In California, the structure and organization of businesses that licensed professional clinical counselors may use to provide services are subject to specific legal and regulatory considerations. A licensed professional clinical counselor must contemplate the most suitable corporate form for tax liability by minimizing both income and self-employment taxes as well as personal liability and personal asset protection concerns such as separating personal and corporate assets and practicing in a business entity that provides limited liability protection to protect personal assets. To undertake their practice without losing sight of the legally permissible forms of business structures, licensed professional clinical counselors should seek the advice and counsel of both experienced corporate attorneys and their tax advisors when choosing a business structure for their practice.

The question of whether rending professional services is permitted through a General Stock Corporation, whether that is a California Corporation or a California S-Corp, is a matter of legal interpretation. This article aims to dissect the legal framework governing the use of General Stock Corporations, such as California Corporations and California S-Corps for practices in California, analyzing the implications, limitations, and potential benefits of adopting such a structure.

Given the stringent regulations on services in California, understanding the nuances and requirements is crucial for licensed professional clinical counselors seeking to incorporate their practices in California as General Stock Corporations. This article endeavors to provide a clear, informative, and practical answer for licensed professional clinical counselors considering the use of a General Stock Corporation for their practice and to inform licensed professional clinical counselors who might currently be practicing licensed professional clinical counseling in a General Stock Corporation their options to get into compliance with the California Corporations Code, the California Business and Professions Code, municipal laws and regulations (such as fictitious business name statement and business license requirements), and the rules and regulations of the California Board of Behavioral Sciences.

Executive Summary: Putting the Conclusion First for Busy Licensed Professional Clinical Counselors

California licensed professional clinical counselors may not practice licensed professional clinical counseling in California using a General Stock Corporation, and instead must opt for a California Licensed Professional Clinical Counselor Corporation. California licensed professional clinical counselors also may not form limited liability companies to render professional services in a private practice.

How to Identify a California General Stock Corporation

A General Stock Corporation may be easily identified by reading the Purpose Statement in the Articles of Incorporation. The Purpose Statement of a California General Stock Corporation will read as follows:

“The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.”

The Purpose Statement of a General Stock Corporation formed in a state other than California will read similarly, although the accepted Purpose Statement wording will vary by state.

How to Identify a California Licensed Professional Clinical Counselor Corporation

A California Corporation may be easily identified by reading the Purpose Statement in the Articles of Incorporation. The Purpose Statement of a California Licensed Professional Clinical Counselor Corporation will read as follows:

“The purpose of the corporation is to engage in the profession of professional clinical counseling and any other lawful activities (other than the banking or trust company business) not prohibited to a corporation engaging in such profession by applicable laws and regulations. This corporation is a professional corporation within the meaning of California Corporations Code section 13400 et. seq.”

Options for Professionals Practicing in a General Stock Corporation

If you are a licensed professional clinical counselor currently practicing licensed professional clinical counseling within a General Stock Corporation, whether formed under California law or the laws of another state, it is imperative to seek informed legal guidance to either form a new California Licensed Professional Clinical Counselor Corporation or convert your California General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation to ensure compliance with the nuanced requirements set by the California Corporations Code, the California Business and Professions Code, and the rules and regulations of the California Board of Behavioral Sciences.

Contact the experienced attorneys at San Diego Corporate Law today for personalized legal solutions tailored to the unique needs of your practice. Our team of corporate attorneys is dedicated to helping you seamlessly transition into a compliant corporate structure, safeguarding the future of your practice and protecting the license you studied and worked hard to obtain.

What are General Stock Corporations and California Licensed Professional Clinical Counselor Corporations?

While similar in structure generally, General Stock Corporations formed under California law or the laws of another state and California Licensed Professional Clinical Counselor Corporations differ with respect to their ability to be used for a professional clinical counseling practice by a California licensed professional clinical counselor in California. Understanding the nuances between these corporate structures is essential for licensed professional clinical counselors intending to establish or continue their practices within the legal frameworks of California or any other state. This section will discuss the attributes of both General Stock Corporations and California Licensed Professional Clinical Counselor Corporations.

What is a General Stock Corporation?

A General Stock Corporation is a business entity formed under the laws of the State of California or the laws of other states that can engage in virtually any legal activity, other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporations Code. This type of corporation is recognized broadly across states, allowing for a degree of uniformity in business operations beyond California or the jurisdiction of its formation and generally permitted to file for authority to transact business in other states (commonly referred to a registration of a foreign corporation).

What is a Professional Licensed Professional Clinical Counselor Corporation in California?

