If you’ve talked to friends in other industries, you’ve probably heard them mention forming an LLC for their business. It’s simple, flexible, and offers liability protection. So, why can’t you do the same for your California medical practice? The answer lies in state law, which prohibits medical professionals from using standard LLCs or corporations. Instead, you’re required to use a specific structure: the Professional Medical Corporation (PMC). This isn’t just a bureaucratic hurdle; it’s a system designed to protect patient care. In this post, we’ll explain exactly what a PMC is, the pros and cons, and the step-by-step process for getting it right. Utilizing specialized entity formation services for medical practices is crucial to handling these unique requirements correctly.
Key Takeaways
- A PMC is a legal requirement, not a choice: In California, you can’t form a standard LLC for a medical practice. State law requires a Professional Medical Corporation (PMC) to ensure clinical decisions are made by licensed physicians, protecting both you and your patients.
- Liability protection depends on proper maintenance: Forming a PMC shields your personal assets from business debts, but this protection is conditional. You must consistently follow corporate formalities, like holding annual meetings and keeping separate finances, to maintain your liability shield.
- Compliance goes beyond state incorporation: Filing with the Secretary of State is just the first step. You must also register with the Medical Board of California and strictly adhere to ownership rules, ensuring only licensed professionals are shareholders, to operate legally and avoid serious penalties.
What Legal Structure Does Your California Medical Practice Need?
Choosing the right business structure for your medical practice is one of the first big decisions you’ll make. It’s not just about paperwork; this choice directly impacts how you handle your taxes, your personal liability for business debts, and your day-to-day operations. Getting it right from the start sets a strong foundation for your practice’s future.
Your Legal Structure Options
In California, the options are specific for medical professionals. You can operate as a sole proprietorship, a partnership with other licensed doctors, or a professional medical corporation. It’s important to note what you can’t do. Unlike other businesses, you cannot form a standard Limited Liability Company (LLC) or a regular corporation for a medical practice in this state. Getting your business accounting and management right from the start depends heavily on picking the correct legal entity. This decision sets the foundation for your financial health and operational efficiency, so it’s worth taking the time to understand your choices thoroughly.
Why California Requires a Professional Medical Corporation (PMC)
You might be wondering why California is so particular about this. The state requires medical practices that want corporate protections to form as a Professional Medical Corporation (PMC). This isn’t an arbitrary rule; it’s written into the California Corporations Code to uphold a high standard of patient care. A PMC is a special business entity created specifically for licensed professionals, including doctors, dentists, and physician assistants. The core idea is to ensure that medical decisions remain in the hands of licensed medical experts, not corporate shareholders who may prioritize profits over patient well-being. This structure allows you to run your practice as a corporation while complying with state laws designed to protect both you and your patients.
A Look at Corporate Practice of Medicine Laws
The PMC requirement is tied to California’s Corporate Practice of Medicine (CPOM) laws. These rules are in place to prevent non-physicians from owning or controlling a medical practice. Essentially, the law states that only licensed medical professionals can be shareholders in a professional medical corporation. This prevents business interests from influencing clinical judgment. Complying with CPOM laws also means you must register your practice with the Medical Board of California. Failing to do so can lead to serious legal and financial penalties. Staying on top of these regulations is crucial, as it protects your license and your practice from potential issues, including a tax notice or audit.
Forming Your PMC: The Legal Checklist
Once you’ve decided that a Professional Medical Corporation is the right move for your practice, it’s time to handle the legal details. Creating a PMC in California involves more than just filing a few papers; it requires careful attention to state laws and regulations specific to medical professionals. This checklist breaks down the essential legal steps to ensure your practice starts on a solid and compliant foundation. Getting these things right from the beginning saves you from headaches and potential penalties down the road.
Key Professional Corporation Requirements
In California, a Professional Medical Corporation has a few non-negotiable rules. First, the corporation can only offer professional medical services. This means you can’t mix your medical practice with an unrelated business under the same corporate umbrella. Second, ownership is restricted. All shareholders of a PMC must be licensed medical professionals, such as physicians, surgeons, or other specific healthcare providers. This is a critical point to remember, as allowing non-physicians to own or control the practice violates state laws. Proper entity formation ensures you meet these requirements from day one, setting up a structure that protects both you and your practice.
Your Licensing and Registration Steps
Before you can even think about opening your doors, you need to make sure all your licensing and registration is in order. This goes beyond your personal medical license. Your new corporation must be registered with the appropriate state boards, most importantly the Medical Board of California. A common mistake is thinking that incorporating with the Secretary of State is the final step. Failing to complete your board registration can lead to serious legal and financial consequences. Think of it as a two-part process: first, form the corporation, then register it with the medical board to get its official blessing to operate.
