You’ve likely seen how psychology is becoming more collaborative: clinical, neuro, and counseling psychologists often integrate care. And if you’re aiming to provide well-rounded services to clients, you might be wondering: Can licensed psychologists in California establish a professional corporation even with different specializations?

This article explains how multi-specialty psychological corporations in California may be formed: who can be involved, what rules apply, and how to maintain full compliance with corporate and licensing laws.

What Is a California Professional Psychological Corporation?

A professional psychological corporation (often called a “psychology professional corporation” or “psychological corporation”) is a specialized corporate structure under California law, tailored for licensed psychologists to render professional services.

Like other professional corporations in the state, there are specific California laws that regulate the formation and compliance of psychological corporations, including:

• California Corporations Code §§ 13400–13410, or the Moscone-Knox Professional Corporation Act.
• California Business and Professions Code, particularly sections regarding psychologists and psychological corporations (BPC §§ 2995-2999).
• California Board of Psychology for obtaining your individual license and certificate of registration of psychological corporations.

Why Form a Psychological Corporation and NOT an LLC? 

This is a question that many professional service providers encounter when incorporating their private practice.

While an LLC may seem attractive for many businesses, California law prohibits psychologists from providing professional psychological services through an LLC. Instead, they must form a Professional Corporation (PC) expressly authorized under the Moscone-Knox Act.

Forming a general corporation for professional services that require compulsory licensure is not a legal option as well, leaving professional corporation as the only option.

Can Psychologists in Different Fields Form a Multi-Specialty Psychological Corporation in California?

Yes, psychologists of different specialties can co-own a single professional psychological corporation, provided that:

• Services offered by a multi-specialty psychological corporation in California must be consistent with what licensed psychologists are authorized to do or within the scope of “the practice of psychology,” as defined in BPC § 2903.
• All shareholders, officers, directors, and any professionals performing the licensed services be appropriately licensed, according to BPC § 2997.
• Your Articles of Incorporation states the corporate purpose (e.g., “to practice psychology”) and the bylaws must be consistent with the Board and corporate law requirements.

Who Can Form or Be Part of a Psychological Corporation?

Professional corporations are highly regulated business entities in California, mainly because they render professional services to consumers. That level of regulation extends to who can be co-owners or shareholders, as well as who can be officers, of an incorporated group practice.

Who Can Be Shareholders and Officers in a Multi-Specialty Psychological Corporation in California

The Moscone-Knox Professional Corporation Act also lays specific California psychological corporation ownership rules.

Specifically, for a psychological corporation, licensed psychologists (regardless of specialization) must hold majority control of a California multi-specialty psychological corporation. At least 51% of shares must be held by licensed psychologists, and the number of such psychologist shareholders must not be fewer than the allied health professional shareholders.

Are Other Health Professionals Allowed as Shareholders?

Yes, but only specific licensed health professional can own shares. According to California psychological corporation ownership rules (CORP § 13401.5(c)), here’s the list of licensed professionals who “may be shareholders, officers, directors, or professional employees” in a psychological corporation:

1. Licensed physicians and surgeons
2. Licensed doctors of podiatric medicine
3. Registered nurses
4. Licensed optometrists
5. Licensed marriage and family therapists
6. Licensed clinical social workers
7. Licensed chiropractors
8. Licensed acupuncturists
9. Naturopathic doctors
10. Licensed professional clinical counselors
11. Licensed midwives

You also must keep in mind these limitations stated in CORP § 13401.5:

• Shares owned by the licensed professionals in the list must not exceed 49% of the corporation’s total number of shares.
• The number of allied health professional shareholders must not exceed the number of licensed psychologists who own shares in a psychological corporation.
• Licensed professionals not included in the list and non-licensed individuals may serve in administrative roles in professional psychological corporations. But they cannot perform psychological services or hold positions requiring professional licensure.

Can Psychology Professional Corporation Shareholders Transfer Their Shares?

Share transfers in a professional corporation are more restricted than other entities to ensure that only licensed professionals are involved in ownership.

Transfers of shares may occur in limited situations, such as when a shareholder dies or becomes a “disqualified person,” as defined in CORP § 13401(e).

Here are other key rules to keep in mind:

• Only licensed professionals may hold shares: Transfers to anyone who is not a licensed psychologist—or to another qualified professional authorized under the law—are invalid. Any transfer that violates this rule is void under the Corporations Code § 13406(a).
• Mandatory share buyback for disqualified shareholders: If a shareholder becomes disqualified or dies, Business and Professions Code § 2999 requires that the corporation’s bylaws or articles include procedures to repurchase or reallocate those shares within a specified time period.
• Accurate recordkeeping is essential. The corporation must maintain proper records of all share issuances and transfers, including stock certificates and a shareholder ledger, to remain in good standing and ensure orderly corporate governance.

Advantages of Forming a Multi-Specialty Psychological Corporation in California

For groups of psychologists with different expertise, establishing a psychological corporation creates a unified structure that supports collaboration, legal protection, and financial efficiency.

Streamlined Collaboration Across Disciplines

Bringing multiple psychological specialties under one professional corporation fosters a coordinated and efficient clinical practice. It simplifies internal referrals, supports interdisciplinary treatment planning, and strengthens your practice’s brand identity as an integrated care provider.