California Licensed Professional Clinical Counselor Corporations are specialized entities formed pursuant to the Moscone-Knox Professional Corporation Act specifically for rendering professional services that require a California license to practice as a licensed professional clinical counselor. This differentiation ensures that licensed professional clinical counselors are able to comply with specific legal stipulations governing their practice, including liability and practice requirements, thereby protecting both the licensed professional clinical counselors and the public they serve.

General Stock Corporations versus California Licensed Professional Clinical Counselor Corporations

Limitations on the Provision of Professional Services Between General Stock Corporations and California Licensed Professional Clinical Counselor Corporations

The primary distinction between a California General Stock Corporation and a California Licensed Professional Clinical Counselor Corporation lies in the nature of the services provided. While General Stock Corporations can operate in a wide array of industries and offer virtually any service or product, other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporations Code, California Licensed Professional Clinical Counselor Corporations are exclusively established by licensed professional clinical counselors to render professional services personally or with professional employees to practice licensed professional clinical counseling under the California Licensed Professional Clinical Counselor Corporation.

Limitations on the Identity of Permitted Shareholders Between General Stock Corporations and California Licensed Professional Clinical Counselor Corporations

Another key difference between General Stock Corporations and California Licensed Professional Clinical Counselor Corporations is the restriction on the ownership structure of a California Licensed Professional Clinical Counselor Corporation. Whereas a General Stock Corporation such as a California Corporation has virtually no restrictions on the identity of shareholders, and a General Stock Corporation recognized by the Internal Revenue Service as an S Corporation like a California S-Corp has some limitations on citizenship and number of permitted shareholders, California Licensed Professional Clinical Counselor Corporations have significant restrictions on the identity of shareholders and must be owned by licensed professional clinical counselors or certain other licensed professionals, such as licensed clinical social workers. For more information about permitted shareholders, read this article about who may be a shareholder of a California Licensed Professional Clinical Counselor Corporation.

Limited Liability Protection Differences Between General Stock Corporations and California Licensed Professional Clinical Counselor Corporations

Liability is another area where California Licensed Professional Clinical Counselor Corporations differ from General Stock Corporations. While shareholders in a General Stock Corporation generally enjoy comprehensive protection from personal liability for the debts, liabilities, obligations, and legal judgments against a General Stock Corporation, professional shareholders and professional employees of a California Licensed Professional Clinical Counselor Corporation are personally liable for their own professional malpractice (professional negligence). However, these professional shareholders are shielded from the malpractice liabilities of their associates and the general debts, liabilities, obligations, and legal judgments against a California Licensed Professional Clinical Counselor Corporation, which still provides a significant benefit compared to sole proprietorships or partnerships where personal assets of professionals are at risk for all debts, liabilities, obligations, and legal judgments against the practice.

Taxation Differences Between General Stock Corporations and California Licensed Professional Clinical Counselor Corporations

Taxation presents the potential for variance between General Stock Corporations and California Professional Corporations. Both General Stock Corporations and California Licensed Professional Clinical Counselor Corporations may elect to be taxed under Subchapter S of the Internal Revenue Code, a specific taxation status potentially offering benefits such as pass-through taxation of income, deductions, and credit through to shareholders to be reported on personal tax returns. However, if not electing to be taxed as an S Corporation, traditionally personal service corporations (sometimes referred to as professional service corporations) such as California Licensed Professional Clinical Counselor Corporations not electing S Corporation tax status were taxed at a flat federal rate of 35% in addition to state income taxes. Furthermore, these personal services corporations were subject to the double taxation of traditional C corporations. Under the Tax Cuts and Jobs Act signed by then President Trump in 2018 reduced the federal flat tax from 35% to the standard federal corporate tax rate of 21%, but this tax cut is due to expire at the end of 2025 and return to the 35% federal tax rate unless the Tax Cuts and Jobs Act is extended or new tax laws are adopted.

Summary of General Stock Corporation versus California Licensed Professional Clinical Counselor Corporation Differences

In summary, a California Licensed Professional Clinical Counselor Corporation serves as a critical vehicle for licensed professional clinical counselors desiring to practice licensed professional clinical counseling within a corporate framework while adhering to the legal requirements and professional standards of the practice in California. This structure not only provides a way to manage the business aspects of a professional clinical counseling practice, but also offers a layer of protection against certain liabilities and the advantages of corporate tax structures. Understanding these differences is essential for licensed professional clinical counselors in deciding the appropriate entity structure for their practice.

How to Identify if Business Entities are General Stock Corporations or California Licensed Professional Clinical Counselor Corporations?

