Forming a Medical Corporation
Are you considering forming a medical corporation in the Bay Area? It is crucial that you have the knowledge and resources to put the best structure in place for your business. There are special rules and regulations for the formation of professional medical corporations in California. Here, our Fremont attorney for starting a business highlights the dos and the don’ts for forming a medical corporation in California.
The Dos and Don’ts for Forming a Medical Corporation in California
DO Ensure Full Compliance With California Ownership Regulations
There are special requirements for the ownership of medical corporations in California. The Moscone-Knox Professional Corporation Act mandates that medical corporations in California must be owned by licensed professionals. Further, licensed physicians must hold at least 51 percent of shares. The remaining (minority) ownership may be limited to certain allied health professionals. Unauthorized ownership can lead to serious regulatory sanctions.
DO Follow California Naming Conventions for Medical Corporations
California imposes strict naming requirements for medical corporations to prevent misleading or deceptive business identities. The corporation’s name must include “Medical Corporation” or a similar professional designation. It should reasonably align with the physician’s licensed name.
DO Clearly Separate the Clinical Practice from Administrative Matters
A well-structured medical corporation should maintain a clear distinction between clinical decision-making and business operations. Physicians must retain full control over medical judgments and patient care. Administrative staff and even third party companies can handle other matters, such as finances, billing, marketing, and human resources (HR).
DO File a Statement of Information Within 90 Days of Incorporation
When you form a medical corporation in California, you should file a Statement of Information with the California Secretary of State within 90 days of incorporation. Be proactive: Make sure all the required business formation paperwork is filed in a timely manner. You can use Form SI-550.
DON’T Violate California Licensing Requirements
Physicians who form a medical corporation should always be in full compliance with our state’s licensing requirements. Every shareholder, director, and officer of a medical corporation must hold a valid license in their respective field as per the California Business and Professions Code.
DON’T Neglect Corporate Record-Keeping Requirements
Medical corporations in California are subject to strict record-keeping requirements. Maintaining accurate and up-to-date corporate records is a legal requirement under California corporate law. A medical corporation must document meeting minutes, bylaws, stock issuance, tax filings, and financial records.
DON’T Mishandle Sensitive Patient Medical Records
A patient’s medical records are protected under the federal Health Insurance Portability and Accountability Act (HIPAA) and the California Confidentiality of Medical Information Act (CMIA). Mishandling medical data—whether through improper storage, unauthorized access, or insecure disposal—can lead to serious penalties.
Contact Our California Medical Corporation Formation Attorney Today
Lynnette Ariathurai is a California business formation lawyer with extensive experience helping clients navigate the dos and don’ts of forming medical corporations. Contact us today for a fully confidential, no obligation initial consultation. With an office in Fremont, we help entrepreneurs form medical corporations throughout the region, including in Newark, Hayward, East Bay, and Milpitas.