Dr. Sarah was excited to fulfill her dream: opening a hearing aid dispensing company. As a licensed audiologist in Southern California, she initially considered forming a professional corporation. But she dropped the idea because the sole purpose of this new venture was to dispense hearing aids.

Instead, she decided to form a general stock corporation. She thought it would be the perfect fit because her new venture would focus only on dispensing hearing aids, not performing clinical diagnostics.

For a while, that structure worked. But once she tried joining insurance networks to grow the business, everything changed.

We’ll walk you through her story: what caused the problem and how to start a hearing aid business in California through a compliant professional audiology corporation

Case Study: How the Wrong Corporation Slowed a California Hearing Aid Dispenser’s Expansion

When Dr. Sarah first launched her hearing aid dispensing company, she saw it as a natural extension of her practice as a licensed audiologist — but not necessarily a clinical practice. She worked full-time diagnosing patients for a medical group, and she wanted this new business to operate more like a business venture.

She envisioned this venture as a way to expand her reach, serve more patients, and build something independent from her employer.

That thinking shaped her decisions:

• A general stock corporation felt like the right entity for selling hearing aids.
• She considered adding a physician partner to help with startup costs.
• They even explored forming an LLC but soon learned a physician partner is prohibited to render services through that structure.

Sharing the Risk, The Capital, But Not the Corporation

On paper, it seemed like a smart way to share risk and raise capital with a physician involved. As they explored options, however, several complications surfaced.

Their first idea was to form a limited liability company (LLC), but California law prohibits licensed professionals from rendering professional services through an LLC, making that structure unavailable.

Next, they considered whether a professional audiology corporation might work, but quickly realized that only licensed audiologists or, in some cases, speech-language pathologists may own shares in such an entity. Since physicians are not permitted to be shareholders in an audiology corporation, her colleague could not legally join her in that structure.

Though Sarah could have formed a professional audiology corporation, she opted instead to establish a general stock corporation because the sole purpose of this new venture was to dispense hearing aids — and, having just earned her hearing aid dispenser’s license, that seemed like the best fit at the outset.

The solution they settled on was for each to form their own corporations — the physician creating a medical corporation, and Dr. Sarah moving forward with a general stock corporation — and then collaborating between the two entities.

It Worked… Until It Didn’t: Insurance Changed the Game

For several years, this setup worked.

Dr. Sarah’s hearing aid dispensing business ran smoothly. Operating through her general stock corporation, she built a steady client base, invested in equipment, and carved out a niche separate from her full-time audiology practice. The model seemed to work: the corporation was structured around retail dispensing, and her patients appreciated the convenience and continuity of care.

But as the business grew, Dr. Sarah wanted to expand further by joining insurance networks, including major providers like Blue Shield of California. That’s when everything changed.

Under the Corporate Practice of Medicine (CPOM) doctrine and Blue Shield’s own contracting rules, corporations that provide professional services — even services tied to hearing aid dispensing — are required to operate as professional corporations, not general stock corporations.

Even though she wasn’t planning to expand diagnostic services, insurers still classified her work as professional audiology services requiring a professional corporation.

Her general stock corporation no longer met the requirements — and her application was denied.

Why Corporate Structure Matters for a California Hearing Aid Dispensing Business

If you’re building or expanding a hearing aid business, it’s natural to think of it as a retail venture. But the moment your work touches patient care — or you want to join insurance networks — California law treats those services as professional audiology services, not retail activity.

That distinction is what caught Dr. Sarah off guard. To move forward with insurance providers and to bring her business fully into alignment with California law, she had to convert her entity.

Under the California Corporations Code (§13400–13410), Corporate Practice of Medicine (CPOM) doctrine and Blue Shield’s own contracting rules:

• Any business providing audiology-related services, even hearing aid dispensing, must operate through a professional audiology corporation.
• Insurance carriers, including major networks like Blue Shield of California, will not credential or contract with a general stock corporation for these services.
• An LLC is not an option for licensed audiologists in California, or any corporation aiming to render professional services. (CORP § 13401)

This requirement becomes especially important if your vision includes:

• Accepting insurance
• Working with managed care plans
• Expanding into in-network hearing aid services
• Building a scalable business that complements your clinical work

Dr. Sarah didn’t initially plan for any of that — but growth pushed her there. And this is where she wished she learned more about forming a professional audiology corporation when she was learning how to start a hearing aid business in California.

