If you are a California osteopath, here are four important things you should know before you open your own practice.

1.         You may incorporate as a California Professional Osteopathic Medical Corporation.

Under California law, you cannot operate your osteopathic medical practice as any type of corporation other than a California Professional Osteopathic Medical Corporation. That is, you cannot use a standard c-corporation, s-corp, or a limited liability company. California professional corporations were created in 1968 via the enactment of the Moscone-Knox Professional Corporation Act (the “Moscone-Knox Act” or the “Act”). See Cal. Corp. Code, §13400 et seq. The Act gives professionals, such as osteopaths, the ability to protect their personal and family assets from being seized by creditors to pay business-related lawsuit judgments, debts, or other business liabilities. Prior to the Act, most professionals were organized as general partnerships or sole proprietorships. Neither of those business forms protected personal and family assets from being seized. The Moscone-Knox Act solved that problem for licensed professionals. San Diego Corporate Law highly recommends incorporating as a California Professional Osteopathic Medical Corporation before you open your osteopathic medical practice. The corporate shield will protect against many types of judgments if you get sued. It is essential to have an experienced San Diego corporate attorney provide advice and assistance with setting up your practice.

2.         Only certain licensed professionals may be owners of your California Professional Osteopathic Medical Corporation.

Under the provisions of the Moscone-Knox Act, there are certain rules and restrictions with respect to who may be shareholders of your California Professional Osteopathic Medical Corporation. Essentially, all of the owners must be licensed persons.

Licensure is required, meaning that if any of your owners lose their license, they must be removed as an owner. For this reason and others, it is important to have a Buy-Sell Agreement that sets out the mechanisms for removing an owner and dealing with the process, timing, payment, and other matters. Here again, an experienced San Diego corporate attorney can help by drafting a Buy-Sell Agreement.

3.         There are similar restrictions for directors and senior management.

In a similar manner, the Moscone-Knox Act limits who may serve on the board of directors and who may be hired as the CEO, President, CFO, Treasurer, and other officers of a California Professional Osteopathic Medical Corporation. Only the listed professionals can serve on the board of directors and only licensed osteopaths can be hired in certain officer positions. The policy reasons are straightforward; only trained and licensed professionals should be in charge of a California Osteopathic Medical Professional Corporation. Of course, other types of non-licensed employees can be hired as long as they are not engaged in providing osteopathic medical services.

4.         Your California Professional Corporation must be properly named.

All corporations, including California professional corporations, must file articles of incorporation with the California Secretary of State’s office. When doing so, all corporations must comply with various rules with respect to corporation names. First, the name must be unique and not already taken by someone else. Second, for a California Professional Osteopathic Medical Corporation, the name must include a proper designation that the entity is a corporation. Finally, a California Professional Osteopathic Medical Corporation must have a name that includes only the name or surname of the osteopath to comply with California Business and Professions Code without maintaining a fictitious name permit.