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Licensed professionals in California who wish to practice through a corporate entity face a distinct set of legal requirements that differ substantially from those governing ordinary business corporations. The Moscone-Knox Professional Corporation Act, together with the California Corporations Code and the profession-specific regulations of the Business and Professions Code, establishes a specialized framework for the formation, governance, and operation of professional corporations. These entities are subject to regulatory oversight by the state agency charged with licensing the particular profession involved, and their shares may be issued only to individuals who hold the appropriate professional license. The Law Offices of Alan Abergel, P.C. (LOAA) forms California professional corporations for licensed professionals across a range of disciplines and provides the ongoing compliance, governance, and transactional services that professional corporation owners need throughout the life of the entity.
A professional corporation is a special-purpose corporate entity authorized to render "professional services" as defined under California law. Professional services means any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act. The key distinguishing feature of a professional corporation is that it may render its professional services only through individuals who are duly licensed in the particular profession involved. The corporation itself does not hold a professional license — rather, it serves as the business entity through which licensed individuals deliver their services to clients and patients.
The professional corporation structure exists because California law generally does not permit most licensed professionals to render professional services through a standard business corporation or a limited liability company. The LLC form is unavailable for most licensed professions in California, which means that professionals who want the benefits of operating through a formal business entity — including liability protection, tax planning flexibility, and the ability to establish retirement plans — must typically form a professional corporation rather than an LLC or standard corporation. There are limited exceptions: accountants, attorneys, architects, engineers, and land surveyors have been permitted to operate as limited liability partnerships (LLPs), though the authorization for engineering, land surveying, and architecture LLPs has been subject to legislative sunset provisions that require attention to current law.
It is also important to note that certain professionals, such as engineers and real estate brokers, have always been permitted to conduct their activities as standard corporations under other provisions of law. These corporations are not "professional corporations" within the meaning of the Moscone-Knox Professional Corporation Act, and the Act's requirements do not apply to them. LOAA advises professionals on which entity form is available and appropriate for their particular license type, helping clients avoid the common mistake of forming the wrong type of entity for their profession.
LOAA forms California professional corporations for licensed professionals across a broad range of disciplines. The firm handles formations for lawyers, dentists, optometrists, physicians and surgeons, chiropractors, veterinarians, certified public accountants (CPAs), psychologists, psychiatrists, and architects, among other licensed professionals authorized to practice through a professional corporation under California law.
The formation process for a professional corporation involves several steps that go beyond the standard business incorporation filing. The articles of incorporation must include specific language required by the Moscone-Knox Professional Corporation Act, identifying the corporation as a professional corporation and specifying the profession in which it will engage. The corporate name must comply with the naming requirements of both the Corporations Code and the rules of the licensing agency that regulates the particular profession. Many licensing agencies impose specific naming conventions — a law corporation, for example, must include the designation "A Professional Corporation" or "A Professional Law Corporation" in its name, while a medical corporation must comply with the Medical Board of California's naming rules.
LOAA prepares the articles of incorporation, bylaws, initial corporate resolutions, stock certificates, and other organizational documents necessary to establish the professional corporation. The firm also assists with obtaining an Employer Identification Number (EIN) from the Internal Revenue Service, filing the Statement of Information with the California Secretary of State, and completing any additional registration requirements imposed by the applicable licensing agency. The goal is to deliver a fully formed, properly documented entity that is ready to begin operations in compliance with all applicable corporate and professional regulatory requirements.
Most professional corporations in California are required to register with the governmental agency that regulates the profession in which the corporation intends to engage. The corporation is permitted to render professional services only while a current certificate of registration is in effect. This registration requirement means that formation alone is not sufficient — the professional corporation must obtain and maintain its registration with the licensing agency as an ongoing condition of lawful operation.
The specific registration requirements and procedures vary by profession. The State Bar of California administers the registration of law corporations. The Medical Board of California and the various healing arts boards oversee the registration of medical, dental, chiropractic, optometric, and other healthcare professional corporations. The California Board of Accountancy handles CPA corporations, and the California Architects Board oversees architecture corporations. Each agency has its own application forms, documentation requirements, and renewal schedules, and some agencies conduct their own review of the corporation's organizational documents to confirm compliance with their profession-specific rules.
