Many information on how to form a professional medical corporation in California can be found on Google. It can make the process look as easy as do-this-and-do-that-and-you’re-ready-to-go. So, even those starting a professional medical corporation like you may attempt to do everything on your own only to find out you missed one critical step and then, you go back to square one.

You can avoid such costly mistake if your resources are legit, meaning coming from an expert corporate attorney. You will then realize that there’s more to forming your professional medical corporation than meets the eye.

When starting a professional medical corporation in California, choosing a name for the business is as vital as getting the necessary licenses and permissions, setting up corporate bylaws, and giving out stock. These and other factors essential to creating a professional medical firm will be discussed in this article. Operating Agreements, Insurance, Record keeping, Financial Management, Contracts, and other related topics will be addressed. By being aware of these crucial factors, you can establish a strong foundation for your medical firm and position yourself for long-term success.

What Is a Professional Corporation?

Professional corporations comprise a certain group of professionals like accountants, lawyers, and physicians among others. Whether an S or C corporation, they are required to fulfill certain legal requirements and are covered by restrictions specific to each group of professionals. Professional medical corporations are governed by laws that differ depending on the state.

How to Form a Professional Medical Corporation

If you are a medical professional who want to know how to form a professional medical corporation in California, remember to check the following guidelines:

Know Your Options. Choose the Medical Corporation Type That Best Suits Your Requirements

So, how to form a professional medical corporation in California? First, choosing the best type of corporation for your purposes should be one of your top priorities. There are numerous choices, each with pros and cons of their own.

In many states outside of California, a more generic option for a professional corporation is referred to as a professional service corporation (PSC). The PSC is a type of business that was made to offer professional services like consulting, accounting, law, and other related fields. PSCs may be a valuable substitute for non-medical professionals looking for support services for medical practices, such as billing or marketing. It’s not just for doctors and nurses but is similar to a PMC because it gives you limited liability protection and tax benefits. In California, the California Secretary of State and state law sets out requirements that each one of these professionals form its own specific type of professional corporation.

Professional Medical Corporation

A PMC is a corporation specially made for medical professionals, like doctors and dentists also licensed as a physician. Usually, it is employed to offer patients expert medical care. Limited liability protection for the shareholders, tax advantages, and the capacity to draw outside investment are all benefits of a PMC. However, PMCs are subject to a few limitations, like the demand that all shareholders hold valid medical licenses unless they are allied professionals as described in the California law such as the California Code of Regulations.

Medical Group

To provide medical services to patients, a group of medical experts, such as doctors or nurses, join a special kind of entity known as a medical group. Depending on the requirements and objectives of the group, the organization may be set up as a PMC, PSC, or another kind of business. Medical groups provide the advantages of pooled knowledge and resources, shared liability, and shared resources. However, because there are more stockholders, they might also need more complicated management and decision-making systems.

The finest medical organization for you will ultimately depend on your requirements and objectives. To make the best choice for your circumstances, it is crucial to thoroughly weigh the benefits and drawbacks of each option and seek legal and financial guidance. The steps on how to form a professional medical corporation in California include:

  1. Pick a distinctive and expertly written business name. Verify that another company isn’t already using the name and that it’s available.
  2. Obtain the licenses and authorizations required to function as a medical corporation. A company license, a medical license, and any other permissions necessary by your state or local government may fall under this category.
  3. Establish corporate bylaws that spell out how the corporation should be governed and the duties and obligations of the board of directors and the shareholders.
  4. Hold an organizational meeting, elect a board of directors, enact the bylaws, and elect officers.
  5. Shares of stock should be issued to the shareholders, who will own the company.
  6. Make an operating agreement that spells out the guidelines for how the organization will be administered, including how profits and losses will be shared, who is responsible for what, and how decisions will be made.
  7. Think about buying insurance to shield the organization and its owners from potential liabilities. This might encompass general liability insurance, professional liability insurance, and other varieties of protection.
  8. Create a system for maintaining accounting records and managing finances, including producing financial statements.
  9. To ensure that the corporation is appropriately set up and run, following all relevant rules and regulations, get legal and financial guidance as needed.

