A physician’s ultimate dream is to run a private practice, and California can be considered one of the most promising states to succeed. One of the first steps to accomplishing this dream is forming a company. But what entity should a medical practice choose? Can a medical practice be an LLC in California?

Unfortunately, many physicians make the mistake of forming an LLC (limited liability company) or LLP (limited liability partnership) simply because this is the entity of choice for their profession in other states. California is different. LLC for medical practice in California is not acceptable. Instead, physicians, among other qualified professionals, must form a professional corporation to start a private practice.

This is key information that you should be well aware of from the start and that internet articles confuse. Only a legitimate corporate lawyer can give you proper directions and information. Before you begin setting up your private practice, your first mission is to seek the help of an expert to guide you all the way.

Can a Medical Practice Be An LLC or LLP or Is It Restricted to Professional Corporation?

A medical professional who wishes to run a private practice in California can only form a professional medical corporation (PMC). You cannot operate as an LLC or LLP. Lawyers, architects, engineers, public accountants, and land surveyors are the only professionals allowed to use LLP.    

You can form a professional medical corporation with fellow medical professionals who can become shareholders. Now, the shareholders can be taxed as an S corporation or a C corporation.   

S Corp vs C Corp: What’s the Difference?  

C Corp and S Corp are tax codes. First, C Corp is called such because the IRS taxed all newly formed corporations based on the Internal Revenue Code subchapter C. The problem with C Corp taxation is that it requires the shareholders to pay tax twice: the money earned by the corporation and the money earned by individual shareholders.   

 Meanwhile, S Corp is based on IRS’s subchapter S, hence the name. It’s also the most preferred tax code among medical professionals because it doesn’t require them to pay federal taxes. This means they only pay income tax.   

Can a Medical Practice Be an LLC / LLP and an S Corp and LLP at the Same Time?  

Some medical professionals from other states with S Corp figure that partnering with another physician with an LLP will fly. However, this is also unacceptable. California strictly implements the “PMC only” entity for medical professionals who want to start a private practice in the state.  

Forming a Professional Medical Corporation in California  

In other states, a professional corporation is equal to a professional service corporation (PSC), which covers a wide range of professionals including medical. In California, medical professionals are required to form a professional medical corporation. 

Professional medical corporations are restricted to licensed physicians, dentists, physical therapists, podiatrists, surgeons etc. Unless the shareholders are allied professionals as described in the California Code of Regulations, they must hold a valid medical license.  

Learn more about how to form a professional medical corporation here. 

Can a Medical Practice Be An LLC in California? Our Legal Experts Can Help You Understand the Right Business Entity for Your Private Practice


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