Certain professional corporations are exempt from the registration requirement. Medical corporations, dental corporations, veterinary corporations, architectural corporations, and certain other specified types of professional corporations are not required to register with their licensing agency, though they remain subject to the substantive requirements of the Moscone-Knox Professional Corporation Act and the Corporations Code. LOAA advises clients on whether their particular profession requires registration, assists with the registration process where required, and ensures that the corporation's organizational documents satisfy both the Corporations Code requirements and any profession-specific standards imposed by the licensing agency.
One of the most distinctive features of the professional corporation form is the restriction on who may own shares. The shares of capital stock of a professional corporation may be issued only to appropriately licensed persons. A law corporation, for example, may issue shares only to active members of the State Bar of California or to attorneys duly licensed in other states who meet the applicable requirements. A medical corporation may issue shares only to licensed physicians, and a dental corporation only to licensed dentists. This restriction ensures that ownership and control of the professional corporation remain in the hands of individuals who are subject to the professional licensing standards and ethical obligations that govern the practice.
There are limited exceptions to the general rule of profession-specific ownership. Certain health and welfare-related professional corporations may issue shares, subject to ownership restrictions, to members of other designated professions. Licensed optometrists, for example, may be shareholders of podiatry corporations under specified circumstances, and similar cross-profession ownership provisions exist for certain other healthcare specialties. These exceptions are narrowly defined by statute, and professional corporations that seek to take advantage of them must confirm that their particular ownership arrangement falls within the permissible scope.
When a shareholder of a professional corporation loses or surrenders the professional license that qualified them to hold shares, a mandatory disposition of shares is triggered. The corporation's bylaws and shareholder agreements must address this contingency, establishing procedures for the valuation and purchase of the disqualified shareholder's interest. A shareholder of a professional corporation may have fiduciary duties, both to the corporation and to other shareholders, to comply with share ownership and transfer requirements imposed by law and by any shareholder buy-out agreement. LOAA drafts shareholder buy-sell agreements that address license disqualification, death, disability, retirement, voluntary withdrawal, and other triggering events, ensuring that the corporation has a clear and enforceable mechanism for handling ownership transitions.
Professional corporations are subject to the general provisions of the California Corporations Code that apply to all corporations, plus the additional requirements imposed by the Moscone-Knox Professional Corporation Act and the profession-specific regulations of the applicable licensing agency. This layered governance framework creates obligations that professional corporation owners must understand and observe to maintain the corporation's good standing and liability protections.
The Moscone-Knox Act imposes requirements regarding the composition of the board of directors, the qualifications of officers, the maintenance of professional liability insurance or other security, and the restrictions on corporate activities. Directors and officers of a professional corporation must, in most cases, be licensed professionals themselves, though the specific requirements vary by profession. The corporation must confine its activities to the rendering of the professional services for which it was organized and to activities incidental thereto, and it may not engage in business activities unrelated to its professional purpose.
LOAA advises professional corporation owners on corporate governance matters, including the proper conduct of board and shareholder meetings, the adoption and amendment of bylaws, the maintenance of corporate minutes and records, compliance with annual reporting and registration renewal requirements, and the implementation of governance practices that preserve the corporation's limited liability protections. The firm also assists with the preparation of shareholder agreements, employment agreements between the corporation and its professional shareholders, and compensation arrangements that comply with both corporate law and the ethical rules of the applicable profession.
Professional corporations are bought, sold, and merged just as other businesses are, but the transactions carry additional complexity because of the share ownership restrictions, licensing agency requirements, and professional regulatory considerations that attach to these entities. A buyer who is not licensed in the relevant profession cannot acquire shares of the professional corporation, which means that the universe of potential acquirers is limited to licensed professionals and, in the healthcare context, to individuals holding licenses in the designated cross-ownership professions.