Gathering Your Essential Documents
Proper documentation is the backbone of your corporation. You’ll need to prepare and file your Articles of Incorporation with the California Secretary of State, which officially creates your PMC. After that, you’ll draft your corporate bylaws—the internal rules for how your corporation will be run. These cover everything from shareholder meetings to director responsibilities. Inadequate corporate formalities and documentation are common pitfalls that can jeopardize your corporate status. Keeping these essential records organized is crucial for maintaining compliance and is a core part of our business accounting and management services.
Registering with the Medical Board
This step is so important it deserves its own spotlight. After you’ve filed your Articles of Incorporation, you must register your PMC with the Medical Board of California. This often involves submitting a Fictitious Name Permit application if you plan to operate under a name different from the one on your incorporation documents. The board will review your paperwork to confirm that your corporation complies with all state regulations, including ownership and naming rules. As legal experts warn, failing to register can lead to significant penalties, making this a step you absolutely cannot afford to overlook.
How to Name Your Practice Correctly
California has specific rules for naming your medical corporation. The name must include words that signify its corporate status, such as “Professional Corporation” or “Medical Corporation.” This signals to the public and regulatory bodies that your practice is a corporation. Before you get too attached to a name, you’ll need to check with the California Secretary of State to ensure it’s not already taken. Choosing a compliant name is just one part of maintaining your corporate status, which also includes holding annual shareholder meetings and other important formalities to stay in good standing.
Is a PMC Right for You? Weighing the Pros and Cons
Deciding on a business structure is a big step. A Professional Medical Corporation comes with some fantastic benefits, but it also has its complexities. Let’s walk through the pros and cons so you can feel confident about whether it’s the right move for your practice.
Protecting Your Personal Assets
A major advantage of a PMC is creating a legal barrier between your business and personal finances. If your practice faces a lawsuit over business debts or an employee issue, your personal assets—like your home and savings—are generally protected. It’s important to be clear on one thing, though: this protection doesn’t extend to medical malpractice. You are still personally responsible for your professional work, which is why having solid malpractice insurance is non-negotiable. This structure separates business liability from your personal life, but not your professional duty of care.
Finding Tax Advantages
One of the most compelling reasons to form a PMC is the potential for tax savings. A PMC can elect to be taxed as an S-Corporation or a C-Corporation, which can significantly lower your overall tax burden compared to operating as a sole proprietor. This structure allows you to deduct legitimate business expenses, including salaries, insurance premiums, and retirement plan contributions, which reduces your taxable income. Getting the right business tax planning advice from the start is key to making the most of these benefits and ensuring your practice is set up for financial health.
Gaining Operational Flexibility
A PMC offers a surprising amount of flexibility in how you structure and run your practice. For instance, you can bring in other licensed professionals as shareholders, officers, or directors, which is great for building a group practice. However, this flexibility comes with formal responsibilities. California law requires PMCs to follow certain corporate formalities, such as holding annual shareholder meetings and keeping detailed records. Staying organized with these requirements is essential for maintaining your corporate status and its protections. It’s a trade-off: more opportunity for growth, but with more structured rules to follow.
Limiting Your Professional Liability
This point is closely related to asset protection but deserves its own spotlight. As an owner of a PMC, you generally aren’t personally on the hook for the practice’s overall debts or legal judgments against the business itself. If the practice can’t pay its lease, for example, creditors typically can’t come after your personal bank account. But remember the crucial exception: you are always personally liable for your own professional negligence or malpractice. The corporation protects you from the business’s liabilities, not from the consequences of your own medical practice.
The Challenge of Complex Formation
Let’s be honest: setting up a PMC isn’t as simple as just filling out a form. The process involves higher startup costs than a sole proprietorship and a fair amount of administrative work. You’ll need to navigate specific legal and regulatory steps to get everything right from day one. Because of these complexities, most physicians seek legal and accounting help to ensure their corporation is formed correctly. While this initial investment of time and money can feel daunting, getting professional help with your entity formation prevents costly mistakes down the road.
Staying on Top of Regulations
Operating a PMC in California means you have to play by a specific set of rules. A critical step is registering your practice with the Medical Board of California and keeping that registration current. Failing to do so can lead to serious legal and financial penalties. You also need to be aware of the state’s Corporate Practice of Medicine (CPOM) laws, which are designed to prevent non-physicians from influencing medical decisions. These regulations are strict, so ongoing compliance isn’t just good practice—it’s a legal necessity for keeping your doors open.