Realizing how insurers enforced these rules changed her understanding of how to start a hearing aid business in California that could scale. Insurance access wasn’t optional—it was essential to serve more patients and compete with established audiology practices. She knew she had to convert her venture into a professional corporation. 

Dr. Sarah’s Only Solution: Converting to a Professional Audiology Corporation

What began as a side venture had now matured into a professional enterprise. And Dr. Sarah saw this as the chance to form (or convert) her business into the right corporate structure to support the next phase of growth. Here’s how the process went:

Step 1: Choose the Right Entity Type for Your California Audiology Practice

If you’ll provide clinical audiology services or seek insurance contracts, choose a Professional Audiology Corporation. Verify that your business activities fall under audiology, not just retail.

Step 2: Know Who Can—and Cannot—Own an Audiology Corporation

Similar to Dr. Sarah, considering bringing in business partners might be higher up in your priorities as well. So make sure you are clear on the ownership rules for an incorporated audiology practice in California, according to CORP § 13401.5 (e). The law states:

• Only licensed audiologists can be major shareholders.
• Licensed speech-language pathologists can be minor shareholder, owning up to 49% of the total shares.
• Physicians, dentists, nurses, chiropractors, and other professionals cannot be shareholders.

This forced her to rethink how she collaborated with her physician colleague. They each maintained their own professional entities (his medical corporation and her professional audiology corporation) and worked together through formal contracts.

While this required some adjustment from their original plans, it gave both businesses the ability to grow independently while collaborating where their services overlapped.

Step 3: Select a California-Compliant Name for Your Audiology Corporation

California requires very specific naming rules for corporations that render professional services. According to California Business and Professions Code § 2537.4 (b), an audiology corporation’s name must include any of these words and similar titles:

• “audiology”
• “audiologist”
• “audiological”
• “hearing clinic”
• “hearing clinician”
• “hearing therapist”

The name must also include a word or abbreviation of a corporate designator like “corporation,” “incorporated,” “Professional Corporation,” or “Inc.”

Here’s an important part of this step: Check name availability—and reserve it—with the Secretary of State.

Dr. Sarah had invested heavily in branding her hearing aid business in the community, so she worked carefully to select a new corporate name that preserved the trust she had built with patients while meeting the state’s name-style rules.

Step 4: Draft the Required Corporation Documents for Audiology Practices

If you’re forming an audiology corporation from the start, you’ll have to draft your Articles of Incorporation.

In Dr. Sarah’s case, she needed to amend her existing general stock corporation articles and filings. In general, you’ll need:

• Articles of Incorporation that state your professional purpose
• Corporate bylaws, outlining shareholder rules that comply with state laws (BPC § 2537.5)

Step 5: File Your Professional Audiology Corporation With the Secretary of State

Once your documents are prepared, the next step is making your corporation official with the state. You’ll need to submit required documents and pay filing fees to the Secretary of State.

After processing, the state will return stamped Articles confirming your corporation’s legal status.

The official CA SOS website has a comprehensive FAQ page you can visit for guidance on forming a professional corporation.

Step 6: Get an EIN and Establish Financial Accounts Under Your New Corporation

With your corporation formally recognized, you now need to align your tax identity and financial accounts.

• If forming a new professional corporation, obtain an employer identification number (EIN) from the IRS.
• If you’re converting your business into a professional corporation, you should ask your CPA whether you can retain your existing EIN (many PCs can).
• Update banks, payment processors, and vendors with your new legal business name.

For Dr. Sarah, keeping her banking connections and business credit was one of the biggest benefits of converting her business entity into a professional corporation. But if you’re forming a new one, it’s best practice to open a separate business bank account for your corporation. 

Step 7: Update Your California Audiology Licensing Records

Once your tax and financial details match your new structure, the next step is ensuring your licensing records do as well. Make sure the California Speech-Language Pathology & Audiology Board has the correct entity information, so your professional records remain compliant.

