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Medical Corporation in California: What Are the benefits?

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Many physicians looking to build a new practice are concerned first and foremost with the practice itself–finding a location, an office space, a roster of patients, providing effective service, etc. The legal structure of the practice, however, can be just as integral to its success. Below, we discuss some of the advantages of forming a medical corporation in California. If you are looking to start a medical practice in California, or if you have any questions about a matter of healthcare or business law, call a seasoned California healthcare business law attorney.

What is a California Medical Corporation?

A professional medical corporation is a corporate business entity formed pursuant to California’s Moscone-Knox Professional Corporation Act (the Act) for the purposes of engaging in the practice of medicine. When you form the corporation, it becomes a separate legal entity from the founders and owners. When you see patients, sign contracts, or otherwise conduct business, you are acting on behalf of the corporation, rather than as an individual.

California medical corporations must be owned by one or more physicians. Non-physicians can have an ownership interest, but physicians must have majority ownership. If a physician does not establish a medical corporation, when they practice medicine they will be considered a “sole proprietorship” by default.

Limiting Liability

Physicians are often higher-earning individuals that present attractive targets for lawsuits. While doctors carry malpractice insurance, malpractice is only one source of liability for medical professionals. Medical professionals must also worry about personal liability for employment-related matters such as sexual harassment, discrimination, or even personal injury on the property, as well as business liabilities such as HIPAA and other regulatory fines. Sole proprietorships leave the individual responsible for all of these liabilities.

A professional corporation places a barrier between the business and the individuals. Liability for any business-related matter will extend only to the corporation’s assets, not the personal bank account of the owners or employees. Individuals are also shielded against the malpractice of other employees.

Tax Savings

Corporations are taxed differently than sole proprietorships. California medical corporations are taxed as “C corporations” by default, which involves taxation at the corporate level and then again at the shareholder level when shareholders receive income. Because medical corporations tend to have few shareholders, however, they can opt for “S corporation” status. S corps are taxed only at the shareholder level, not at the corporate level, avoiding double taxation. S corps can also save money on self-employment tax, not available to sole proprietorships.


Practitioners can build their brand, reputation, and patient base around the name of the medical practice. When one practitioner leaves a sole proprietorship or partnership, that business entity ceases to exist. If another partner continues on, they will need to re-establish the business. A corporation, however, exists separate from the owners. When one shareholder retires, leaves, or passes away, they can simply sell their shares to the other shareholders and allow the name of the corporation to continue. This allows for easy continuity, patient satisfaction, and general institutional ease. Keeping the same entity avoids things like having to re-establish third-party contracts and signing leases under a new name.


Medical corporations are eligible for fringe benefits such as 401(k)s and retirement plans with higher contribution limits than sole proprietorships or partnerships. Medical corporations are also eligible to provide tax-deductible health insurance, life insurance, and disability insurance.

Trusted Advice and Representation for Your California Medical Practice

For assistance with matters pertaining to healthcare employment disputes, healthcare mergers and acquisitions, regulatory compliance, business disputes, fraud allegations, licensing, or any other healthcare legal issue, contact the Law Offices of Art Kalantar in Los Angeles or California statewide at 310-773-0001.

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