California healthcare compliance involves some of the strictest requirements in the United States. The state vigorously enforces the Corporate Practice of Medicine (CPOM) doctrine, prohibits general business corporations and non-licensed entities from owning medical practices, and permits multi-discipline professional ownership only under strict limitations with a 49% cap for allied healthcare professionals. Recent legislation effective January 1, 2026, has intensified CPOM enforcement.
California explicitly prohibits Professional Limited Liability Companies (PLLCs) for healthcare services under California Corporations Code § 17701.04, which states that LLCs cannot provide professional services unless specifically authorized by licensing laws—and healthcare licensing laws provide no such authorization.
If you're organizing a healthcare practice in California, you must use a Professional Corporation (PC) to practice medicine legally. According to California Corporations Code § 13401, a professional corporation is defined as a corporation organized to render 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.
Under California Corporations Code § 13403, all shareholders, officers, and directors must hold active, unrestricted California licenses in the profession the corporation practices.
Professional corporations must limit services to a single profession. A medical corporation cannot combine medical practice with optometry, dentistry, or other healthcare professions in one entity. California Business and Professions Code § 2406 specifically authorizes licensed physicians and surgeons and licensed doctors of podiatric medicine to form medical corporations.
California Corporations Code § 13401.5 authorizes licensed healthcare professionals to form professional corporations, including physicians and surgeons, psychologists, nurses, optometrists, podiatrists, chiropractors, acupuncturists, naturopathic doctors, physical therapists, occupational therapists, speech-language pathologists, audiologists, marriage and family therapists, clinical social workers, physician assistants, dentists, dental hygienists, veterinarians, and midwives.
The prohibition on PLLCs creates significant challenges for healthcare professionals accustomed to LLC structures in other states. California Corporations Code § 17701.04 explicitly prohibits LLCs from providing professional services unless specifically authorized by the relevant licensing statutes. The Medical Board of California has never authorized LLCs or PLLCs for medical practice, creating an absolute prohibition.
This represents a fundamental policy choice. California views the professional corporation structure as essential for maintaining professional accountability and preventing commercial interests from interfering with clinical judgment. The PC structure requires licensed professionals to maintain direct ownership and control, consistent with California's strict Corporate Practice of Medicine enforcement.
California maintains one of the strictest CPOM enforcement regimes in the United States. The doctrine, established in People v. Pacific Health Corp., 12 Cal.2d 156 (1938), prohibits general business corporations from practicing medicine directly or indirectly by employing physicians or controlling medical decisions.
California Business and Professions Code § 2400 establishes the foundational statutory prohibition against corporations and non-physician entities practicing medicine or employing physicians to provide medical services. This prohibition works in conjunction with Business and Professions Code § 2052, which reinforces that only licensed physicians may practice medicine in California.
Only the following entities may legally employ physicians according to the Medical Board of California:
Management Services Organizations (MSOs) represent the primary structure through which non-physician business entities may participate in healthcare delivery, but only with strict limitations. MSOs may provide non-clinical administrative services including billing, accounting, HR administration, facilities management, and IT systems.
However, MSOs cannot control clinical decisions, physician employment, or patient medical records beyond billing, and cannot receive percentage-based fees tied to clinical revenue under Business and Professions Code § 650.
Two landmark bills effective January 1, 2026—Senate Bill 351 and Assembly Bill 1415—substantially modify CPOM enforcement and private equity oversight.
Senate Bill 351 codifies the CPOM doctrine into explicit statutory prohibitions by creating Division 1.7 (Section 1190) of the California Health and Safety Code. SB 351 prohibits non-physician entities from controlling clinical decisions, voids non-compete clauses in physician agreements, and grants the Attorney General enforcement authority.
Assembly Bill 1415 expands the Office of Health Care Affordability oversight authority, requiring private equity groups and MSOs to provide 90-day advance notice for material healthcare transactions.
Formation involves coordinating across multiple state agencies with different fees, deadlines, and requirements. Healthcare professionals forming professional corporations in California must navigate a specific process with exact fees, deadlines, and coordination requirements across multiple state agencies.
The California Secretary of State requires all professional corporation filings through the BizFile Online portal.
Staying compliant means tracking multiple deadlines and requirements across different agencies. California healthcare professional corporations face three primary annual compliance obligations: (1) biennial Statement of Information filings with a $25 fee due within a 6-month window based on incorporation date, (2) an $800 annual minimum franchise tax due by April 15 for calendar-year filers (with first-year exemption), and (3) emerging compliance requirements under AB 3129 affecting MSO/PPMC arrangements effective January 1, 2026.
Professional corporations must file Form SI-100 (Statement of Information) on a biennial basis with the California Secretary of State. The initial Statement of Information must be filed within 90 days after filing Articles of Incorporation. Thereafter, you must file every two years during a 6-month window based on your incorporation anniversary month. The biennial filing fee is $25.00, which can be completed online through BizFile Online.
Continued failure to file can result in suspension or forfeiture of the corporation's rights, privileges, and powers. According to the California Secretary of State Business Entities FAQs, suspension authority rests with both the Secretary of State and the California Franchise Tax Board.
California healthcare professional corporations must pay an annual minimum franchise tax of $800 to the California Franchise Tax Board, as documented in the 2024 California Corporation Tax Booklet (Form 100). For calendar-year filers, this payment is due by April 15 each year.
First-Year Exemption: New professional corporations are exempt from the $800 minimum franchise tax for their first taxable year only. Beginning in the second taxable year, the full $800 minimum franchise tax obligation applies without exception.