Since General Stock Corporations, whether formed under California law or the laws of another state, cannot render professional services in California, it is important for every professional clinical counselor to identify whether they are practicing licensed professional clinical counseling as a California Licensed Professional Clinical Counselor Corporation or a General Stock Corporation such as a California Corporation or a California S-Corp.

While the corporate documents of a California Licensed Professional Clinical Counselor Corporation, such as the Articles of Incorporation, Bylaws, and Stock Certificates should contain language specific to the practice under the California Licensed Professional Clinical Counselor Corporation, the easiest way to determine whether a business entity is a General Stock Corporation or a California Licensed Professional Clinical Counselor Corporation is to review the Purpose Statement in the Articles of Incorporation of the business structure.

Purpose Statement of a General Stock Corporation

A General Stock Corporation may be easily identified by reading the Purpose Statement in the Articles of Incorporation. The Purpose Statement of a California General Stock Corporation will read as follows:

“The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.”

The Purpose Statement of a General Stock Corporation formed in a state other than California will read similarly, although the accepted Purpose Statement wording will vary by state.

Purpose Statement of a California Licensed Professional Clinical Counselor Corporation

A California Corporation may be easily identified by reading the Purpose Statement in the Articles of Incorporation. The Purpose Statement of a California Licensed Professional Clinical Counselor Corporation will read as follows:

” The purpose of the corporation is to engage in the profession of professional clinical counseling and any other lawful activities (other than the banking or trust company business) not prohibited to a corporation engaging in such profession by applicable laws and regulations. This corporation is a professional corporation within the meaning of California Corporations Code section 13400 et. seq.”

What to Do if Practicing a Profession in a General Stock Corporation?

A licensed professional clinical counselor practicing licensed professional clinical counseling in California using a General Stock Corporation should contact the experienced attorneys at San Diego Corporate Law today for personalized legal solutions tailored to the unique needs of their practice. Our team of corporate attorneys is dedicated to helping licensed professional clinical counselors seamlessly transition into a compliant corporate structure, safeguarding the future of their practice and protecting the license they studied and worked hard to obtain.

What are the Options for a Licensed Professional Clinical Counselor Practicing Licensed Professional Clinical Counseling in a General Stock Corporation?

In California, licensed professional clinical counselors who discover they are not incompliance with the California Corporation Code, the California Business and Professions Code, and the rules and regulations of the California Board of Behavioral Sciences because they are practicing licensed professional clinical counseling under a General Stock Corporation should cease operating as a General Stock Corporation as soon as possible. These licensed professional clinical counselors are presented with two viable pathways to align their business structure with California laws and regulations: (1) forming a new California Licensed Professional Clinical Counselor Corporation and thereafter dissolving and winding up the General Stock Corporation; or (2) converting their existing General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation. This section of the article will explore the considerations involved in each option, providing a clear roadmap for licensed professional clinical counselors facing the need to navigate this transition.

Forming a New California Licensed Professional Clinical Counselor Corporation and Dissolving and Winding Up the General Stock Corporation

Forming a new California Licensed Professional Clinical Counselor Corporation as a means to come into compliance with the California laws and regulations for corporate structures permitted to be used for practices is a viable option for licensed professional clinical counselors operating their practice under a General Stock Corporation. This option entails the establishment of a California Licensed Professional Clinical Counselor Corporation that adheres to the specifics outlined in the Moscone-Knox Professional Corporation Act, the California Corporations Code, and California Business and Professions Code, thereby enabling the professional clinical counselor to legally render services within the State of California.

Forming a California Licensed Professional Clinical Counselor Corporation

The initial step in forming a California Licensed Professional Clinical Counselor Corporation is drafting and filing Articles of Incorporation specific to licensed professional clinical counseling with the California Secretary of State. These Articles of Incorporation should include the required Purpose Statement for a California Licensed Professional Clinical Counselor Corporation and should also comply with all pertinent codes and regulations specific to the profession of licensed professional clinical counseling. Subsequently, it is essential to adopt corporate Bylaws that govern the internal operations of the California Licensed Professional Clinical Counselor Corporation. All of the required language that must be included in the corporate documents of a California Licensed Professional Clinical Counselor Corporation should be included in the Articles of Incorporation and the corporate Bylaws. A California Statement of Information, Internal Revenue Service EIN, S Corporation election, California Limited Offering Exemption Notice, and FinCEN Beneficial Ownership Information Report should be filed for the new California Licensed Professional Clinical Counselor Corporation, and all other corporate documents should be drafted and adopted.