Who Can (and Can’t) Be an Owner
The rules around ownership in a California PMC are crystal clear: all shareholders must be licensed medical professionals. California law strictly prohibits non-licensed individuals from having any ownership stake or control over a medical practice. This is a cornerstone of the CPOM doctrine, ensuring that patient care remains in the hands of qualified, licensed practitioners. This means you can’t bring on a family member or a business-savvy friend as a co-owner unless they also hold the required professional license. It’s a critical detail to understand before you start planning your ownership structure.
Your Step-by-Step Plan to Form Your Practice
Once you’ve decided on a Professional Medical Corporation, it’s time to bring it to life. This isn’t just about filing paperwork; it’s about building a strong, compliant foundation for your practice’s future. Following these steps will help you establish your corporation correctly and set you up for long-term success.
Issuing Stock Certificates
Think of stock certificates as the official proof of ownership in your corporation. After you’ve filed your articles of incorporation, you need to issue these certificates to each shareholder. This step is more than just a formality—it’s a critical legal requirement. Failing to properly issue stock can blur the lines between you and your corporation, potentially putting your personal assets at risk if the practice faces legal trouble. It solidifies the corporate structure and is a key part of your initial entity formation. Make sure this is one of the first things you do after your PMC is officially registered.
Maintaining Corporate Formalities
Running a corporation means you have to act like one. This involves keeping up with “corporate formalities,” which are the operational rules that keep your business compliant. You’ll need to hold annual meetings for directors and shareholders, even if you’re the only one, and keep detailed records of these meetings, known as minutes. Neglecting these tasks is a common misstep that can jeopardize your liability protection. Consistently maintaining these records demonstrates that your practice operates as a legitimate, separate legal entity, which is essential for protecting your personal assets and staying in good standing with state requirements.
Setting Up Your Finances and Banking
Keeping your practice’s finances separate from your personal accounts is non-negotiable. Start by opening a dedicated business bank account as soon as your corporation is formed. All practice-related income and expenses must flow through this account. Next, choose and set up a reliable accounting system. Using the right software from day one makes tracking your financial health, managing cash flow, and preparing for tax season much simpler. Proper accounting software implementation establishes the clear financial controls necessary to prevent legal issues and make sound business decisions.
Securing the Right Insurance
In the medical field, having the right insurance is crucial for managing risk. Malpractice insurance is an absolute must-have to protect you and your practice from claims related to professional negligence. Beyond that, you’ll likely need other policies, such as general liability insurance for slip-and-fall incidents on your property, workers’ compensation if you have employees, and property insurance. Working with an insurance broker who specializes in medical practices can help you identify the exact coverage you need to operate with confidence, ensuring you’re protected from all angles.
Drafting Professional Agreements
If you’re going into practice with partners, clear agreements are essential for a healthy working relationship. A shareholder agreement outlines the rights and responsibilities of each owner, including what happens if a shareholder wants to leave, becomes disabled, or passes away. You should also have well-drafted employment contracts for any physicians or key staff you hire. These documents define roles, compensation, and expectations, which helps prevent misunderstandings down the road. Taking the time to create these professional agreements is a proactive step that provides clarity and a solid framework for your practice’s operations.
How an Expert Can Help You Form Your Practice
Setting up a professional medical corporation is more than just filing paperwork; it’s about building a solid legal and financial foundation for your future. The process is filled with specific requirements and potential pitfalls that can be overwhelming to handle on your own. This is where bringing in a professional can make all the difference. An expert in entity formation can help you manage every detail, from initial setup to long-term compliance, so you can focus on what you do best: caring for your patients. They provide the structure and support needed to ensure your practice starts on the right foot and stays there.
Ensuring You’re Legally Compliant
California has strict rules for medical corporations, particularly the Corporate Practice of Medicine (CPOM) doctrine. One of the biggest mistakes a new practice can make is accidentally allowing non-physicians to have ownership or control, which directly violates these laws. Another common oversight is failing to register correctly with the Medical Board of California. Both of these missteps can lead to serious legal and financial penalties. An experienced advisor understands these regulations inside and out. They ensure every step you take is compliant, protecting you from fines and legal trouble that could jeopardize your practice before it even gets off the ground.