Asset Protection and Liability Separation

A California psychology professional corporation separates business obligations from your personal assets. While it does not shield individual psychologists from their own malpractice, it does protect against non-professional liabilities—such as lease obligations, debts, and general business lawsuits—helping preserve personal financial security.

Enhanced Professional Credibility and Tax Advantages

Operating as a multi-specialty psychological corporation in California reinforces your practice’s credibility with clients, insurers, and referral networks by signaling compliance with state laws and the Board of Psychology standards.

Potential Tax Advantages for Psychology Professional Corporations

Forming a professional corporation also opens the door to tax efficiencies unavailable to sole proprietors. Here’s how:

• The corporation can deduct ordinary and necessary business expenses (e.g., office rent, equipment, employee wages) under relevant IRS rules.
• Eligible corporations may elect S-Corporation status to avoid double taxation and pass income directly to shareholders. Learn more about the advantages of S-Corp tax election here.
• Shareholders may structure compensation strategically through salaries and, if the corporation elects S-Corp status, through a combination of salaries and profit distributions.

Consult a CPA familiar with health-industry taxation, as some rules for personal service corporations or qualified business income deductions may apply.

How Multiple Psychologists Can Form a Professional Corporation

Forming a psychology professional corporation with multiple owners in California requires careful attention to both corporate and professional licensing laws. Here’s an overview of how to properly form and structure your multi-owner psychological corporation:

1. Choose a Compliant Corporate Name: Choose a unique corporate name that complies with both Secretary of State and Board of Psychology naming rules. The name must be unique, not misleading, and clearly indicate the corporation’s professional nature. (CORP § 13409, BPC § 201)
2. File Articles of Incorporation with the Secretary of State: It must clearly state that the entity is a professional corporation (Cal. Corp. Code § 13404) and specify its purpose of providing psychological services in compliance with California law. You can file this online through the SOS website.
3. Obtain a Certificate of Registration from the Board of Psychology: You must register with the Board, verifying that all shareholders, directors, and officers are properly licensed and that your corporation meets all Board requirements.
4. Adopt Bylaws and Shareholder Agreements: Your bylaws and shareholder agreement should define share ownership, transfer restrictions, removal of disqualified shareholders, and procedures for voting and profit distribution.
5. Designate a Registered Agent for Service of Process: Every professional corporation must list a California address and registered agent in its Articles of Incorporation.
6. Issue Shares to Licensed Psychologists: Shares may be issued in exchange for cash, property, or other contributions of fair value. Accurate share issuance and recordkeeping are essential for maintaining corporate validity.
7. Obtain a Federal EIN and Register for State Taxes: Apply for an Employer Identification Number (EIN) from the IRS and complete all necessary registrations with the California Franchise Tax Board.
8. Elect Your Tax Classification: By default, professional corporations will be designated as C-Corp. But you can elect an S-Corp status to maximize tax efficiency by filing IRS Form 2553.
9. Maintain Ongoing Compliance: Keep licenses current, hold annual meetings, document major decisions, and maintain up-to-date shareholder and stock records.

Key Considerations for Maintaining Compliance and Professional Ethics

Having a thriving multi-specialty psychological corporation in California doesn’t end with just filing forms. It’s also equally important to ensure compliance and strict adherence to state laws, regulations, and ethical standards.

Separate Professional Liability

In a professional corporation with multiple owners, each psychologist remains individually liable for their professional acts. And the corporate structure does not shield you from malpractice claims.

Individual Professional Accountability

Professional incorporation, even in a shared entity, does not diminish ethical or licensure duties. You and your co-owners must each uphold personal ethical and licensure duties: confidentiality, informed consent, supervision, recordkeeping, and reporting obligations per the CA Board of Psychology Laws and Regulations.

Internal Boundaries When Specialties Overlap

When multiple specialties coexist under one corporation, such as assessment, therapy, and consultation, clear internal role definitions are essential. It may help to have written policies that outline your corporation’s referral procedures, shared-case protocols, and conflict-of-interest safeguards to prevent dual-role violations and ensure ethical clarity among practitioners.

FAQs About Forming a Multi-Specialty Psychological Corporation in CA

What corporate entity can a psychologist form in California?

A professional corporation (PC) is the legally required business entity for licensed professionals like psychologists forming a corporation that provides professional services, according to the Moscone-Knox Professional Corporation Act. 

Do psychologists need to be in the same specialty to form a corporation?

No. Psychologists of different specialties may co-own a single professional corporation as long as all services remain within the scope of the “practice of psychology,” as defined in BPC § 2903. Each psychologist must also hold an active license, and their professional corporation must be duly registered with the CA Secretary of State and the California Board of Psychology.

Can a psychologist form a corporation with non-psychologists?

Only licensed professionals (also referred to as “allied health professionals”) recognized under Corporations Code § 13401.5 may hold minority shares. But majority ownership must remain with licensed psychologists.

What are the liabilities for malpractice within the corporation?

Each psychologist remains personally responsible for their own professional conduct. The corporation does not shield individual practitioners against malpractice.

Set Your Group Practice for Success with a Compliant Psychological Corporation

Your dream of providing comprehensive psychological care for clients is within your reach. By forming compliant multi-specialty psychological corporation in California, you’re making sure that your group practice is built for long-term success from the start.

Avoid legal hurdles and complicated processes. Call Incorporation Attorney at +1 (714) 634-4838 to schedule a consultation today!

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance about your specific situation.