Pay Close Attention to Your Professional Medical Corporation Business Name

A crucial step in creating your professional medical corporation is picking a company name. The name of your medical company will be used to identify it and set it apart from other companies, so it should be unique, professional, and easy to remember.  

Pick a distinctive and expertly written business name for the medical professional corporation. Make sure to confirm the name’s availability and ensure that no other California medical corporation is already using it. 

Here are some pointers for picking a company name for a corporation of professionals in medicine:  

  • Make it stand out: Pick a name that is simple to say and remember. Refrain from using technical or medical jargon that patients or clients may not understand. Many physicians just go with the use of the name or surname.  
  • Ensure simplicity: Pick a name that is simple to say and spell. Avoid using complex or uncommon terms and phrases that are difficult to remember or spell.  
  • Professionalize it: Choose a name that accurately captures the competence and reputation of your medical practice. Do not use slang or language that is too informal.  
  • Verify availability: Confirm that no other company is already using the name you have selected. You can determine whether a business name is available by exploring internet directories or getting in touch with the office that handles business registration in your state.  
  • Think about your audience: Consider your target market while selecting a name that will resonate with them. For instance, you should refrain from picking an overly trendy or modern name if you are targeting an older demographic.  
  • Get opinions: Get opinions from coworkers, friends, and family to understand how people will react to the name you choose. This helps you identify potential problems or worries before deciding on the name.  

Overall, carefully considering the procedure is essential to choosing a great company name. A wise name choice can position your medical practice as a credible and professional supplier of healthcare services.  

If you want to use a DBA, secure a Fictitious Name Permit from the California Medical Board 

In some cases, a medical corporation may wish to utilize a business name that is different than the one that has been approved by the California Secretary of State. A “doing business as” (DBA) permission, commonly referred to as a fictitious name permit, enables a company to conduct business under a name other than its legal name. The medical board of California, also known as the California Medical Board (CMB), must issue a permit to medical corporations that do business in California under a fictitious name.   

  • The corporation may apply to the board for a fictitious name permit from the CMB. Typically, the application must include and will ask the business for information on its legal name, the fictitious name it plans to use, and the specifics of its line of business.  
  • The CMB will examine the application once it is submitted to make sure the fictitious name does not clash with the names of any other companies operating in the state. The CMB will provide the company with a fictitious name permit if the name is accepted.  
  • If the business wants to keep using the fictitious name, it must renew the fictitious name permit before it expires. The permit is good for a set amount of time, usually one or two years.  

It is important to remember that a fictitious name permit only lets a company operate under a different name. It does not change the legal status of the company. The same rules and procedures apply to a California corporation that uses a fictitious name as to one that uses its real name.  

Obtain the Necessary Licenses and Authorizations    

Next to “how to form a professional medical corporation in California”, a common question asked by medical professionals is: “what are the licenses needed to operate legally?” Getting the proper licenses and permits is vital to starting a professional medical business. A company license, a medical license, and any other permissions necessary by your state or local government may fall under this category.  

When applying for licenses and permits, keep the following points in mind:  

Business license    

In most states, corporations engaged in the practice of medicine must have a business license. You need this legal document to run your company in the state. You will generally need to fill out an application and pay a fee to get a business license.  

Medical license 

Depending on your state’s rules, you will need a medical license to practice medicine as a business. A state medical board usually grants this license. You must usually meet specific educational and training requirements to get this license.  

Other permits 

You might also need to acquire other permits or certificates depending on the nature of your medical practice. For example, if you are running a medical clinic, the local health department may want you to apply for additional, specific permits. Similarly, you might need a home health agency license to offer home health services.  

IMPORTANT NOTE: The precise license and permitting regulations for your state and profession should be thoroughly investigated, as they can differ significantly. Before starting a medical practice, it’s a good idea to get legal and financial guidance to ensure you have all the required licenses and permissions.  

Draft Your Company Bylaws and Articles of Incorporation 

It’s common that professionals confuse bylaws with articles of incorporation, but they are in fact two different documents.  Company bylaws and articles of incorporation specify the policies and procedures for managing the California professional medical corporation, as well as the duties and obligations of the board of directors and the shareholders. 