Step 8: Keep Your Audiology Corporation in Good Standing

After formation, the goal is to keep your corporation in good standing year after year. Here are some practices that will help you maintain compliance:

• Hold required annual meetings
• Keep accurate minutes
• Maintain shareholder licensing records
• Renew licenses and entity documents on time

These small, consistent steps protect your corporate shield and support long-term stability.

The Result: Growth, Insurance Access, and a Stronger Audiology Practice

The actual conversion process took about a month.

When the process was complete, Dr. Sarah’s business had a stronger legal and financial foundation. Most importantly, she was now eligible to participate in major insurance networks. Patients could access her services through their health plans, her practice could compete on a larger scale, and she could finally move forward with confidence that her business structure aligned with both state law and industry expectations.

During our initial consultation with Dr. Sarah, she was understandably concerned about the timeline and difficulty of the process. But it turned out that she didn’t need to worry so much because the actual corporate conversion process only took her about a month.

And the result was so worth it for the future of her business and audiology practice in California.

She was able to retain her existing tax ID, keep her banking relationships intact, and preserve the business credit she had established. This continuity made the transition smoother and less disruptive for her day-to-day operations.

The best part? Once the conversion was complete, insurers accepted her. Patients could finally see her in-network. And her professional license as an audiology in California is now grounded in a fully compliant, scalable business with room to grow.

FAQs on How to Start a Hearing Aid Business in California

Can a hearing aid dispensing business operate as a general stock corporation in California?

It can—but only if you’re strictly selling hearing aids as a retail activity. The moment your services involve audiology-related patient care, or you plan to bill insurance, a general stock corporation will no longer meet the requirements under the Moscone-Knox Professional Corporation Act.

Do I need to be a licensed audiologist to form a professional audiology corporation?

Yes. California law allows only licensed audiologists (and in some cases licensed speech-language pathologists) to own shares in an audiology corporation. Other professionals, including physicians and chiropractors, cannot be shareholders.

Can I convert my current hearing aid dispensing business into a professional audiology corporation?

Yes. If you are a licensed audiologist in California, you can convert your existing corporation into a professional audiology corporation. Many insurance networks even require this before approving your credentialing or contracting application.

How to start a hearing aid business in California under a professional corporation?

Whether your plan is to dispense hearing aids or render clinical services, you’ll need to follow the same process for opening a professional audiology corporation.  

It includes choosing a compliant business name, filing Articles of Incorporation and other incorporation documents with the Secretary of State, drafting your corporate bylaws, obtaining EIN from the IRS, and following ownership rules and compliance standards to keep your corporation in good standing. 

Do I need to change my EIN when converting my corporation? 

Not always. Many professional corporations may be eligible to retain their existing EIN after conversion, depending on IRS criteria and your CPA’s guidance. Maintaining your EIN helps preserve banking relationships, payroll accounts, and business credit.

What naming rules apply to an audiology corporation in California?

Your corporate name must include a profession-specific term such as “audiology,” “audiologist,” “audiological,” “hearing clinic,” or “hearing therapist,” plus a corporate designator like “Inc.” or “Professional Corporation.” 

Do I still need bylaws and corporate minutes for a small audiology corporation?

Yes. California requires professional corporations to follow strict corporate formalities, which include bylaws, shareholder records, annual minutes, and compliance with licensing rules. These steps help protect your liability shield.

From Setback to Stability: The Smartest Move You Can Make for Your Audiology Practice

When learning how to start a hearing aid business in California on your own—like Dr. Sarah was—forming an audiology corporation might not even come up. She had the right instincts to incorporate her venture. But she didn’t realize early on how a professional corporation structure would support long-term stability. 

You can future-proof your hearing aid venture right from the beginning. Doing so opens the door to insurance networks, which will allow you to serve more clients and for your business to grow with a solid foundation. 

Now, the next step is to work with a legal team that always forms professional corporations in California. Call the Law Offices of Gale & Vallance at (714) 634-4838 or fill out this contact form on Incorporation Attorney to schedule your consultation.