Managing Your Documentation
When you form a corporation, you create a new legal entity, and that entity requires meticulous records. It’s a common mistake for physicians to overlook key documentation, such as properly issuing stock certificates or holding and recording official meetings. Failing to do so can put your corporate status at risk, potentially erasing the liability protection you worked so hard to create. A professional service helps you establish and maintain these crucial records from day one. They ensure your stock is issued correctly, your bylaws are in order, and your meeting minutes are properly documented, creating a complete and defensible corporate history.
Getting Administrative Support
Running a professional medical corporation involves ongoing administrative duties that are easy to forget when you’re busy with patients. For example, California law requires PMCs to hold annual shareholder meetings to maintain their corporate status. It’s also critical to remember that only licensed medical professionals can be shareholders. An expert can provide the administrative support needed to keep these tasks on track. They can help schedule and document required meetings, manage your corporate records, and ensure all administrative formalities are consistently met, freeing you up to concentrate on your clinical work.
Monitoring Your Ongoing Compliance
Compliance isn’t a one-time checklist you complete during formation—it’s an ongoing commitment. To maintain your corporate protections, you need to pay close attention to corporate formalities year after year. This includes adopting and following bylaws, maintaining corporate minute and stock books, and conducting annual meetings. An expert partner acts as your compliance watchdog, monitoring deadlines and requirements so nothing gets missed. This proactive approach ensures your practice remains in good standing with the state, providing peace of mind and safeguarding your personal assets from business liabilities.
Getting Help with Tax Planning
While forming a professional medical corporation offers significant benefits, it also comes with tax implications that require careful planning. The structure of a PMC can create complexities that, if not managed properly, could lead to a higher tax burden. This is why strategic business tax planning is essential from the very beginning. A financial expert can analyze your specific situation and help you structure your corporation in the most tax-efficient way possible. They can identify opportunities for deductions and help you create a financial strategy that aligns with both your personal and professional goals.
Making Smart Decisions from the Start
Setting up your professional medical corporation correctly from day one saves you from headaches down the road. These foundational steps aren’t just about checking boxes; they create the legal and financial backbone of your practice, ensuring you’re compliant and positioned for healthy growth. Getting these details right allows you to focus on what you do best: caring for your patients.
Choosing Your Ownership Structure
In California, the rules for who can own a medical practice are strict. The Corporate Practice of Medicine (CPOM) doctrine is designed to keep medical decisions in the hands of licensed professionals, not corporate interests. This means that allowing non-physicians to own or control your practice is a direct violation of state law. As legal experts note, this can lead to significant legal and financial penalties. When forming your practice, you must ensure that all owners are licensed physicians. This isn’t just a suggestion—it’s a core requirement for operating legally in the state and a critical step in our entity formation process.
What to Include in Your Operating Agreement
Think of your operating agreement as the rulebook for your practice. It outlines how your corporation will be run, how decisions will be made, and what happens in various scenarios, like a shareholder leaving the practice. For a Professional Medical Corporation (PMC), this document must specify that the corporation will only provide medical services. It also needs to reinforce the ownership rules. According to legal sources, “shareholders of professional medical corporations must be licensed medical professionals.” Your agreement should clearly define roles, responsibilities, profit distribution, and procedures for resolving disputes, creating a clear framework that protects all partners involved.
Setting Up Your Record-Keeping System
From the moment you open your doors, you need a reliable system for tracking every financial transaction. Inadequate record-keeping can quickly spiral into a major liability, leading to compliance issues and financial trouble. It’s essential to choose an accounting system that fits your practice’s needs and to use it consistently. This includes maintaining detailed records of all income, expenses, patient billing, and payroll. Getting your accounting software implementation right from the start provides a clear view of your financial health and makes tax time much smoother. It also ensures you have the documentation needed to back up your financial decisions.
Running Your Corporate Meetings
Operating as a corporation comes with certain obligations, often called “corporate formalities.” One of the most important is holding regular meetings. California law requires professional medical corporations to hold annual shareholder meetings. These aren’t just for show; they are where you’ll make key decisions, elect directors, and approve major actions. You must keep detailed minutes of these meetings as part of your corporate record. Consistently holding and documenting these meetings demonstrates that you are operating as a legitimate corporation, which is crucial for maintaining the liability protection that a PMC offers.
Establishing Financial Controls
Strong financial controls are the guardrails that protect your practice’s assets and ensure financial integrity. This means putting clear procedures in place for handling money. Simple steps like separating business and personal bank accounts, requiring dual signatures for large checks, and creating a formal process for approving expenses can prevent errors and deter fraud. As legal guides for physicians point out, “improper financial controls can lead to significant legal issues and financial penalties.” Establishing these controls early on builds a trustworthy financial environment and gives you confidence in your numbers as you manage your business accounting.
