Registration service. Email me at sam@mollaeilaw.com or call me today here.

Let me help you start your professional corporation in California as quickly and efficiently as possible. Email me at sam@mollaeilaw.com.

Law Corporation for Lawyers and Attorneys

If you’re a lawyer/attorney in California, you SHOULD form a Professional Law Corporation and follow the rules of the California State Bar and the California Rules of Professional Conduct.

The corporation’s name must include a corporate ending such as: “A Professional Corporation,” “P.C.,” “Inc.,” etc. The professional law corporation’s name cannot include “APLC,” “PLC,” or “LLC” as its corporate endings.

The corporate name in State Bar records (and on file with the Secretary of State) is the only name it may practice law. The professional corporation must also state within its Articles of Incorporation that its purpose is “law.”

Learn more about Law Professional Corporation here.

Dental Corporation for Dentists

If you’re a dentist, you SHOULD form a Dentistry Professional Corporation. Be a licensed Dental Board of California dentist to open a professional dental corporation.

The corporation’s name must contain the name or the last name of one or more of the present, prospective, or former shareholders and must include the words “dental corporation,” “Professional Corporation,” “Inc.,” etc. If you’re opening your corporation under a fictitious name, file a fictitious business name statement in the county of operation and the California Dental Board.

Learn more about a Dental Professional Corporation here.

Medical Corporation for Doctors and Physicians

Doctors/physicians SHOULD form a Professional Medical Corporation. Be licensed by the Medical Board of California to open a medical corporation.

Here, at least 51% of the shares must be owned by a licensed physician/surgeon. Under the Business and Professions Code, physicians can only partner with other physicians, osteopaths, or podiatrists. Get the Board’s pre-approval for a fictitious business name other than your name.

Learn more here about Medical Corporation.

Accounting Corporation for Accountants

Accountants/CPAs SHOULD form an accountancy corporation. Be licensed by the California Board of Accountancy (CBA) to create a corporation. Have at least one shareholder with an active CPA or PA license.

Learn more about Accountant Professional Corporation here.

Veterinarians Corporation

Veterinarians SHOULD form a veterinary corporation.

Only licensed veterinarians can be shareholders of this corporation. Other licensed professionals can become officers, directors, or professional employees if the shares they own are not over 49% of all the corporate shares. The corporation’s name may include the word veterinary and either “Corporation” “Corp.” “Incorporated” or “Inc.”

Learn more about Veterinary Corporation here.

Pharmacy Corporation for Pharmacists

Pharmacists MUST form a pharmacy corporation. The name of the corporation and any word containing “pharmacist,” “pharmacy,” or “pharmaceutical” and wording or abbreviations like “corp.” or “Inc.”

Every shareholder, director, and officer of a pharmacy corporation, except an assistant secretary and an assistant treasurer, must be licensed as defined in Section 13401 of the Corporations Code.

Learn more about pharmacy corporations here.

Audiology Corporation for Audiologists

Audiologists licensed by the Audiology Board MUST form an Audiology Corporation.

The corporation’s name must include “audiology,” “audiologist,” “audiological,l” “hearing clinic,” “hearing clinician,” “hearing therapist,” or any similar name.

Learn more about Audiology Corporation here.

Chiropractic Corporation for Chiropractors

Chiropractors MUST form a chiropractic corporation.

Professional chiropractic corporations may NOT use fictitious names. The corporate name must include “chiropractic,” the name or last name of one or more present, prospective, or former shareholders, and the word “corporation” or other word denoting corporate existence.

You must also submit a Certificate of Registration to the California Board of Chiropractic Examiners.

Learn more about Chiropractic Corporations here.

Optometric Corporation for Optometrists

Optometrists MUST form an optometric corporation. The corporation’s name must have the owner’s name.

A licensed optometrist must own at least 51% of the corporate shares. The other 49% can be owned by physicians and surgeons, podiatrists, psychologists, registered nurses, marriage and family therapists, clinical social workers, physician assistants, chiropractors, acupuncturists, naturopathic doctors, or any other licensed person.

Learn more about Optometric Corporation here.

Podiatry Corporation for Podiatrists

Podiatrists registered with the California Secretary of State, the Medical Board of California, and The American Board of Pediatrics MUST form a Podiatry Corporation.

The corporation’s name must contain the name or the last name of one or more present, prospective, or former shareholders. It must include a corporate ending such as: “Podiatry Corporation,” “Podiatry Corp.,” “Podiatrist,” “Doctor of Podiatric Medicine,” “D.P.M,” “A Professional Corporation,” “Professional Corporation,” “APC,” “A.P.C.” “PC,” “Prof. Corp.,” “Inc.,” “Incorporated,” “Corporation,” “A California Professional Corporation” or words or abbreviations denoting its corporate existence.

Learn more about Podiatry Corporation here.

