If you’re a physician, you’re likely already aware that forming a medical professional corporation in California is one of the most regulated—and risky—paths to incorporation.
Why? Because the state’s Corporate Practice of Medicine (CPOM) doctrine imposes strict limitations on who can own, manage, and profit from a medical practice.
This guide explains California professional medical corporation (medical corporation) requirements, including CPOM, ownership limits, naming rules, and the steps to form and maintain compliance — with experienced, medical corporation attorney support available if you want it done correctly, and a compliant practice from day one.
What Is a Medical Professional Corporation in California?
A medical professional corporation is a physician-owned professional entity that allows licensed doctors to legally operate a medical practice under a corporate setup. It is designed for physician-led medical practices built around professional licensing requirements—not just general business law.
That distinction matters because medical professional corporations are:
- Structured to preserve physician control
- Designed to comply with unique restrictions that do not apply to standard corporations
Like other corporate structures that provide professional services in California, a professional medical corporation is governed by the Moscone-Knox Professional Corporation Act and is further regulated by the Medical Board of California.
Why Physicians Cannot Use Standard LLCs in California
Medical practices are not treated the same way as ordinary businesses in California because they involve licensed physicians providing professional services to the public.
The law is also clear in prohibiting medical practices from operating as a limited liability company (LLC). According to California Corporations Code § 13401, the legally compliant corporate structure for these businesses is a professional corporation.
Medical Professional Corporation vs S-Corporation vs PLLC
With different types of business structures out there, doing your own incorporation filing could get complicated right from the start. Let’s clear up a common point of confusion:
- Medical Professional Corporation (PC): An entity governed by state law that must be primarily owned and controlled by licensed physicians.
- S-Corporation: A tax election, not a separate type of corporation.
- Professional Limited Liability Company (PLLC): A business entity that licensed professionals can use in other states, but not in California.
If you’re a licensed physician, the correct entity is a California professional medical corporation. Simultaneously, you can elect an S-Corporation tax status to avoid double taxation. But a California professional limited liability company for physicians is not an option.
Corporate Practice of Medicine Rules in California
California’s Corporate Practice of Medicine (CPOM) doctrine is one of the biggest reasons medical corporation formation requires specialized planning. That’s because you must structure your corporation, so physicians keep clinical control—usually through carefully drafted agreements and compensation terms.
In California, CPOM is enforced through a combination of:
- Medical Board of California enforcement policies, which provides oversight for improper practice and CPOM compliance.
- California Business & Professions Code § 2052, which prohibits unlicensed practice of medicine.
- Relevant case law and legal opinions for real-world examples of CPOM violations and unlawful non-physician involvement in California medical corporations.
This legal principle is designed to prevent non-physicians—or any unlicensed individuals—from owning or controlling a medical practice. It exists to ensure that clinical decisions remain in the hands of licensed physicians in California, free from outside financial pressures or management interference.
What CPOM Means for Physicians
California’s CPOM doctrine prevents non-physicians from owning or controlling medical practices. In practical terms, CPOM means that only licensed physicians can:
- Exercise clinical judgment
- Control medical decision-making
CPOM issues often surface when ownership, compensation, or contracts create indirect control by someone who is not licensed to practice medicine.
Common risk areas include:
- Non-physician ownership attempts
- Profit-sharing models tied too closely to medical revenue
- “Silent partner” influence
- Overreaching management control through contracts
Bottom line: Persons who are not licensed physicians cannot dictate nor influence decisions related to patient care, supervise licensed professional staff, or profit directly from clinical activities.
Read more about the California CPOM rules here, and learn the answer to whether or not a non-physician can own a medical practice.
CPOM problems often come from ownership language, compensation structures, and MSO agreements—not the filing itself.
Form your Medical Professional Corporation the right way with Incorporation Attorney!
Who Can Own a California Medical Professional Corporation?
California’s laws are very clear: Physicians must maintain majority ownership and control.
A medical professional corporation is a physician-led structure. Simply put, only licensed physicians in California are allowed to retain major ownership of this entity.
In practice, this helps ensure that non-licensed individuals would not control or profit from the clinical side of medical practice.
As stated in Cal. Corp. Code § 13401.5, at least 51% of a Medical Corporation must be owned by licensed medical doctors.
Can Other Licensed Healthcare Professionals Own a Medical Corporation?
