Who Can Work for a San Diego California Professional Corporation?
Professional corporations can be created specifically for doctors, nurses, and healing arts practitioners under the Moscone-Knox Professional Corporation Act. See Cal. Corp. Code, §§ 13400-13410. When formed, the professional corporation becomes a legal entity separate and apart from the healing arts practitioners and provides a shield that protects personal assets. Currently, there are several professions covered by the Moscone-Knox Professional Corporation Act, including without limitation:
- Medical corporation
- Podiatric medical corporation
- Psychological corporation
- Speech-language pathology corporation
- And more
There are many advantages to medical corporations, but there are a few disadvantages. Among the disadvantages, potentially, are restrictions on who can be shareholders, officers, directors, or professional employees of medical corporations. As an example, only medical professionals in the specific field (such as nursing) and in allied fields (such as physicians) can be shareholders or professional employees in a nursing corporation. The idea behind these rules is to prevent non-professionals from interfering with the professional and ethical obligations of the healthcare providers. However, non-licensed persons can work for medical corporations, even at very high levels of management, as long as certain conditions are satisfied.
San Diego Professional Corporations: Non-Licensed Persons as Employees, but Not Owners
In general, a non-licensed person can work for or with a professional practice in almost any non-professional capacity as long as there in no ownership by the non-licensed person. This might include providing the essential services of a chief operating officer.
In general, “ownership” is the right to control and the right to receive profits from a business. Note that there are two components. With a non-licensed employee, it is essential to avoid both aspects.
San Diego Professional Corporations: No Sharing in Profits
There are several keys to ensuring that there is no “ownership” for any non-licensed employee. First, the non-licensed employee should not have stock or other forms of ownership including contingent stock or debt holdings that entitle the holder to certain rights with respect to corporation decisions.
Second – and this is where trouble often occurs – the non-licensed employee cannot have a share in revenues that are derived from the medical services being provided. Thus, any sort of profit-sharing is forbidden and extreme caution should be used with any sort of bonus structure that is based on revenues, profits, or sales.
The best practice is to have a set salary that is not based on sales, revenue, or any other economic, volume, or sales targets.
San Diego Professional Corporations: No Control Over Professional-Related Decisions
Likewise, there are several keys to ensuring that there is no “control” for any non-licensed employee with respect to professional-related decisions. First, the non-licensed employee should not have any sort of “control” of corporation decisions. This means, the non-licensed person should not have a vote — either directly or indirectly — with respect to who is elected to the board of directors, who is appointed as CEO, and similar decisions.
Second, the non-licensed employee should not have any sort of ultimate authority over profession employees, establishing the duties of professional employees, or how the professional practice is run. As examples, the non-licensed employee should not have the authority
- To hire or fire professional employees and/or technicians and assistants (at least based on professional qualifications — as opposed to non-professional reasons for termination like theft)
- Establish targets for volume or patients-per-hour or similar
- Setting hours and procedures for the professional employees
- Setting/changing coding and billing procedures for patients
- Selecting medical equipment, supplies, facilities, etc.
- Content of advertising or disclosures
- And more
In general, the medical professionals cannot delegate to a non-professional decisions that are medical in nature and/or that impact professional ethical obligations. However, once decisions are made, implementation can be done by non-professionals.
Call San Diego Corporate Law Today
If you need legal advice relating to setting up your medical corporation, call experienced business attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard has been named a “Rising Star” for 2015, 2016 and 2017 by SuperLawyers.com. Contact Mr. Leonard at (858) 483-9200 or by email.
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