California physicians must maintain active licensure through the Medical Board of California and complete 50 hours of approved continuing medical education (CME) every two years to remain eligible for professional corporation ownership and clinical practice. Only physicians holding active, unrestricted licenses in good standing are permitted to own and control medical professional corporations under California Business and Professions Code Section 2415.
The Medical Board of California serves as the primary regulatory authority for physician licensure and professional oversight.
Mailing Address:
Medical Board of California
2005 Evergreen Street, Suite 1200
Sacramento, CA 95815
Phone: (800) 633-2322 or (916) 263-2382
Online Contact: Contact form available at mbc.ca.gov/contact
California physicians must complete 50 hours of approved CME every two years, including a one-time 12-hour pain management course that covers risks of addiction related to Schedule II controlled substances (pathologists and radiologists are exempt). Physicians with patient populations including more than 25% individuals aged 65 or older need at least 10 hours per two-year cycle in geriatrics or related fields.
Physicians must retain CME records for at least four years and are subject to annual audits for compliance verification according to the Medical Board of California.
The Medical Board recognizes CME from American Medical Association (AMA), California Medical Association (CMA), Accreditation Council for Continuing Medical Education (ACCME), and American Academy of Family Physicians (AAFP) accredited providers.
California physician licenses operate on a two-year renewal cycle, with licenses expiring at 11:59 p.m. on the last day of the month of issuance according to Medical Board renewal guidelines.
The Medical Board sends renewal notices 180 days before expiration. You must complete renewal through the online BreEZe system. Failure to renew within 30 days after expiration results in delinquent status with additional penalty fees. Licenses expired for more than five years require a completely new application.
Only physicians with active, unrestricted licenses in good standing can own and control medical professional corporations per California Business and Professions Code Section 2415. Inactive license holders cannot practice medicine and face ownership restrictions. Physicians with suspended, revoked, or disciplinary-restricted licenses are non-compliant and cannot maintain professional corporation ownership.
California permits limited multi-discipline ownership in healthcare professional corporations under California Corporations Code Section 13401.5, which allows specific combinations of licensed healthcare professionals to share ownership with a strict 49% ownership cap for allied professionals.
This creates a mandatory majority ownership requirement: the primary profession must maintain at least 51% ownership, while all allied professionals combined cannot exceed 49%.
For medical corporations, the statute permits ownership by physicians together with licensed doctors of podiatric medicine, psychologists, registered nurses, optometrists, and other allied healthcare professionals as specified in Corporations Code Section 13401.5, all subject to the 49% aggregate cap.
Non-licensed ownership is categorically prohibited, with only narrow exceptions for the assistant secretary and assistant treasurer positions. According to California Business and Professions Code Section 2408, all shareholders, directors, and officers (except assistant secretary or assistant treasurer) of a medical or podiatry corporation must be licensed persons as defined in Corporations Code Section 13401.
No, with limited exceptions. California's Corporate Practice of Medicine doctrine prohibits general business corporations from employing physicians. Only these entities may employ physicians: Professional Medical Corporations owned by licensed physicians, licensed hospitals, licensed HMOs/health plans, government healthcare facilities, and certain nonprofit community clinics meeting statutory requirements. See Section: California's Corporate Practice of Medicine Doctrine for details.
All shareholders, officers, and directors of a medical professional corporation must hold active, unrestricted California licenses per California Business and Professions Code Section 2415. License lapse creates immediate non-compliance. The corporation must either transfer ownership to licensed physicians or cease operations. Licenses expired for more than five years require new applications. Contact the Medical Board at (800) 633-2322 for renewal options. See Section: Professional Licensing Coordination for details.
California requires biennial (every two years) Statement of Information filings using Form SI-100, not annual reports. The initial filing is due within 90 days of incorporation ($25 fee), then biennially during a 6-month window based on your incorporation anniversary. The $800 annual franchise tax is separate, due by April 15 for calendar-year filers. See Section: Ongoing Compliance Requirements for complete details.
Private equity investment in California medical practices faces significant restrictions under the Corporate Practice of Medicine doctrine and new legislation effective January 1, 2026. General business corporations and investment firms cannot own or control medical professional corporations under California Business and Professions Code Section 2415. Senate Bill 351, effective January 1, 2026, explicitly prohibits private equity firms and hedge funds from controlling clinical decisions, patient referrals, physician staffing, or medical practice operations.
Private equity firms considering California healthcare investments should consult healthcare attorneys specializing in California's Corporate Practice of Medicine (CPOM) restrictions. SB 351 explicitly prohibits private equity and hedge funds from interfering with physician clinical judgment in diagnosis, treatment decisions, patient referrals, and work scheduling. The California Attorney General now holds explicit enforcement authority over CPOM violations under SB 351, creating significant legal and operational risks for non-compliant transaction structures.
Healthcare organizations in California can utilize various professional services to manage entity compliance requirements. Key services available include professional corporation formation with licensing coordination, automated Statement of Information filing, franchise tax management, and registered agent services across California jurisdictions. These services help healthcare entities maintain compliance with formation fees ($100-$850 depending on expedited processing), biennial Statement of Information requirements ($25 filing fee), annual $800 minimum franchise tax obligations, and registered agent address requirements mandated by California Corporations Code.
Ready to simplify your healthcare entity compliance? Book a demo with Discern today and see how we can reduce your administrative burden while ensuring your California entities stay in good standing.
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