California professional medical corporation bylaws are beneficial and highly advisable for anyone establishing a California medical business. Such medical professionals generally create a California Professional Corporation (PC), which is owned by doctors with medical licenses.

Such professional corporations must abide by the California Corporations Code along with the rule and regulations governing the medical industry, which are set forth in the California Business and Professions Code; such code is followed by all medical practices operating in the state.

Differences Between C Corp, S Corp, and Professional Corporation

When it comes to learning about the different corporations, it is important to know that there are a few different types of corporations that a business owner can operate. This includes the following:

When identifying the difference between such corporations, we can look at how the corporation is owned and managed. Below are some of the differences of a professional corporation:

  • All owners, officers, and directors must be licensed in the industry in which they operate.
  • A certain number of shares must be owned by a licensed professional.
  • All shares of the California PC must be given to licensed professionals who are currently licensed to practice in the state where the company is incorporated.
  • Voting trusts and proxies are not allowed, i.e., allowing a shareholder to give permission to a third party to manage the shares.
  • If a shareholder becomes disqualified as a licensed professional, then he must transfer his shares to the business.
  • If a shareholder dies, then the business must acquire the shares within six months.
  • Tax requirements and implications.


Whether it is a law firm, medical office, engineering firm, etc., the individuals overseeing the business must be licensed in that respective industry. Therefore, if a law firm is established as a California PC, the business can’t have a legal secretary or paralegal own part of the business.

Share Percentage Requirements

Furthermore, in the California professional corporation, at least 51 percent of the shares have to be owned by a licensed doctor or surgeon, which means that only up to 49 percent of the other shares can be held by one of the following:

  • Podiatrist
  • Psychologist
  • Registered nurse (RN)
  • Optometrist
  • Marriage/family/child counselor
  • Social worker
  • Physician’s assistant
  • Chiropractor
  • Acupuncturist

Licensing in the State of Incorporation

Regarding the shares being issued, any shares given to such licensed owners must ensure that the professionals are licensed to practice in the state where the company is incorporated.

Voting Trusts and Proxies

None of the California PC shareholders can enter into a voting trust or proxy that would allow someone else to take ownership over the shares. If the shareholder no longer wants to hold his shares, he can sell them only to someone else who is also licensed to practice in the same industry in the state where the company was incorporated.

Disqualified Licensing

If any one of the shareholders loses his or her license to practice, then the business itself must acquire the shares within 90 days after the date of disqualification or else it will risk suspension or termination as a California PC.

Death of a Shareholder

Similarly, if a shareholder passes away and the business doesn’t acquire the shares within six months after the shareholder’s date of death, then it is at risk of suspension of termination.

For the above two reasons, it is important that both a shareholder and the business itself enter into a buy-sell agreement whereby the shareholder allows the business to immediately acquire the shares, with or without consent of the shareholder. Therefore, if the shareholder fails to transfer his shares after he is disqualified as an industry professional, then the business can involuntarily take over his shares. Additionally, if a shareholder passes away, the business need not wait until the executor of the estate handles the outstanding shares; rather, the California professional corporation can acquire the shares.


When it comes to tax requirements, a California PC is taxed at a rate of 35 percent for federal income taxes; however, this can be avoided if the company pays all of its taxable gains as salary or if the company elects to have the PC taxed as an S corporation.

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