You cannot form a PLLC in California. The state’s LLC statute bars any limited liability company from rendering “professional services” as defined by the Moscone-Knox Professional Corporation Act, which covers most professions licensed under the Business and Professions Code along with the Chiropractic Act and the Osteopathic Act.1California Legislative Information. California Code CORP 17701.04 – General Provisions If you are a doctor, lawyer, dentist, accountant, therapist, or similar licensed professional, your practical options are a Professional Corporation or, for a short list of fields, a Limited Liability Partnership.
Why California Does Not Allow PLLCs
Most states let licensed professionals combine LLC liability protection with professional regulation through a Professional Limited Liability Company. California went the other way. Corporations Code Section 17701.04(e) states plainly that nothing in the state’s LLC laws permits an LLC to render professional services.1California Legislative Information. California Code CORP 17701.04 – General Provisions The policy choice behind the ban is that individual professionals should stay personally accountable for their own work, and that the licensing boards should oversee a corporate structure they already know.
Trying to work around the rule does not go well. If you file LLC paperwork with the Secretary of State and list a professional service as the business purpose, the filing will be rejected. Operating under an unauthorized structure can also prompt discipline from your licensing board. For attorneys, delivering legal services through an entity the State Bar has not authorized can amount to unauthorized practice of law under Business and Professions Code Sections 6125 and 6126, which carries potential misdemeanor exposure.
When an LLC Is Actually Allowed
The ban does not reach every occupation that requires a license. Section 17701.04(b) permits an LLC to provide a licensed service when the specific licensing act for that profession authorizes LLCs to hold the license.1California Legislative Information. California Code CORP 17701.04 – General Provisions The distinction turns on whether your work counts as a “professional service” under Moscone-Knox or is simply an occupation that happens to require a license.
The clearest example is contracting. Since January 2012, licensed general engineering contractors, general building contractors, and specialty contractors have been allowed to operate as California LLCs. Real estate brokers, insurance agents, and other occupationally licensed businesses may also qualify, depending on what their own licensing provisions say. If your license sits outside the Moscone-Knox definition and your licensing statute allows LLC formation, you can form a standard LLC. There is still no “PLLC” designation in California; you simply form an LLC.
Professional Corporation: The Main Alternative
For professions locked out of LLC formation, the Professional Corporation is the required vehicle. The Moscone-Knox Professional Corporation Act, codified at Corporations Code Section 13400, governs how these entities are formed, owned, and run.2California Legislative Information. California Code Section 13400 – Moscone-Knox Professional Corporation Act It covers physicians, surgeons, attorneys, dentists, psychologists, optometrists, marriage and family therapists, certified public accountants, and many other licensees under the Business and Professions Code.
A PC operates much like an ordinary California corporation for governance and tax purposes. The important point for anyone comparing it to a PLLC is what it does not do: the PC structure never shields an individual professional from personal liability for their own malpractice or negligent acts. It can protect you from a co-owner’s business debts, but your own professional conduct remains your own. That is the feature California wants, and it is the reason the state refuses to recognize PLLCs in the first place.
Tax treatment is flexible. A PC can be taxed as either a C corporation (8.84% on net income) or an S corporation (1.5% on net income), and every PC doing business in California owes an annual minimum franchise tax of $800 regardless of earnings.3California Legislative Information. California Revenue and Taxation Code 23153 Newly incorporated California corporations are exempt from the $800 minimum in their first taxable year under a rule in effect since January 1, 2020.4FTB. Corporations From year two on, the minimum applies every year the corporation exists, even if dormant, so a PC that is no longer being used should be formally dissolved.
The LLP Option for Five Professions
If a corporate structure does not fit your practice, a handful of professions have a second route. California Corporations Code Section 16956 authorizes registered Limited Liability Partnerships for attorneys, accountants, architects, engineers, and land surveyors.5California Legislative Information. California Code CORP Chapter 5 Article 10 – Registered Limited Liability Partnerships Each profession has to meet specific insurance or security requirements to register, and the services themselves must still be delivered by individually licensed people.
An LLP is a partnership underneath, so income passes through to the partners’ personal returns rather than being taxed at the entity level the way a C corporation is. For multi-partner law firms and accounting practices, LLPs are common. Solo practitioners generally find a Professional Corporation more workable. Doctors, dentists, psychologists, and other health professions are not on the LLP list and must use a PC.
Who Can Own a California Professional Corporation
Ownership rules are strict. Every shareholder, director, and officer generally has to be a licensed professional authorized to perform the services the corporation provides.6California Legislative Information. California Code, Corporations Code CORP 13401 An attorney cannot hold shares in a medical corporation, and a dentist cannot hold shares in a law corporation, absent a specific statutory exception.
Some professions permit limited cross-licensed ownership. Medical corporations, for example, may include licensed podiatrists, psychologists, optometrists, registered nurses, and certain other health-related licensees as shareholders, directors, or officers, but those non-physician owners collectively cannot hold more than 49% of the shares and cannot outnumber the physician shareholders.7New York Codes, Rules and Regulations. 16 California Code of Regulations 1343 – Requirements for Professional Corporations
Solo practitioners get simpler rules. A one-shareholder PC needs only one director, who also serves as president and treasurer, and the remaining officers do not need to be licensed.8California Legislative Information. California Code, Corporations Code CORP 13403 A two-shareholder PC needs two directors (the shareholders themselves), who divide the president, vice president, secretary, and treasurer roles between them.
Forming the PC: What Is Actually Required
Once you have confirmed that your profession needs a PC rather than an LLC, formation itself is a short sequence. Pick a corporate name that satisfies both the Secretary of State and your licensing board. Boards vary: law corporations must carry a designation such as “A Professional Corporation” or “APC” and may not use “LLC,” “APLC,” or “PLC”;9The State Bar of California. Application for Issuance of a Certificate of Registration as a Law Corporation medical corporations typically use the physician’s licensed name plus an approved suffix and need a fictitious name permit from the Medical Board to use anything else.10Medical Board of California. Frequently Asked Questions
File Articles of Incorporation on Form ARTS-PC with the Secretary of State.11California Secretary of State. Articles of Incorporation of a Professional Corporation The filing fee is $100, with an additional $5 certification fee plus per-page copy charges if you need a certified copy for your board.12California Secretary of State. Business Entities Fee Schedule Online filing through the bizfile portal is generally faster than mail.
The filing creates the corporation, but it does not authorize you to practice through it. You also need a certificate of registration from the board that regulates your profession. The State Bar, for instance, charges $257 for a law corporation application and requires a certified copy of the articles, specified bylaw excerpts, a specimen share certificate with the required legend, and a list of shareholders, officers, and directors.9The State Bar of California. Application for Issuance of a Certificate of Registration as a Law Corporation The Medical Board, Dental Board, Board of Accountancy, and others each run their own process. Contact your board before you file your articles so you know what the board will need from them.
Within 90 days of incorporating, file a Statement of Information (Form SI-550) with the Secretary of State and pay the $25 fee.13California Secretary of State. Instructions for Completing the Statement of Information Form SI-550 Missing it leads to penalties and eventual suspension or forfeiture of the corporation.14California Secretary of State. Statements of Information Filing Tips After that, file updated statements on the schedule the Secretary of State sets, and any time your officers, directors, or address change in between.
The common misstep is treating the Secretary of State filing as the end of the process. Board registration, the Statement of Information, and Franchise Tax Board registration all need to happen inside that first 90-day window. Handle them together and your PC starts life clean, which is as close as California gets to the simplicity a PLLC would have offered.