Business Lawyer for Corporations in California

Healthcare Corporations in California: Choosing the Right Structure

In California, healthcare professionals—including physicians, dentists, and other licensed providers—must often structure their practices as professional corporations (PCs) rather than other entities like LLCs. This ensures compliance with state laws requiring ownership and control by individuals licensed in the same profession.

At West Coast Health Law, we specialize in helping healthcare practitioners select and form the right corporate structure for their needs. Whether you're transitioning from a sole proprietorship or forming a new practice, we'll guide you through this critical decision-making process. Contact us today at (619) 996-0460 to schedule a Free 15-minute consultation and plan your next steps.

What is a Healthcare Corporation?

A healthcare corporation is a professional corporation (PC) established to provide medical, dental, or other licensed health services. As a legal entity, it is distinct from its owners (shareholders), offering several benefits:

• Legal Identity: A PC can sue or be sued, enter into contracts, own property, and take on debt.
• Limited Liability: Shareholders' personal assets are generally protected from corporate debts and liabilities.
• Tax Options: Depending on the structure chosen (e.g., C corporation or S corporation), tax treatment can be tailored to suit individual needs.

Why Consider an S Corporation for Your Healthcare Practice?

For solo and small healthcare practices, an S corporation can be an excellent choice to avoid the issue of double taxation that is inherent in a C corporation. Here's how:

• Tax Efficiency: An S corporation is not taxed at the corporate level. Instead, profits and losses pass through to the shareholders, who report them on their personal tax returns. This avoids the corporate and individual taxation levels seen in C corporations.
• Flexibility for Solo Practitioners: S corporations allow owners to pay themselves a salary and take distributions. This balance can lead to significant tax savings when structured correctly.
• Compliance with California Laws: S corporations still fulfill the requirements of professional healthcare corporations, ensuring regulatory compliance.

However, there are specific eligibility criteria for S corporations, including:

• A limit of 100 shareholders.
• Shareholders must generally be U.S. citizens or residents.
• Only one class of stock is allowed.

Given the complexity of tax and legal implications, consulting both a corporate attorney and a CPA is crucial. These professionals will work as a team to help you decide if an S corporation aligns with your practice's financial and operational goals.

How to Incorporate Your Healthcare Practice in California

Incorporating a healthcare practice involves several key steps:

1. File Articles of Incorporation: Include information such as the practice's purpose and shareholder structure.
2. Draft Corporate Bylaws: Establish rules for operation, including ownership and voting rights.
3. Elect a Board of Directors: Shareholders elect directors to oversee operations.
4. Issue Stock Certificates: Shares are issued to shareholders, reflecting their ownership interests.

At West Coast Health Law, we handle every step to ensure compliance with California's stringent healthcare regulations.

Advantages of a Healthcare Corporation

1. Limited Liability Protection: Shareholders' personal assets are safeguarded from corporate debts or malpractice lawsuits against the corporation.
2. Regulatory Compliance: Only professional corporations meet California's healthcare licensing requirements.
3. Tax Planning Opportunities: Whether structured as a C corp or an S corp, corporations offer ways to minimize tax liabilities and maximize growth potential.

The Role of a CPA in Choosing the Right Structure

Selecting between an S corporation, C corporation, or other business structure is not just a legal decision; it has profound financial implications. A CPA will analyze your income, projected growth, and tax obligations to determine the most advantageous structure for you.

At West Coast Health Law, we encourage a collaborative approach, we will work closely with CPA's to craft solutions tailored to each healthcare professional's unique situation.

Contact a Healthcare Corporate Lawyer in San Diego, CA Today

Whether you're forming a new healthcare practice or restructuring an existing one, West Coast Health Law is here to help. Let us guide you through the legal and strategic decisions involved in incorporation.  

Contact us either by completing the online form or by calling us at (619) 996-0460, and we will schedule a Free 15 minute consultation to discuss your business venture.