Articles of Incorporation 

The articles of incorporation, often referred to as the corporate charter or the certificate of incorporation, is a legal document that declares a corporation’s existence and outlines its objectives, management, and functions. To receive a corporate charter, which gives the corporation legal status as a separate entity from its owners and enables it to carry on business and engage in contracts, you will file the articles of incorporation with the secretary of state.  

The name of the corporation, the reason it was founded, the addresses of the incorporators, the amount and types of stock that will be issued, and the names and addresses of the directors who will run the corporation are generally included in the articles of incorporation. The articles may also spell out the rights and responsibilities of shareholders, the powers and duties of directors, and other important information about how the medical professional organization is run and how it works. In its articles of incorporation, a medical corporation must state that its business purpose is “medicine.”  

Corporate Bylaws 

Corporate bylaws are a set of guidelines that describe how professional corporation must be managed in California. They cover a wide range of subjects, such as the authority and responsibility of the board of directors, shareholder rights and obligations, and the processes for making decisions and carrying out business.  

The bylaws you draft for your professional medical firm should be thorough, well-written, and reflect your company’s unique requirements and objectives. Include the following essential clauses in your bylaws:  

  • The organization’s aims, objectives, and the kinds of services it will offer should all be stated in the purpose and mission statement.  
  • The corporate structure should specify the number and duties of the board of directors, as well as the selection and removal processes for directors.  
  • The rights and obligations of the shareholders should be described here, including the shareholders’ right to vote, their right to dividends, and their right to view corporate records.  
  • The regulations for calling and holding board meetings and shareholder meetings, including the prerequisites for notification and the quorum required to conduct business, should be outlined here.  
  • The decision-making process should be clearly described, including how the board of directors and shareholders make decisions.  

In general, it’s important to make sure that your company’s bylaws are clear, complete, and match the needs and goals of your medical corporation. To ensure that your bylaws are correctly written and in compliance with all relevant laws and regulations, it is a good idea to get legal counsel.  

Hold an Organization Meeting: Elect a Board of Directors, Enact the Bylaws, and Elect Officers 

Once your corporation is active, the next stage in creating a professional medical corporation is to elect a board of directors and hold an organizational meeting once you have written your corporate bylaws.  

The board of directors is in charge of reviewing the corporation’s financial performance as well as managing the corporation’s overall affairs, including setting strategic goals and other important business decisions. The shareholders, who are the corporation’s owners, often elect the board of directors.  

You must adhere to the steps stated in your corporation bylaws to elect a board of directors and have an organizational meeting. This could mean telling the stockholders about the meeting, deciding when it will happen, and figuring out the quorum (the minimum number of stockholders needed to do business). At the organizational meeting, the shareholders will vote on the bylaws, choose the board of directors, and vote for the people in charge, such as the president, secretary, and treasurer.  

It is important to make sure that the board of directors and other officials are qualified and committed to the company’s success. A diverse and representative board is also a good idea because it can help make decisions by bringing in different points of view and experiences.  

The organizational meeting is a key part of starting a professional medical corporation because it sets up the rules for how the corporation will be run and managed. To ensure that the meeting is conducted appropriately, it is crucial to adhere to the policies established in the bylaws and get the necessary legal and financial assistance.  

Shares of Stocks Should be Issued to the Shareholders Who Will Own the Company 

The next step in creating a professional medical firm is to issue shares of stock to the shareholders after choosing a board of directors and holding an organizational meeting.  

Stock shares signify ownership in the company. They may be given to the people who started the company or to investors from outside the company. When shares are issued, the shareholders take on the status of corporate owners and get certain rights and privileges in addition to a portion of the corporation’s revenues and losses.  

 When issuing stock, there are various important factors to consider. The number of shares issued will determine the ownership proportion that each shareholder will have in the corporation. The number of shares given out should be carefully thought out because it can significantly affect how the company is owned.  

