California Professional Corporations

 

Background Information

In California there are only three legal ways to own an optometry practice: sole proprietorship, partnership, or professional corporation (PC). An optometrist cannot practice as a limited liability company (LLC) or a "regular" corporation. A PC may be registered with the IRS as either a "C corporation" or an "S corporation," that does not matter as far as the State Board rules or California law. (Note: Many states do permit optometrists to form an LLC. LLC's have some advantages over corporations, including fewer formalities and better asset protection. You should consult an attorney or CPA before deciding the best form for your practice.)

 

The principle difference between a regular corporation and a PC is that, in a PC, there are restrictions on who can be a shareholder, officer, or director of the corporation. Essentially, except for certain officers, these people must be licensed professionals, and a majority interest must be owned by an optometrist. This means there are restrictions on share transfers and sales, and these restrictions must be properly reflected in the corporate documents.

 

Keep in mind that you must also comply with the rules of the California Board of Optometry. Your corporation name should have in it the name of the optometrist/owner, or of at least one of them if there is more than one. In most cases it is best to use your name, such as John Doe, O.D., a Professional Corpration. Or for two doctors, Doe and Smith, Optometrists, a Professional Corporation. This will make state board compliance easier. If you'll do business using any, even slight, variation from the corporate name, you'll also need to obtain a Fictitious Name Permit (FNP) from the Board of Optometry. In nearly 100% of cases this is recommended.

 

Should I Form a Corporation?

The decision whether or not to incorporate your business is one that should be made after discussion and with the advice of your accountant and lawyer. For some there is no advantage in being a corporation. For others, especially where there are or may be two or more owners, there can be significant advantages in being incorporated. Though there are some added costs (annual tax of $800, cost of preparing corporate tax returns), most professionals prefer to own their businesses through a corporation because it separates their business assets and liabilities from their personal assets, and offers a considerable amount of privacy protection. For instance, if you are sued by an employee for wrongful termination, that lawsuit will not expose your personal assets, such as your home, and the other party usually cannot obtain information about your personal assets through the lawsuit.

 

What are the Costs for Incorporating?

Apart from legal fees, there are some filing fees required to be paid by everyone. The Secretary of State charges $100 to file your Articles. (Expedited fees for 24 hour service are an additional $350, otherwise it takes about 30 days to get your Articles back from the Secretary of State.) Purchasing a Corporate Book, which includes your stock certificates and corporate seal, costs about $60. If you use a filing service to do the filing for you, which is recommended, there is an additional fee for their services. In all, it typically costs about $245. Then you add to that the legal fees. That is typically $1000 - $2000. With the California Corporate Pack, however, you can prepare the all the required documents yourself and reduce this down to the cost of the Pack, saving you about $1000 in the overall process.

 

What is the California Corporation Pack?

Forming a proper California professional corporation need not be a complicated or expensive thing. It does, however, need to be done properly. The California Corporation Pack contains each of the forms and documents, and comprehensive step-by-step instructions, for creating your own California corporation professional corporation. All forms were prepared by a California licensed attorney, and, except for details such as your name, are ready to be used as-is. The forms include Articles of Incorporation, Bylaws, Organizational Minutes, Meeting Notices, Resolutions, Annual Minutes, and the related documents to form, and maintain, your corporation.

 

Basic Terminology

Before you get started, it is helpful to understand some terms.

  • Incorporator - this is the PERSON that signs the Articles of Incorporation and starts the process of creating the entity. The incorporator will perform some basic initial steps, then will resign.
  • Articles of Incorporation - this is the document that is filed with the Secretary of State to create the corporation.
  • Bylaws - these are the rules of how the corporation operates. It must contain proper language for the corporation to be a valid professional corporation.
  • Shareholder - shareholders must be licensed professionals. They elect the Directors to actually run the corporation.
  • Director - directors must be licensed professionals. Directors make policy and appoint the officers of the corporation. 
  • Officer - The required officers are President, Secretary, and Treasurer (CFO). They must be licensed. Vice-presidents are optional and do not need to be licensed. The officers run the day-to-day operations of the business.
  • Registered Agent - this is a person or entity that resides in California and can accept service of process on behalf of the corporation.

 

Should I Hire an Attorney To Do This For Me?

None of this is hard to do yourself with a little help. You can certainly hire an attorney to do it for you, and if you need advice, you should seriously consider having an attorney help you. Most attorneys charge from $1000-$2000 to prepare the corporate book and the documents for you to sign. Alternatively, if you already know you want to form a corporation, with the California Corporation Pack you can do it yourself and save $1000 or more. The California Corporation Pack costs only $445 and it contains every document you need to create your corporation, with blanks where you will fill in your name and/or address, and detailed step-by-step instructions to walk you through the process.

 

When Can I Purchase the California Corporate Pack?

The California Corporate Pack should be available for purchase by the end of January. If you need help forming a corporation sooner please feel free to call or email me.