Common Formation Mistakes to Avoid
Setting up your medical practice is an exciting step, but the formation process is filled with complexities that can easily trip you up. A simple oversight today can create significant legal and financial headaches tomorrow. The good news is that you can sidestep these common pitfalls with a bit of foresight and planning. From messy documentation to missed registration deadlines, getting these details right from the start is crucial for building a stable and compliant practice.
Think of it like this: you wouldn’t start a complex medical procedure without a clear plan, and the same principle applies to your business. By understanding the most frequent mistakes, you can create a solid foundation for your practice. This means paying close attention to your corporate paperwork, adhering to ongoing formalities, and ensuring every decision aligns with California’s strict regulations. Getting your business accounting and management in order from day one will help you stay organized and avoid these common stumbles. Let’s walk through the key areas where new practice owners often go wrong.
Avoiding Documentation Errors
Your formation documents are more than just paperwork; they are the legal blueprint of your practice. Simple typos or incorrect information on your Articles of Incorporation can cause delays and rejection from the Secretary of State. More serious errors, like drafting bylaws that don’t comply with California law, can create major problems later on. For example, one of the most critical rules is ensuring your documents correctly reflect that only licensed physicians can own or control the practice. Any language that suggests otherwise directly violates the state’s Corporate Practice of Medicine (CPOM) laws. Double-checking every detail for accuracy and completeness is a non-negotiable step in protecting your new venture.
Don’t Overlook Corporate Formalities
Once your practice is formed, you have to act like a corporation to be treated as one. This means observing “corporate formalities”—the ongoing tasks that prove your practice is a separate entity from you personally. These include holding regular board meetings, keeping detailed minutes, and maintaining a separate bank account for all business transactions. It can be tempting to skip these steps when you’re busy, but failing to do so can allow courts to “pierce the corporate veil.” This would make your personal assets vulnerable in a lawsuit against the practice. Consistently following these procedures is essential for protecting the liability shield your corporation provides.
Steering Clear of Compliance Violations
California has very specific rules for professional medical corporations, and compliance is not a one-time checklist item. It’s an ongoing commitment. A fundamental rule is that shareholders in a PMC must be licensed medical professionals. This structure ensures that clinical decisions remain in the hands of qualified practitioners. Furthermore, your corporation is legally restricted to providing medical services only. While this may seem straightforward, it can become complicated if you plan to offer related but non-medical services. Staying on top of these regulations is key to operating legally and avoiding penalties that could require tax notice and audit representation.
Handling Non-Physician Ownership Rules
The rule against non-physician ownership is one of the most important—and often misunderstood—regulations in California. The Corporate Practice of Medicine (CPOM) doctrine strictly prohibits non-licensed individuals from owning or controlling a medical practice. This isn’t just about who holds stock; it’s also about who has decision-making power. Any management agreements, profit-sharing arrangements, or other contracts with non-physicians must be structured carefully to avoid giving them improper influence over clinical or business operations. Violating these laws can lead to severe consequences, including the loss of your medical license, so it’s an area that demands careful attention and expert legal and financial advice.
Preventing Registration Oversights
After you’ve filed all your paperwork with the California Secretary of State, there’s one more critical step: registering your practice with the Medical Board of California. Many physicians mistakenly believe that incorporating with the state is the final hurdle, but it’s not. Failing to register with the Medical Board can result in serious legal and financial penalties, and it could even invalidate your corporation’s legal status. This registration is what officially permits your corporation to practice medicine in the state. Think of it as the final seal of approval. Missing this deadline or submitting an incomplete application is an avoidable mistake that can put your entire practice at risk before you even see your first patient.
How to Choose a Professional Formation Service
Deciding to bring in professional help to form your medical practice is a smart move. The healthcare industry has so many specific rules and laws, which makes it tricky to start a business without expert help. But with so many options out there, from online filing services to full-service law and accounting firms, how do you pick the right partner? It comes down to finding a provider who understands the unique challenges of a California medical practice and can offer the level of support you need.
Think of this as building your foundational team. You want experts who can handle the complexities of legal and financial compliance so you can focus on what you do best: caring for patients. A good formation service doesn’t just file paperwork; they provide a strategic advantage from day one. They’ll help you sidestep common pitfalls, ensure your structure is sound, and set you up for long-term financial health and legal compliance. This initial investment in the right expertise will pay dividends for the entire life of your practice.
