Corporations – Professional Corporation – California
CALIFORNIA CORPORATIONS CODE, §§13400-13410 (Moscone-Knox Professional Corporation Act CALIFORNIA BUSINESS AND PROFESSIONS CODE, §§ 2000-2521 (Medicine)
CALIFORNIA CORPORATIONS CODE,
§§13400-13410 (Moscone-Knox Professional Corporation Act)
“Professional services” are 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.
A “professional corporation” is a corporation organized under the General Corporation Law or the Moscone-Knox Professional Corporation Act and that is engaged in rendering professional services in a single profession (except as otherwise authorized in §13401.5) pursuant to a certificate of registration issued by the governmental agency regulating the profession and that in its practice or business designates itself as a professional or other corporation as may be required by statute. However, any professional corporation rendering professional services by persons duly licensed by the Medical Board of California, or any examining committee under the jurisdiction of the board, is not required to obtain a certificate of registration in order to render those professional services.
A “licensed person” is any natural person who is duly licensed under the provisions of the Business and Professions Code to render the same professional services as are or will be rendered by the professional corporation of which he or she is or intends to become, an officer, director, shareholder, or employee.
A “disqualified person” means a licensed person who for any reason becomes legally disqualified (temporarily or permanently) to render the professional services that the particular professional corporation of which he or she is an officer, director, shareholder, or employee is or was rendering.
The following licensed persons may be shareholders, officers, directors, or professional employees of a professional medical corporation so long as the sum of all shares owned by those licensed persons does not exceed 49 percent of the total number of shares of the professional corporation and so long as the number of those licensed persons owning shares in the professional corporation does not exceed the number of persons licensed by the governmental agency regulating the designated professional corporation:
Licensed doctors of podiatric medicine.
Licensed marriage, family, and child counselors.
Licensed clinical social workers.
Licensed physician assistants.
The provisions of the General Corporation Law apply to professional corporations, except where such provisions are in conflict with or inconsistent with the provisions of the Moscone-Knox Professional Corporation Act.
A professional corporation which has only one shareholder need have only one director who shall be such shareholder and who shall also serve as the president and treasurer of the corporation. The other officers of the corporation in such situation need not be licensed persons. A professional corporation which has only two shareholders need have only two directors who shall be such shareholders. The two shareholders between them shall fill the offices of president, vice president, secretary and treasurer.
A professional medical corporation may establish in its articles or bylaws the manner in which its directors are selected and removed, their powers, duties, and compensation. Each term of office may not exceed three years. The articles or bylaws of a professional medical corporation with more than 200 shareholders may provide that directors who are officers of the corporation or who are responsible for the management of all medical services at one or more medical centers may have terms of office, as directors, of up to six years; however, no more than 50 percent of the members of the board, plus one additional member of the board, may have six-year terms of office.
The articles of incorporation of a professional corporation must contain a specific statement that the corporation is a professional corporation within the Moscone-Knox Professional Corporation Act.
No professional corporation can render professional services in this California without a currently effective certificate of registration issued by the governmental agency regulating the profession in which such corporation is or proposes to be engaged.
A professional corporation may lawfully render professional services in this state, but only through employees who are licensed persons. The corporation may employ persons not so licensed, but such persons may not render any professional services rendered or to be rendered by that corporation in this state. A professional corporation may render professional services outside of this state, but only through employees who are licensed to render the same professional services in the jurisdiction or jurisdictions in which the person practices.
Shares of capital stock in a professional corporation may be issued only to a licensed person or to a person who is licensed to render the same professional services in the jurisdiction or jurisdictions in which the person practices, and any shares issued in violation of this restriction are void.
No shareholder of a professional corporation qualified to render professional services in California may enter into a voting trust, proxy, or any other arrangement vesting another person (other than another person who is a shareholder of the same corporation) with the authority to exercise the voting power of any or all of his or her shares, and any such purported voting trust, proxy or other arrangement is void.
Shares in a professional qualified to render professional services in California may be transferred only to a licensed person, to a shareholder of the same corporation, to a person licensed to practice the same profession in the jurisdiction or jurisdictions in which the person practices, or to such professional corporation, and any transfer in violation of this restriction is void.
A professional corporation may purchase its own shares without regard to any restrictions provided by law upon the repurchase of shares, if at least one share remains issued and outstanding.
A professional corporation qualified to render professional services in California must acquire all of the shares of a shareholder who is disqualified from rendering professional services in California or of a deceased shareholder who was, on his or her date of death, licensed to render professional services in this state. If a disqualified shareholder or the representative of a deceased shareholder fails to transfer his shares to the corporation, to another shareholder of the corporation, to a person licensed to practice the same profession in the jurisdiction or jurisdictions in which the person practices, or to a licensed person, within 90 days following the date of disqualification, or within six months following the date of death of such shareholder, then the certificate of registration of such corporation may be suspended or revoked by the governmental agency regulating the profession in which such corporation is engaged. In the event of such suspension or revocation such corporation shall cease forthwith to render professional services in California.