Physician Assistant Corporation for PA’s

Physician assistants MUST form a Physician Assistant Corporation.

Incorporating a Professional Licensed Physician Assistants Corporation will limit your liability against creditors and lawsuits, minimize the self-employment taxes of the shareholders, allow you to build corporate business credit, and much more.

The corporation’s name must contain the words “physician assistant.” It must include a corporate ending such as: “A Professional Corporation,” “Professional Corporation,” “APC,” “A.P.C.” “PC,” “P.C.,” “Prof. Corp.,” “Inc.,” “Incorporated,” “Corporation,” “A California Professional Corporation” or words or abbreviations denoting its corporate existence.

Learn more about Physician Assistant Corporation here.

Nursing Corporation for Nurses

Nurses MUST form a nursing corporation.

The corporate name must include “nursing” or “registered nursing”. It must.”ncludincludee a word or abbreviation showing its corporate existence like “Corporation” “Corp.” “Incorporated” or “Inc.” Fictitious name can be used so long as the words “nursing” or “registered to nurse” is part of the name.

Learn more about Nursing Corporation here.

Speech-Language Pathologist Corporation

Speech-Language Pathology Board of California licensed Speech-language pathologists MUST form a Speech-Language Pathology Corporation.

The corporate name must include “speech pathologist” “speech pathology,” “speech therapy,” “speech correction,” “speech corrections,” “speech therapist,” “speech clinic,” “speech clinician,” “language pathologist” “language pathology” “logopedics” “logopedist” “communicology” “communicology” “aphasiologist” “voice therapy” “voice therapist” “voice pathology” “voice pathologist” “language therapist” “podiatrist”, or any other similar titles.

Learn more about Speech-Language Pathology Corporation here.

Engineer Corporation for Engineers

Engineers are highly recommended to create a professional engineering corporation.

While engineering practices are allowed to be LLCs in limited situations, creating a professional corporation is more beneficial. There are many benefits to incorporation, like limiting personal liability, obtaining business credit without a personal guarantee, and passing profits and losses to shareholders to avoid double taxation.

If the corporate name contains a unique name, that person must be a licensed engineer, land surveyor, architect, or registered geologist.

Also, professional engineering corporations are allowed to use a Doing Business As (DBA) or a fictitious name.

Architectural Corporation for Architects

Architects may create a professional architectural corporation.

The corporation’s name must contain the name or the last name of one or more of the present, prospective, or former shareholders, or of someone associated with a predecessor person, partnership, or other organization and whose name or names under the predecessor organization.

Its name must include either the words “architectural corporation” or “architect” or “architects” and wording showing corporate existence such as “Corporation” “Corp.” “Incorporated” or “Inc.”

California Professional Corporation for Physical Therapists

Physical therapists MUST form a professional physical therapy corporation.

Each shareholder, director, and officer of a physical therapy corporation, except an assistant secretary and an assistant treasurer (must be a licensed person defined in Section 13401 of the Corporations Code).

The corporation’s name must contain the words “physical therapy” or “physical therapist” and any wording or abbreviations showing corporate existence like “Corporation” “Corp.” “Incorporated” or “Inc.”

Marriage and Family Therapist Corporation

Marriage or family therapists MUST open a marriage and family therapy corporation.

The corporate name must contain one or more of the words “marriage,” “family, have,” or “child.” It must include one or more of the words “counseling,” “counselor” “therapy,” or “therapist.”

Learn more about Marriage and Family Therapy Corporation here.

California Clinical Social Worker Corporation

Licensed clinical social workers MUST open a clinical social worker corporation.

The name of the corporation must include the words “licensed clinical social worker” and a word or abbreviation showing its corporate existence like “Corp.” or “Inc.” Using a fictitious name here isn’t allowed.

Learn more about clinical social worker corporations here.

Psychology Corporation for Psychologists

Psychologists MUST open a Psychology Corporation. The corporate name must include “psychology,” “psychological,” “psychologist,” etc.

It must include a word or abbreviation showing its corporate existence like “Corporation” “Corp.” “Incorporated” or “Inc.”

Learn more about Psychology Corporation here.

WHAT TO DO NEXT

If you’re a lawyer, doctor, dentist, accountant, pharmacist, veterinarian, architect, optometrist, nurse, speech-language pathologist, audiologist, dental hygienist, family therapist, psychiatrist, or psychologist, you probably don’t have the time to do all of the complicated above steps yourself to start your business.

While the ten steps above give a basic overview of what is required to form the Professional Corporation, several complicated nuances may affect the formation of your Professional Corporation.

Most problems that corporations run into in the long run are caused by mistakes in the formation stage of the professional corporation.

One of the best things you can do is work with a business lawyer who can help you get started with your Professional Corporation without dealing with the legal headache of understanding the intricacies of proadequatelyling your professional corporation.

If you’re interested in starting your Professional Corporation, email me at sam@mollaeilaw.com