Share class 

Common and preferred shares are just two of the many share classes that may be issued. The most popular kind of share is a common share, which generally entitles the owner to a portion of the company’s revenues, the right to vote on corporate issues, and the right to dividends (if declared). Preferred shares can come with different rights and perks, such as a fixed dividend or the right to a more significant percentage of the profits.  


The price that shareholders must pay for the shares will depend on the value of the issued shares. The share price needs to be thought about carefully because it can greatly affect how the company’s finances are set up.  

Stock option plan 

By allowing employees to buy company shares at a discount, a stock option plan enables a company to recruit and keep personnel. Talented individuals can be attracted and retained using this strategy. Still, it’s important to carefully review the terms and conditions of the stock option plan to make sure it’s fair and suitable for both the company and the employees.  

Overall, there are several steps to making a professional medical organization, and issuing stock is one of them. To make sure the process goes smoothly, it is important to carefully look at the number, type, value, and terms of the shares being given out. It would be best to get the necessary legal and financial assistance.  

Make an Operating Agreement That Spells Out the Guidelines of How the Organization Will Be Administered

The operating agreement for a professional medical corporation is a legal document that spells out how the business will be run. Your operating agreement will include a wide range of subjects, including how profits and losses are allocated, what the shareholders are responsible for, how decisions are made, and how business is conducted.  

We have dealt with a number of physicians who have formed business entities outside of the state of California. For those doctors, it is very common for them to use a professional limited liability company and create their operating agreement for that entity. However, in California, it is prohibited for a physician to provide professional services through limited liability company.  

When forming professional limited liability companies outside of California, it is crucial to draft an operating agreement that fully addresses the demands and objectives of your company when setting up a professional medical firm. It would help if you made the following points a priority in your operating agreement:  

The division of profits and losses 

This section should specify how the corporation’s gains and losses will be distributed among its shareholders. This may depend on the proportional ownership each shareholder holds in the organization or on other elements, including the financial contributions each shareholder has made to the company.  

The obligations and duties of the shareholders should be described here, along with any financial contributions they are obligated to make to the corporation and any other responsibilities they may have.  

The management and decision-making processes 

This should describe how decisions are made, including how the board of directors and shareholders make decisions. It should also specify the duties and roles of the corporation’s officers.  

The steps to add or remove shareholders are: This should include any prerequisites or constraints that could be necessary, as well as the steps for adding or removing shareholders.  

Resolution of disputes 

This should describe how disagreements between shareholders or between shareholders and the corporation will be handled.  

IMPORTANT NOTE: A professional medical corporation’s operating agreement is a crucial instrument for setting precise and standardized regulations and procedures. The operating agreement needs to be thorough, well-written, and indicative of the unique requirements and objectives of your company. To make sure that your operating agreement is correctly formed and in compliance with all relevant rules and regulations, it is a good idea to get legal and financial guidance.  

Think About Buying Insurance to Shield the Organization and Its Owners from Potential Liabilities 

When establishing your professional medical corporation, buying insurance is a crucial factor to consider. The company and its shareholders can be protected by getting insurance against possible liabilities and financial losses.  This might encompass general liability insurance, professional liability insurance, and other varieties of protection. 

A professional medical corporation may need to consider various insurance products, such as:  

  • Professional liability insurance, also referred to as malpractice insurance, shields the company and its stockholders from responsibility for any mistakes or omissions that may be made when rendering medical services. It can assist in paying for the injured party’s defense expenses, settlements, and any damages that may be granted.  
  • General liability insurance protects the company from any liabilities that may result from conducting business, such as injuries a patient has while on the premises of a medical facility.  
  • Insurance against business interruption protects the company’s finances if it cannot operate due to a covered loss, such as a pandemic or natural disaster. It can assist with paying for missed revenue and other expenditures that can arise while the company is unable to operate.  
  • Disability insurance This kind of insurance protects a shareholder’s finances if they get sick or hurt and can’t work. It can help pay for lost wages and other costs that might come up because of the disability.  
  • Life insurance This kind of insurance offers financial security if a shareholder passes away. The costs of missed wages and other expenses that could be incurred due to the death can be partially covered.  