No professional corporation may be formed so as to cause any violation of law, or any applicable rules and regulations, relating to fee splitting, kickbacks, or other similar practices by physicians and surgeons or psychologists, including, but not limited to, §650 or §2960(e) of the Business and Professions Code. A violation of any such provisions shall be grounds for the suspension or revocation of the certificate of registration of the professional corporation.
A professional corporation may adopt any name permitted by a law expressly applicable to the profession in which such corporation is engaged or by a rule or regulation of the governmental agency regulating such profession. The §201(b) do not apply to the name of a professional corporation if name contains or is restricted to the name or the last name of one or more of the present, prospective, or former shareholders or of persons who were associated with a predecessor person, partnership or other organization or whose name or names appeared in the name of such predecessor organization, and the Secretary of State shall have no authority by reason of §201(b) to refuse to file articles of incorporation which set forth such a name.
The name of a professional corporation cannot be substantially the same as the name of a domestic corporation, the name of a foreign corporation qualified to render professional services in this state which is authorized to transact business in this state, or a name which is under reservation for another corporation.
A professional qualified to render professional services in California is subject to the applicable rules and regulations adopted by, and all the disciplinary provisions of the Business and Professions Code expressly governing the practice of the profession in this state, and to the powers of, the governmental agency regulating the profession in which such corporation is engaged. Nothing in the Moscone-Knox Professional Corporation Act affects or impairs the disciplinary powers of any governmental agency over licensed persons or any law, rule or regulation pertaining to the standards for professional conduct of licensed persons or to the professional relationship between any licensed person furnishing professional services and the person receiving such services.
CALIFORNIA BUSINESS AND PROFESSIONS CODE
§§ 2000-2521 (Medicine)
A medical corporation is a corporation which is authorized to render professional services, as defined in §§ 13401 and 13401.5 of the Corporations Code, so long as that corporation and its shareholders, officers, directors and employees rendering professional services who are physicians, psychologists, registered nurses, optometrists, podiatrists physician assistants, are in compliance with the Moscone-Knox Professional Corporation Act, the provisions of BUSINESS AND PROFESSIONS CODE, §§ 2000-2521, and all other statutes and regulations now or hereafter enacted or adopted pertaining to the corporation and the conduct of its affairs.
With respect to a medical corporation, the governmental agency referred to in the Moscone-Knox Professional Corporation Act is the Division of Licensing.
Except as provided in §§ 13401.5 and 13403 of the CORPORATIONS CODE, each shareholder, director and officer of a medical corporation, except an assistant secretary or an assistant treasurer, shall be a licensed person as defined in the CORPORATIONS CODE.
A shareholder of a medical corporation which renders professional services may be a medical corporation which has only one shareholder who shall be a licensed person licensed person as defined in the CORPORATIONS CODE. The shareholder of the latter corporation may be an officer or director of the former corporation.
The income of a medical corporation attributable to professional services rendered while a shareholder is a disqualified person, as licensed person as defined in the CORPORATIONS CODE, shall not in any manner accrue to the benefit of such a shareholder or his or her shares in the a professional corporation.
A medical corporation may not do or fail to do any act the doing of which or the failure to do which would constitute unprofessional conduct under any statute or regulation now or hereafter in effect. In the conduct of its practice, the medical corporation must observe and be bound by such statutes and regulations to the same extent as a licensee under CALIFORNIA BUSINESS AND PROFESSIONS CODE, §§ 2000-2521.
The offering and operation by a medical corporation of a health care service plan licensed pursuant to the provisions of Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code is hereby authorized. For such purpose a medical corporation may employ, or enter into contracts or other arrangements with, any person or persons authorized to practice any of the healing arts, but no such employment, contract, or arrangement shall provide for the rendering, supervision, or control of professional services other than as authorized by law.
The Division of Licensing may adopt and enforce regulations to carry out the purposes and objectives of this article and the Moscone-Knox Professional Corporation Act including regulations requiring (a) that the bylaws of a medical or podiatry corporation shall include a provision whereby the capital stock of such corporation owned by a disqualified or a deceased person shall be sold to the corporation or to the remaining shareholders of such corporation within such time as such regulations may provide and that a medical corporation shall provide adequate security by insurance or otherwise for claims against it by its patients arising out of the rendering of professional services.
Any type of business organization that holds itself out to the public as an organization practicing medicine, or that a reasonably informed person would believe is engaged in the practice of medicine, shall be owned and operated only by one or more licensed physicians and surgeons.
A physician and surgeon who knowingly practices medicine with a business organization not owned or operated in compliance with the above restriction will have his or her license to practice permanently revoked.
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