Minority ownership (not exceeding 49%) may only be held by other licensed professionals expressly permitted under Cal. Corp. Code § 13401.5 (a), including:
- Doctors of podiatric medicine
- Psychologists
- Registered nurses
- Optometrists
- Marriage and family therapists
- Clinical social workers
- Physician assistants
- Chiropractors
- Acupuncturists
- Naturopathic doctors
- Professional clinical counselors
- Physical therapists
- Pharmacists
- Midwives
- Occupational therapists
While other licensed healthcare professionals can own minority shares, the corporate structure must always preserve physician control.
If you’re a physician planning to bring in partners who are non-physicians, it’s wise to get specific legal guidance from a medical professional corporation attorney in California.
MSOs and Alternative Structures for Non-Physician Participation in Medical PCs
One of the most common questions we see is: “If non-physicians can’t own the practice, how can they participate in the business?”
If you’re a physician looking to partner with investors, business managers, or non-licensed individuals, you cannot simply offer equity in your medical professional corporation. That’s a fast track to violating CPOM.
This is where alternative structures come into play, specifically the MSO model.
What Is a Management Services Organization (MSO)?
A Management Services Organization (MSO) is a separate legal entity, typically an LLC or general corporation, that contracts with a medical corporation to handle non-clinical business functions, such as:
- Payroll
- Billing and collections
- HR and staffing
- Equipment leasing
- Office space management
- IT systems and marketing
The MSO model allows non-physician entrepreneurs, business partners, and managers to participate in running the business side but never the clinical side of the operation.
How MSOs Separate Clinical and Non-Clinical Control
An MSO doesn’t “unlock” prohibited ownership rights—it simply provides a legal way for non‑physicians to participate in non‑clinical operations without interfering in medical practice control. Here’s an example:
| Medical Corporation (PC) | Management Services Organization (MSO) |
|---|---|
| Hires and supervises clinical staff | Manages administrative staff, marketing, and office systems |
| Makes all clinical decisions | Provides support services only |
| Holds medical licenses and professional liability | May hold IP, lease assets, or brand name |
| Retains 100% of clinical profits | Paid a fee for services rendered |
There needs to be a clear separation of clinical and non-clinical responsibilities between a collaborating medical corporation and MSO. This should be clearly reflected in a well-drafted MSO agreement, ideally reviewed by a physician professional corporation lawyer.
If your practice involves investors, a med spa, or non-physician administrators, we can help structure a compliant PC + MSO model.
Consult a California-based professional medical corporation attorney today!
Other Healthcare Professional Corporation Structures by Practice Type
While licensed physicians typically form professional medical corporations in California, other licensed healthcare professionals may need their own distinct professional entities depending on their license type.
But remember: Even in multidisciplinary or shared-service models, physician control remains central whenever medical services are provided under a physician-led medical corporation structure.
Here’s how legal structure varies based on the type of provider involved:
Professional Corporations for Physician Assistants
Physician assistants may form a professional corporation, but they cannot provide medical services independently and must be supervised by a licensed physician.
Professional Corporations for Midwifery Practices
Licensed midwives may operate independently, but operations involving physicians should be structured carefully to remain aligned with California CPOM restrictions.
Professional Corporations for Physical Therapy and OT Clinics
PTs and OTs typically form separate professional entities, and any shared space or service model with physicians must be structured to avoid improper shared clinical control.
Professional Corporations for Medical Spas
In California, a medical spa offering clinical procedures must be structured so that a physician-owned medical corporation maintains clinical ownership and control.
How to Form a Medical Professional Corporation in California
Forming a medical professional corporation in California is not just “filing a corporation.” The goal is to build a structure that is compliant, defensible, and aligned with the Medical Board and CPOM principles.
Here’s a quick list of steps to incorporate a medical practice:
- Choose a legally compliant business name and apply for a Fictitious Name Permit if needed.
- File the Articles of Incorporation with the California Secretary of State.
- Draft corporate bylaws and shareholder agreements.
- Obtain an EIN from the IRS and open a business bank account.
- Elect S-Corporation status for an efficient tax structure.
- Comply with the California Medical Board ownership and licensing policies.
- Maintain ongoing compliance with state and medical board rules.