LOAA handles the purchase, sale, and merger of professional corporations, managing both the transactional and regulatory dimensions of these deals. The firm drafts and negotiates purchase agreements, conducts due diligence on the target corporation's regulatory standing, licensing history, and shareholder compliance, and coordinates with the applicable licensing agency to ensure that any required approvals or notifications are completed. For mergers between professional corporations, the firm prepares the plan of merger, obtains the required shareholder and board approvals, and files the necessary documents with the California Secretary of State and the licensing agency.
Valuation of professional corporations presents its own challenges, as the value of the practice is often closely tied to the personal goodwill of the individual practitioners — particularly in solo and small group practices. LOAA works with valuation professionals and the client's financial advisors to structure transactions that account for the distinction between personal goodwill and enterprise goodwill, which has significant implications for both the purchase price allocation and the tax treatment of the transaction for buyer and seller.
Professional corporations have legal needs that extend beyond formation, governance, and regulatory compliance. The practice name, logo, and branding of a professional corporation are valuable intellectual property assets that deserve legal protection. LOAA assists professional corporations with trademark registration for practice names and logos, copyright registration for original materials produced by the practice, and the drafting of licensing agreements when the corporation's intellectual property is used by affiliates, partners, or successors.
Real estate transactions are another common legal need for professional practices. Doctors, dentists, attorneys, accountants, and other professionals frequently lease or purchase the office space from which they operate, and the terms of these real estate arrangements can significantly affect the practice's operating costs, flexibility, and long-term planning. LOAA handles commercial lease negotiations, office purchase transactions, and build-out agreements for professional corporation clients, ensuring that the real estate arrangements support the practice's operational needs and growth objectives.
Zoning and land use considerations arise when a professional practice seeks to establish or relocate its office in a particular location. Local zoning ordinances may restrict the types of professional activities permitted in certain zones, impose parking and signage requirements, or require conditional use permits for certain types of professional offices. Healthcare practices, in particular, may face zoning issues related to patient volume, hours of operation, and the intensity of use associated with medical or dental facilities. LOAA advises professional corporations on zoning compliance, assists with conditional use permit applications where necessary.
Forming and operating a professional corporation in California involves a combination of corporate law, professional regulatory compliance, and practical business judgment that requires counsel with experience across these interconnected areas. A business attorney who understands corporate formation but lacks familiarity with the Moscone-Knox Act's profession-specific requirements, or a regulatory attorney who knows the licensing rules but cannot handle the transactional and governance work, will leave gaps that the client must fill with additional counsel and additional cost.
LOAA provides a comprehensive practice that covers the full range of legal needs that professional corporations encounter, from initial formation and licensing agency registration through shareholder agreements, governance matters, intellectual property protection, real estate transactions, and the eventual sale or merger of the practice. The firm's status as a business law practice with experience across multiple disciplines allows it to serve professional corporation clients with practical, business-focused advice that accounts for the regulatory constraints and opportunities unique to the professional corporation form.
Licensed professionals in California who are considering forming a professional corporation, who need compliance assistance with an existing professional corporation, or who are contemplating the purchase, sale, or merger of a professional practice are encouraged to contact LOAA for a consultation. The firm will evaluate the client's professional licensing status, practice objectives, and business needs and recommend the entity structure and legal approach best suited to the client's circumstances.
Disclaimer: The information on this page is provided for general informational purposes only and does not constitute legal advice. No attorney-client relationship is created by reading this content. Every legal matter is unique, and you should consult directly with a qualified attorney regarding your specific circumstances.
"I engaged Alan to help me through the complexities of obtaining my Lenders License. He was very knowledgeable about the process and provided me with a high level of service.I worked quickly getting him all the information needed and he worked at my pace. He was responsive to e-mails and questions and followed up with the DFPI to make sure everything was filed correctly.I had read online that this process could take as long as 6 months however Alan completed the assignment in less than 3 I will be retaining his services in the future to ensure my company remains in compliance."
-Petroleum Realty Group Inc.
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-Anonymous
"Very helpful in assisting in obtaining an OCCC Texas Motor Vehicle Sales Finance License. Very knowledgeable in answering all questions the OCCC asked for on their questionnaire. Highly recommended and would re-hire for any future assistance regarding motor vehicle and finance business. God Bless!"
-Raul