Dissolving and Winding Up a General Stock Corporation

Upon the successful formation of the California Licensed Professional Clinical Counselor Corporation, attention must then turn to the dissolution and winding up of the General Stock Corporation. This process involves settling debts and obligations, distributing any remaining assets, and filing the necessary documentation with the state in which the General Stock Corporation is registered to officially terminate the corporate existence of the General Stock Corporation.

If the General Stock Corporation is a California General Stock Corporation, the experienced attorneys at San Diego Corporate Law can assist in the dissolution and winding up process by drafting the plan of dissolution, shareholder and board of directors approvals, and drafting and filing the Certificate of Election to Wind Up and Dissolve and the Certificate of Election to Wind Up and Dissolve with the California Secretary of State.

If the General Stock Corporation is registered in a state other than California, an attorney licensed to practice in the state where the General Stock Corporation is registered should assist with the dissolution and winding up of the General Stock Corporation.

When is Forming a New California Licensed Professional Clinical Counselor Corporation and Dissolving and Winding Up the General Stock Corporation the Best Option?

Transitioning to a California Licensed Professional Clinical Counselor Corporation not only assures compliance with California law but also provided the limited liability status for professional clinical counselor shareholders, which is crucial for protecting their personal assets from business liabilities. Additionally, it aligns the business structure not only with the norms and expectations of a professional clinical counseling practice within California, potentially enhancing its legitimacy and reputation among peers and clients, but also complies with the legal requirements for the practice in California.

Forming a new California Licensed Professional Clinical Counselor Corporation and dissolving and winding up the previously used General Stock Corporation is generally the less expensive of the two options, however, if the administrative burden of managing contracts with patients, vendors, business bank accounts, loss of operating history, or insurance coverage or panels to name a few would be less cumbersome with a conversion of the General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation, the higher legal fees may justify using the conversion option as opposed to the formation of a new California Licensed Professional Clinical Counselor Corporation and the dissolution and winding up of the General Stock Corporation.

Licensed Professional Clinical Counselors navigating this transition should consult with legal and financial advisors to ensure a seamless and compliant shift from a General Stock Corporation to a California Licensed Professional Clinical Counselor Corporation, ultimately ensuring that their practice stands on solid legal and operational ground.

Converting the Existing General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation

The conversion of an existing General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation is a structured process that necessitates meticulous planning and strict adherence to California law. This route allows business entities to transition structure without the need to dissolve the original business entity and form a new business entity, thus retaining its existing operational history, relationships, contracts, and potentially Internal Revenue Service EIN if the taxation type of the General Stock Corporation converting is the same as the resulting California Licensed Professional Clinical Counselor Corporation.

Converting a California General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation

The initial step in converting a California General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation is drafting Articles of Incorporation Conversion specific to licensed professional clinical counseling with the California Secretary of State. These Articles of Incorporation Conversion should include the required Purpose Statement for a California Licensed Professional Clinical Counselor Corporation and should also comply with all pertinent codes and regulations specific to the profession to be practiced. Subsequently, it is essential to adopt new corporate Bylaws that govern the internal operations of the California Licensed Professional Clinical Counselor Corporation, as these corporate Bylaws will differ significantly from the corporate Bylaws used by a California General Stock Corporation. All of the required language that must be included in the corporate documents of a California Licensed Professional Clinical Counselor Corporation should be included in the Articles of Incorporation Conversion and the corporate Bylaws. A California Statement of Information and FinCEN Beneficial Ownership Information Report should be filed after conversion of a California General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation, and all other corporate documents required should be drafted and adopted.

Converting a General Stock Corporation Registered Outside of California into a California Licensed Professional Clinical Counselor Corporation

Not all states allow the conversion of business structures registered in their state to other states. However, if permitted, the process of converting a General Stock Corporation registered in a state other than California into a California Licensed Professional Clinical Counselor Corporation is similar to converting a California General Stock Corporation into a California General Stock Corporation with the addition of an additional set of filings made with the state in which the General Stock Corporation was registered prior to the conversion into a California Licensed Professional Clinical Counselor Corporation to inform that state that the conversion has occurred.

When is Converting a General Stock Corporation into a California Licensed Professional Clinical Counselor Corporation the Best Option?

Conversion presents a practical option for licensed professional clinical counselors seeking to align their corporate structure with the legal regulatory requirements of California laws and regulations without disrupting the continuity of the business operations. Legal and financial advisories play a key role in navigating the conversion process, ensuring that the transition not only complies with California laws and regulations, but also positions the practice for sustained success and growth within the legal framework of a California Professional Clinical Counselor Corporation.