Can Psychologists Have An LLC In California?

An LLC or Limited Liability Company is a structure for a company. The debts or liabilities of the said company cannot be held personally liable owner(s).

LLC pool together the sole proprietorship characteristics and partnership features. When psychologists plan to launch a private practice, LLC is the most suitable structure to opt for.

However, it is not a corporation in a sense. That leaves a doubtful question, can psychologists have an LLC in California?

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This article will attempt to clear the notion and tell you what needs to be done.

LLC for Psychologists in California

Suppose you are a psychology major who has recently obtained a license from the California Board of Psychology.

This is the golden ticket to set up your practice professionally and be for the public. What should be your next step?

Unfortunately, you cannot form an LLC. It is completely prohibited for a psychologist. As a result, you will have to look for a different means to start your practice.

Psychology Corporation

There is still hope, but it is a little tricky. You must understand the terms first. Since you cannot register for LLC in California, you can go for Psychological Professional Corporation, which is taxed as an S-Corp.

Keep in mind that the professional corporation is registered with the California Secretary of State. It allows Psychological Professional services to be provided in general.

Govt. Agency

According to the California Corporation Code, there must be a government agency to correspond with the professional corporation.

The agency’s task is to manage the respective professions.

Be sure to follow the rules and regulations carefully to abide by the agency to avoid consequences (fines, etc.)

California Board of Psychology

Furthermore, you must register for the psychological corporation and acquire a certificate from the California Board of Psychology. Even a tiny error can lead to facing penalties.

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Advantages of Psychological Professional Corporation

You will be surprised at the beneficial points you incur by incorporating this structure. First, you should know that one can treat a professional corporation as a person.

Hence, it can be in a contract, sue, be sued, earn debts, possess property, etc.

  • So, only the professional corporation is responsible for said obligations.
  • It is also accountable for the losses and debts.
  • Creditors can claim compensation from the corporation or its assets; they will not be able to take your personal assets.

Other advantages include:

  • It works as a shield against personal liability claims. Anything unrelated to the professional services is considered safe from entitlements upon lawsuit/sue.
  • The corporation attains an income tax deduction due to self-employment.
  • Also, the employees need not pay tax for the benefits gained if paid for insurance premiums.
  • You can build corporate business credit.

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Eligibility to Set Up Professional Psychological Corporation

As mentioned above, the psychologist must hold a professional license first. What do you do when you have one or more owners?

  • Sole Owner
    You are the only owner of the professional corporation, so you will be the director, president, and treasurer.
  • Two Owners
    If it is you and another licensed colleague, both will be directors. But one has to decide to be the president while the other a vice president. You two should decide who is more suitable to be a treasurer as well.
  • Three Or More Owners
    When more than two professionals become the shareholders/owners of the corporation, an election must be held.

Limitation to Eligibility

In California State, the law limits the ability of who can be the shareholder or owners/directors in a professional psychological corporation. Each must have a license approved by the Medical Board of California.

The following list shows the licensed professionals who are qualified for a professional psychological corporation:

  • Surgeons and physicians
  • Doctors of pediatric medicine
  • Optometrists
  • Chiropractors
  • Acupuncturists
  • Registered nurses (RN)
  • Marriage and family therapists
  • Clinical social workers
  • Professional clinical counselors
  • Naturopathic
  • Midwives

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Shareholder Percentage

If you are a licensed psychologist, you must be the 51% shareholder of the professional psychological corporation you set up. Other party or parties, including one or more licensed professionals listed above, should not own more than 49%.

Or the sum of the rest of the shares should be 49% to keep the licensed psychologist (you), to remain at 51%. It is what the Californian law statutes.

Share Transfer

One can only transfer shares of a professional psychological corporation to one or more licensed professionals in psychology. The share can be transferred to the corporation shareholder or the corporation itself.

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We know that one question can lead to another where a web of data helps clear an indecisive goal. So can psychologists have an LLC in California? Once you get the precise answer, it unlocks several more prospects.

Our aim is to gather these pieces of information for you to take the initiative. We suggest discussing further with a business attorney to learn extensively. Good Luck!

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