Structure Your Medical Corporation Right from the Start
Before anything is filed, the structure must be planned around:
- Who will own shares
- How physician control will be maintained
- How compensation and profit flow will work
- Whether an MSO relationship is required
- What happens when shareholders exit or new physicians join
The initial stage is also where most DIY attempts can go wrong, especially without in-depth knowledge on local laws governing:
- Professional naming and ownership rules
- Physician-majority control in all bylaws, stock distributions, and board composition
- Correct corporate purpose
- Eligibility of major and minor shareholders
Medical PC formation attorney review at this stage prevents long-term structural defects—and positions you for tax and legal compliance from day one.
File Articles and Comply with Licensing Rules
Once structured, you’ll file Articles of Incorporation with the Secretary of State—but that’s just the beginning.
You must ensure compliance with licensing and practice rules, especially if you’re planning to operate under a name different from the corporation’s legal name. This is where you’d have to obtain a Fictitious Name Permit from the Medical Board.
Complete Tax, Employment, and Ongoing Compliance Steps
Once registered, you’ll need to:
- Get an EIN from the IRS
- If desired, make a tax election (e.g., S-Corp via Form 2553)
- Register with the Franchise Tax Board and state payroll agencies
- Maintain annual corporate records and compliance filings
Every step must align with both corporate and medical licensing standards to avoid regulatory risk.
Read our step-by-step guide on how to form a professional medical corporation in California.
Why Work with a Medical Professional Corporation Attorney in California?
Forming a medical professional corporation isn’t just about getting a business registered. The entire process combines corporate law, healthcare compliance, ownership rules, and licensing regulations.
That overlap is exactly why physicians often need specialized legal help—especially in California, where CPOM issues can arise even when the practice “looks normal” from a business perspective.
Working with a healthcare professional corporation attorney means protecting your license, minimizing liability risks, and maintaining long-term clinical control.
Avoid Legal Risks of Improper Medical Corporation Formation
Here’s what a lawyer for professional medical corporation can help you avoid:
- Using the wrong entity type (like an LLC) and triggering licensure violations
- Violating CPOM through non-compliant ownership or delegation structures
- Drafting bylaws or contracts that don’t reflect required physician control
- Risky partnerships with MSOs, investors, or vendors that could invalidate clinical authority
Many of these issues won’t surface until a problem arises—when enforcement, licensing, or litigation risk is already in play.
How Medical Professional Corporation Attorneys in California Help Protect Physician Licenses
An experienced professional medical corporation attorney in California can help you:
- Structure ownership and corporate control to comply with CPOM from day one
- Draft compliant bylaws, shareholder agreements, and MSO contracts
- Ensure your tax elections, business name, and corporate purpose align with state law while not missing out on tax benefits
- Prevent future licensing disputes, scope violations, or enforcement actions
This is not just incorporation. It’s medical-legal entity design—and your license depends on getting it right.
FAQs About California Professional Medical Corporation
Can a non-physician own a medical practice in California?
California’s Corporate Practice of Medicine (CPOM) rules generally prohibit non-physicians from owning or controlling a medical practice. Some business participation is possible through carefully structured alternatives, such as Management Services Organizations (MSOs), but clinical ownership must remain with licensed physicians.
Can a physician form an LLC for a medical practice in California?
Generally, no. California physicians typically cannot use standard LLCs to operate medical practices. Instead, they form medical professional corporations that comply with licensing rules and CPOM restrictions, which are designed to preserve physician control over clinical decision-making.
What is an MSO and why do medical practices use one?
An MSO (Management Services Organization) is a non-clinical business entity that provides administrative and operational support, such as staffing, billing, and marketing. When structured properly, it allows non-physicians to participate in operations while the medical professional corporation remains owned and controlled by licensed physicians.
Schedule a Consultation with a Medical Professional Corporation Attorney in California
If you’re a physician planning to start, join, or restructure a medical practice in California, don’t leave formation to a generic filing service. The legal requirements are too complex to navigate without experienced counsel.
What we can help you with:
Consult our professional medical corporation lawyers and get legal guidance on:
- Medical professional corporation formation and setup
- CPOM-compliant ownership and governance planning
- Shareholder structures for solo and multi-physician practices
- MSO models for non-physician participation (when appropriate)
- Medical corporation updates for growth, partner changes, or restructuring
- Ongoing compliance support to reduce licensing and enforcement risk
Your medical practice is more than a business—it’s a licensed profession. Let’s make sure your entity is structured to reflect that.
Call us now at +1 (714) 634-4838 and schedule a consultation today with one of our physician professional corporation lawyers.