IMPORTANT NOTE: To choose the best coverage, it’s important to carefully look at the insurance requirements of your professional medical organization and get help from a professional in the field. Insurance can protect the owners’ money and help make sure the business will be safe and successful in the long run.  

Create a System for Maintaining Accounting Records and Managing Finances Including Producing Financial Statements 

When setting up a professional medical practice for long-term success, establishing a system for keeping records and managing money is essential. For the firm to run smoothly and be financially successful, proper recordkeeping and financial management are crucial.  

In terms of record-keeping and financial management, take in mind the following:  


Maintaining current, correct financial records for the company is critical. You can use software or hire a bookkeeper to handle billing, payroll, and accounting tasks.  

Financial statements 

A balance sheet and an income statement are two examples of financial statements that give a quick overview of the company’s financial situation. Financial statements must be made and reviewed regularly so that the company’s financial health can be tracked and any problems or concerns can be found.  


Setting a budget can assist the business in making financial decisions and future planning. Setting financial goals and targets means making predictions about how much the company will make and how much it will spend over a specific period.  

Tax planning 

A company can lower its taxes and make more money if it plans its taxes well. It entails being aware of the tax repercussions of various business activities and taking action to reduce taxes by, for example, utilizing tax credits and deductions.  

IMPORTANT NOTE: Overall, it’s critical to build a system for financial management and record-keeping that is precise, effective, and reflects the unique requirements and objectives of the company. To make sure that the corporation’s financial management system is set up correctly and running in conformity with all relevant rules and regulations, it is a good idea to get financial and legal guidance when needed.  

Get Legal and Financial Guidance to Ensure Your Corporation is Properly Set-Up and Run 

As a professional medical corporation, you’ll need to contract with different people, such as vendors, staff, and service providers. Studying and negotiating these contracts in depth is essential to protect the company’s interests and ensure the terms are fair and reasonable.  

When analyzing and negotiating contracts, keep the following points in mind:  

Know the terms 

It’s important to read the contract’s terms carefully and make sure you understand everything to which you are agreeing. Pay close attention to clauses like termination or indemnity that might not be in the company’s best interest.  

Negotiate favorable terms 

To better safeguard the corporation’s interests, don’t be afraid to haggle over the contract’s terms. You might be able to negotiate better conditions, such as cheaper costs, more time to pay, or longer terms.  

Get legal counsel 

It is a good idea to get legal counsel if you have any questions about the contract’s provisions or if it is a complicated or expensive deal. An attorney can tell you how to negotiate the terms of a contract and help you understand how the agreement affects you legally.  

Use standard forms 

You can use a standard form as a starting point if you are entering into a common type of contract, like a supply or service agreement. Standard forms can be an excellent way to cut down on mistakes and save time at the same time. But it is still important to look at the form and change it so that it fits the needs and goals of the organization.  

When looking at and negotiating contracts, it is important for a professional medical organization to be proactive and careful. You can protect the company’s interests and make sure the terms are fair and reasonable by going over the contract and negotiating its terms.  

In conclusion, setting up a professional medical firm is a complex process requiring much thought. To set up a medical corporation, you must do many things, like choose a name, get the licenses and permissions you need, make corporate bylaws, and give out shares of stock. To make sure your business has a strong foundation, it’s important to plan thoroughly and get legal and financial advice when you need it. As a professional seeking to form a medical corporation, you can set yourself up for success by following these steps and carefully considering the important things this article discusses.    

Need Advice on How to Form a Professional Medical Corporation in California the Right Way?    

Setting up your private practice in California is challenging if you are unaware of the proper procedures and the laws. It may seem easy at first, but it gets more complicated along the way because of the rules you may violate or something you failed to do.     

If you need help and advice on how to form a professional medical corporation in California, the help of an attorney whose long years of experience handling this kind of task will be a big deal. A business attorney will guide you through the legal procedures and ensure your documentation complies with California business laws.   

Our seasoned corporate lawyers specialize in forming professional medical corporations in California. We can answer any legal questions on how to form a professional medical corporation in California. Moreover, we can help you meet the requirements so you can start your medical practice as soon as possible. To get started, give us a call!