You cannot form a California PLLC. The state’s LLC statute bars any limited liability company from rendering “professional services” as defined by the Moscone-Knox Professional Corporation Act, which covers professions licensed under the Business and Professions Code, the Chiropractic Act, and the Osteopathic Act.1California Legislative Information. California Code CORP 17701.04 – General Provisions If you are a doctor, lawyer, accountant, dentist, therapist, or similarly licensed professional, your entity choice is a Professional Corporation, or in a few fields a Limited Liability Partnership.
Why California Bars PLLCs
Most states allow a Professional LLC, which pairs LLC-style liability protection with professional regulation. California went the other direction. Corporations Code Section 17701.04(e) states that nothing in the LLC laws authorizes an LLC to render professional services.1California Legislative Information. California Code CORP 17701.04 – General Provisions The policy behind the rule is that individual professionals should stay personally accountable for their own work, and the licensing boards have historically required a corporate form they can oversee directly.
If you file LLC paperwork with the Secretary of State and list a professional service as your business purpose, the filing will be rejected. Operating under an unauthorized structure can also trigger discipline from your licensing board. For attorneys, delivering legal services through an entity not authorized by the State Bar can constitute unauthorized practice of law under Business and Professions Code Sections 6125 and 6126, which carries potential misdemeanor charges.
When a Regular LLC Is Allowed
The ban tracks the legal term “professional services,” not every occupation that requires a license. Section 17701.04(b) permits an LLC to provide licensed services when the specific licensing act governing that profession authorizes LLCs to hold the license.1California Legislative Information. California Code CORP 17701.04 – General Provisions
The clearest example is contractors. Since January 2012, licensed general engineering contractors, general building contractors, and specialty contractors have been able to operate through California LLCs. Real estate brokers, insurance agents, and other occupationally licensed businesses may also qualify depending on the terms of their own licensing statutes. If your license falls outside Moscone-Knox and your licensing act permits an LLC, you can form a standard California LLC. If it doesn’t, you cannot.
The Professional Corporation as the Default
For professions locked out of LLC formation, the Professional Corporation is the required entity. The Moscone-Knox Professional Corporation Act, codified at Corporations Code Section 13400, governs how these corporations are formed, owned, and run.2California Legislative Information. California Code Section 13400 – Moscone-Knox Professional Corporation Act Physicians, surgeons, attorneys, dentists, psychologists, optometrists, marriage and family therapists, certified public accountants, and many other Business and Professions Code licensees fall under it.
A Professional Corporation is governed and taxed much like a standard California corporation. The critical difference is personal liability. The PC form can shield you from a co-owner’s business debts, but it will not insulate you from claims arising out of your own professional work. That is by design; it is the whole reason California requires this structure instead of allowing a PLLC.
The LLP Option for a Few Professions
If a corporate structure does not fit your practice, a narrow set of professions can form a registered Limited Liability Partnership instead. California Corporations Code Section 16956 authorizes LLPs for attorneys, accountants, architects, engineers, and land surveyors.3California Legislative Information. California Code CORP Chapter 5 Article 10 – Registered Limited Liability Partnerships Each profession must meet specific insurance or security requirements to register, and every professional service must still be delivered through a licensed individual.
An LLP is a partnership at its core, so partners report income on their personal returns through pass-through taxation. A PC can elect C-corp or S-corp treatment. Multi-partner law firms and accounting practices often prefer LLPs; solo practitioners usually find the Professional Corporation more workable.
Who Can Own a Professional Corporation
Ownership of a PC is restricted. Generally, every shareholder, director, and officer must be licensed to perform the services the corporation renders.4California Legislative Information. California Code, Corporations Code CORP 13401 A dentist cannot own shares in a law corporation, and an attorney cannot hold equity in a medical corporation, absent a specific statutory exception.
Some professions do allow limited cross-licensing ownership. A medical corporation, for instance, may include licensed podiatrists, psychologists, optometrists, registered nurses, and several other health-related licensees as shareholders, directors, or officers. Those non-physician owners collectively cannot hold more than 49% of the shares, and their number cannot exceed the number of physician shareholders.5New York Codes, Rules and Regulations. 16 California Code of Regulations 1343 – Requirements for Professional Corporations
Solo practice is simpler. A one-shareholder PC needs only one director, who also serves as president and treasurer, and the remaining officers do not need to be licensed.6California Legislative Information. California Code, Corporations Code CORP 13403 A two-shareholder PC needs two directors, who must be the shareholders themselves, and those two must split the roles of president, vice president, secretary, and treasurer.
Forming the Professional Corporation
Formation is a three-agency process, and the Secretary of State filing is only the first step.
You file Articles of Incorporation on Form ARTS-PC with the California Secretary of State, with a $100 filing fee.7California Secretary of State. Articles of Incorporation of a Professional Corporation8California Secretary of State. Business Entities Fee Schedule The articles state that the corporation is organized under the Moscone-Knox Professional Corporation Act for the specific professional service you are licensed to provide, and they require an authorized share count and a California agent for service of process at a physical street address. Your corporate name must satisfy both Secretary of State rules and the naming requirements of your licensing board, which vary by profession. Confirm the name with your board before filing.
Filing the articles creates the corporation but does not authorize you to practice through it. You also need a certificate of registration from the state agency that regulates your profession. Law corporations, for example, apply to the State Bar with a $257 nonrefundable fee, a certified copy of the articles, specified bylaw excerpts, a specimen share certificate with the required legend, and a list of shareholders, officers, and directors.9The State Bar of California. Application for Issuance of a Certificate of Registration as a Law Corporation The Medical Board, Dental Board, Board of Accountancy, and other agencies each run their own application. Contact your board before filing so you know what to prepare.
Within 90 days of incorporation, file a Statement of Information on Form SI-550 with the Secretary of State, along with a $25 fee.10California Secretary of State. Instructions for Completing the Statement of Information Form SI-550 It reports your officers, directors, and agent for service of process. Missing the deadline draws penalties from the Franchise Tax Board and can lead to suspension or forfeiture.11California Secretary of State. Statements of Information Filing Tips You update the statement on the schedule the Secretary of State sets, and whenever your officers, directors, or address change in between.
Every Professional Corporation doing business in California owes an annual minimum franchise tax of $800 whether or not it earns income.12California Legislative Information. California Revenue and Taxation Code 23153 When net income is high enough, the tax is the greater of $800 or the applicable rate: 8.84% for C corporations, 1.5% for S corporations. Corporations formed on or after January 1, 2020, are exempt from the minimum franchise tax for their first taxable year.13FTB. Corporations After that, the $800 accrues every year the corporation exists, dormant or not, so a corporation you no longer use should be formally dissolved with the Secretary of State and the Franchise Tax Board.