LLC, which states Limited Liability Company, is the first choice for many.
It allows you to limit your personal liability, go through fewer administrative hassles, avoid double taxation and offers many other benefits.
Long story short: a doctor can not operate as an LLC in the state of California. As a professional working in CA, you do not have many options when forming a business structure.
But what can you actually form as a doctor in California? To know that, you must stick with this discussion until the end.
What Is The Legal Structure of Medical Practice in CA?
The State of California does not allow physicians to form LLCs. This structure is only for nonprofessional people.
If you are a licensed medical professional looking to start a business with your colleagues in the field, you need to form a professional medical corporation. But that does not mean that you have to go through too many restrictions.
Medical doctors have the ability to become the shareholders of a professional corporation.
Generally, the corporation’s shareholders can be taxed as an S corporation or C Corporation. But in most cases, the shareholders will prefer to be taxed like an S Corp.
What Is The Difference Between A C Corp And S Corp?
All of the corporations will start their existence by being taxed under subchapter C. That is where the name C Corp comes from. That said, the biggest drawback for this corporation, according to many, is the issue of double taxation.
First, when the corp earns money, it will need to pay the taxes on the profit. Secondly, when the corporation shares its profit with the shareholders, the shareholders will need to pay a second wave of tax.
This second level of tax is something that keeps most new organizations away from C Corp.
Likewise, most medical doctors will hate the notion of paying tax two times, regardless of how much each is. Instead, the medical professionals will prefer to make their corporations tax under the subchapter “S” of the Internal Revenue Code.
Well, that is why the name is S Corporation.
One of the major advantages of election S is that the corporation does not require to pay any federal taxes. Instead, all of the income of the corporation after the expenses will be distributed.
And It will be passed through the individual shareholders. Thereby, it will result in one level of taxation.
How Do You Start A Medical Professional Corporation in CA?
The thing is, a medical corp is basically a type of professional corp. In general, when it comes to forming a medical corp, it is pretty much the same as forming any other corporation.
However, there are some additional requirements that you need to place upon the corporation.
These additional requirements come from the medical board and state law. You will also need to work with Articles of Incorporation and file them with the Secretary of State of California.
There will also be the need to pay applicable fees when filing the articles.
The stock certifications and corporate bylaws will require a specific draft. They also need to comply with the rules and regulations of the medical board and the state law.
If you do not carry out all of these properly, your organization will be vulnerable to lawsuits and fines. Now, that is something that you would not want, right?
So, can a doctor have an LLC in CA? The short answer is no. A doctor can not form an LLC in California. Instead, a doctor will need to resort to Professional Corporation.
And generally, the S Corp is the go-to choice for most people in the medical profession.
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