Four Things to Know About Starting Your Physical Therapy California Professional Corporation

If you are a San Diego physical therapist, here are four important things you should know before you open your own practice.

  1. You may incorporate as a California Professional Physical Therapy Corporation.

Under California law, you cannot operate your physical therapy practice as any type of corporation other than a California professional physical therapy corporation. That is, you cannot use a standard c-corporation or a limited liability company. California professional corporations were created in 1968 via the enactment of the Moscone-Knox Professional Corporation Act (the “Moscone-Knox Act” or the “Act”). See Cal. Corp. Code, §13400 et seq. The Act gives healing arts professionals — like physical therapists — the ability to protect their personal and family assets from being seized by creditors to pay business-related lawsuit judgments, debts, or other business liabilities. Prior to the Act, most medical professionals were organized as general partnerships or sole proprietorships. Neither of those business forms protected personal and family assets from being seized. The Moscone-Knox solved that problem for licensed medical professionals. We here at San Diego Corporate Law highly recommend determining if incorporating as a California professional physical therapy corporation before you open your physical therapy practice. The corporate shield will protect against many types of judgments if you get sued. It is essential to have an experienced San Diego corporate attorney provide advice and assistance with setting up your practice.

  1. Only certain licensed professionals may be owners of your California professional physical therapy corporation.

Under the provisions of the Moscone-Knox Act, there are certain rules and restrictions with respect to who may be shareholders of your California professional physical therapy corporation. Essentially, all of the owners must be licensed and at least 51% must be licensed physical therapists. Further, the other 49% must come from this list:

  • Licensed physicians and surgeons
  • Licensed doctors of podiatric medicine
  • Licensed acupuncturists
  • Naturopathic doctors
  • Licensed occupational therapists
  • Licensed speech-language therapists
  • Licensed audiologists
  • Registered nurses
  • Licensed psychologists
  • Licensed physician assistants
  • Licensed midwives

Licensure is required. This means that if any of your owners lose his or her license, then they must be removed as an owner immediately. For this reason and others it is important to have a Buy-Sell Agreement that sets out the mechanisms for removing an owner and dealing with the process, timing, payment, and other matters. Here again, an experienced San Diego corporate attorney can help.

  1. There are similar restrictions for directors and senior management.

In a similar manner, the Moscone-Knox limits who may serve on the board of directors and who may be hired as the President, Treasurer, and other officers of a professional physical therapy corporation. Only the listed professionals can serve on the board of directors and only licensed physical therapists can be hired in certain officer positions. The policy reasons are straightforward. Only trained and licensed medical professionals should be in charge of a physical therapy professional corporation. Of course, other types of non-licensed employees can be hired as long as they are not engaged in providing physical therapy services.

  1. Your California professional corporation must be properly named. All corporations, including California professional corporations, must file articles of incorporation with the California Secretary of State’s office. When doing so, all corporations must comply with various rules with respect to corporation names. First, the name must be unique and not already taken by someone else. Second, for a professional physical therapy corporation, the name must include a designation that the entity is a corporation. Finally, a professional physical therapy corporation must have a name that includes the words “physical therapy” or “physical therapist”.

Contact San Diego Corporate Law

For more information, call Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard focuses his practice on business law, transactional, and corporate matters, and he proudly provides legal services to business owners in San Diego and the surrounding communities. Mr. Leonard can be reached at (858) 483-9200 or via email. Like us on Facebook.

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