What to Look for in a Provider
When you’re vetting potential services, prioritize expertise in California healthcare law. It is so important for healthcare providers to get legal and financial advice from professionals who specialize in setting up businesses for medical practices. A general business advisor might not understand the nuances of the Corporate Practice of Medicine doctrine or the specific requirements of the Medical Board of California. Look for a team that has a proven track record with PMCs. Ask them about their experience with practices like yours and check for testimonials or case studies. A great provider will act as a true partner, guiding you through every decision with clarity and confidence.
Comparing Different Service Levels
Not all formation services are created equal. Some are basic, online-only platforms that will file your Articles of Incorporation and nothing more. Others offer a comprehensive approach that includes drafting bylaws, handling stock issuance, and providing ongoing compliance support. For a medical practice, a more hands-on service is usually the better choice. You’ll want a team that can help you with business accounting and management from the start. This might include setting up your financial systems, creating shareholder agreements, and ensuring all your documentation is in perfect order. While a bare-bones service might seem cheaper, a full-service firm provides invaluable peace of mind.
Breaking Down the Costs
Let’s talk about the investment. Forming a professional medical corporation does come with higher startup costs and administrative responsibilities compared to a sole proprietorship. These expenses include state filing fees, legal and accounting fees, and costs for maintaining corporate records. It’s tempting to cut corners here, but think of these initial costs as an investment in your practice’s future. Paying for expert business tax planning and formation services upfront can save you from incredibly expensive compliance mistakes down the road. Ask for a clear breakdown of all fees so you know exactly what you’re paying for and can budget accordingly.
Planning Your Timeline
Forming a PMC isn’t an overnight process. From drafting documents to getting approvals from the Medical Board, the timeline can take several weeks or even months. If you want to start a healthcare business or make your current one bigger, it’s a good idea to get help from legal and financial experts early on. A professional service can give you a realistic timeline and keep the process moving forward efficiently. They know the order of operations and can anticipate potential delays, helping you manage your launch schedule. Start the conversation with a provider as soon as you decide to form your practice to avoid any last-minute rushes.
Exploring Your Support Options
You’ll likely need a team of experts to get your practice off the ground. A lawyer can help you choose the right business structure and handle the legal filings, while an accountant is essential for setting up your financial framework. At Clear Peak Accounting, we specialize in accounting software implementation and can work alongside your legal counsel to ensure your PMC is built on a solid financial foundation. We help you understand the tax implications of your structure, establish your books, and plan for profitability from the very beginning, ensuring your practice is set up for success.
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Frequently Asked Questions
Why can’t I just form a regular LLC for my medical practice in California? This is a common point of confusion, but California law is very specific on this. The state requires licensed medical professionals to use a structure that keeps clinical decisions firmly in the hands of doctors, not outside business interests. A standard LLC or corporation doesn’t meet this requirement. The Professional Medical Corporation (PMC) was created specifically to give you the liability protection of a corporation while ensuring you comply with state laws designed to protect patient care.
Does a Professional Medical Corporation protect me from malpractice claims? This is a critical distinction to understand. A PMC creates a legal shield between your business liabilities and your personal assets. For example, if your practice has a business debt it can’t pay, your personal savings are generally safe. However, this protection does not extend to your own professional actions. You are always personally responsible for the medical care you provide, which is why malpractice insurance remains an absolute necessity.
What is the single biggest mistake to avoid when setting up my practice? The most costly mistake is failing to complete all the registration steps. Many physicians assume that filing incorporation papers with the Secretary of State is the final step, but it’s not. You must also register your new corporation with the Medical Board of California. Overlooking this crucial step can lead to serious penalties and even invalidate your corporate status, putting your entire practice at risk before you’ve even started.
After my PMC is set up, what are the most important things I need to do to keep it compliant? Formation is just the beginning; ongoing compliance is what maintains your liability protection. The two most important habits to build are maintaining corporate formalities and keeping your finances separate. This means holding annual meetings for shareholders and directors (even if it’s just you) and keeping detailed minutes. It also means running all practice income and expenses through a dedicated business bank account, never mixing it with your personal funds.
Can I bring in a non-physician partner to handle the business side of my practice? No, not as an owner or shareholder. California’s Corporate Practice of Medicine (CPOM) laws are very strict and prohibit non-licensed individuals from having any ownership stake in a medical practice. This rule ensures that business motivations don’t interfere with patient care. While you can certainly hire a non-physician as a practice manager or consultant, they cannot be a co-owner of the corporation.