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Loren, Attorney
Category: Business Law
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Experience:  30 years experience representing clients .
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Can a non-licensed person own any percentage (no matter how

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Can a non-licensed person own any percentage (no matter how small) in a prefessional corp/medical corp in the state of California? I understand that profit sharing is not allowed by the non-licensed party. Thank you.
Thank you for using JustAnswer. I am JudgeLaw and I will do whatever I can to answer your question and provide you excellent service.

No. For a California medical corporation, California law requires at least 51% of the shares must be owned by a licensed physician and surgeon. The remaining 49% may be owned by: podiatrists, psychologists, registered nurses, optometrists, marriage and family therapists, clinical social workers, physician assistants, chiropractors, acupuncturists, or naturopathic doctors. The number of these licensed persons cannot exceed the number of physicians and cannot exceed a combined share total of 49%. A lay (unlicensed) person cannot own any shares of a medical corporation.

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Thank you.

Customer: replied 4 years ago.

Is it possible to be part of the business in any form as an owner? Or any structure?

Thank you, XXXXX XXXXX following up with me.

California law prohibits the corporate practice of medicine. Laypersons or lay entities may not own any part of a medical practice. (Business & Professions Code Section 2400) Physicians must either own the practice, or must be employed or contracted by a physician-owned practice or a medical corporation. (The majority of stock in a medical corporation must be owned by California licensed physicians, with no more than 49% owned by other licensed health care professionals, such as nurses, physician assistants, nurse practitioners, etc. No stock in a medical corporation may be owned by a lay-person. (Corporation Code Section 13401.5(a))

In an attempt to circumvent this legal prohibition, some creative business and management schemes have emerged that violate the law. Businesses that provide management services, franchises or other models that result in any unlicensed person or entity influencing or making medical decisions are in violation of the law.

As an example, businesses that control medical records, the hiring and firing of healthcare staff, decisions over coding and billing, and the approving or selection of medical equipment or drugs, violate the law. Management Service Organizations (MSOs) arranging for advertising, or providing medical services rather than only providing administrative staff and services for a physician's medical practice (non-physician exercising controls over a physician's medical practice, even where physicians own and operate the business) are also engaging in illegal conduct. Also, many current business arrangements violate the prohibition against fee-splitting or giving any consideration for patient referrals. The current practice of lay-owned businesses hiring medical directors is also prohibited. A physician who acts as medical director of a lay-owned business is aiding and abetting the unlicensed practice of medicine. (See Precedential Decision No. MBC – 2007-01-Q, in the matter of the Accusation against Joseph F. Basile.)

I hope this answers your question.

Thank you.

Customer: replied 4 years ago.

Last question. I am interested in purchasing a spa: running and managing the non-medical (esthetician, massage). It currently has a medical side as well and that would remain intact (Dr & nurses), however the facility would share receptionists. I currently work and manage the spa and it seems to be the next natural step. Any suggestions or should I just move on to a new business venture?


You can not partner in the medical side of the spa. You would need to separate out the medical side from the non medical side. You could not commingle the medical and nonmedical services. So, you would need to lease facilities to the medical side and it would be conducted as a distinct business inside the spa facility. You would, essentially, be the landlord.

Thank you.

Loren and 2 other Business Law Specialists are ready to help you
Thank you, Heather, for your positive rating of my service to you. Let me know if you need more help or have future questions. I will be here for you. Just ask for me by name at the start of your question - "JudgeLaw" or use the following link (which you can bookmark in your browser):

Best wishes and good luck to you.

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Customer: replied 4 years ago.
Thanks Hearher.

Good luck to you. I hope it all works out ok.

Customer: replied 4 years ago.

Dear JudgeLaw,


In this particular business, there is only 1 shareholder on the medical corp. Is it possible that I be assigned as the Assistant Treasuer or Assistant Secretary, yet not a profit charing shareholder? And is the Dr. allowed to hold 100% or would he only be allowed 99%? Thank You!

Hello Heather. Thak you for following up with me.

1. Yes, the statutes specifically permit a lyperson to serve as asst secretary of treasurer of the corporation.

2. Licensed doctors must own 100% of the corporation. If there is only one doctor then he may own 100%.

Thank you.

Customer: replied 4 years ago.

In this case, where a lay person serves as the assistant sec. or treas., is it required that only the dr. be a shareholder at 100% or may there be a split between a dr. and a RN or like practitioner where the dr. obviously owns 51% or more of the corp.

Yes. A "professional corporation" is defined as a "corporation organized under the General Corporation Law… that is engaged in rendering professional services in a single profession, except as otherwise authorized in Section 13401.5[.]"1 Section 13401.5 enumerate fourteen separate types of professional corporations that provide health care services, then lists the licensed health professionals outside of the designated professional corporation who can be "shareholders, officers, directors, directors or professional employees" of the professional corporation as long as they do not control the corporation. The statute states, in relevant part:

Notwithstanding subdivision (d) of Section 13401 and any other provision of law, the following licensed persons may be shareholders, officers, directors, or professional employees of the professional corporations designated in this section so long as the sum of all shares owned by those licensed persons does not exceed 49 percent of the total number of shares of the professional corporation so designated herein, and so long as the number of those licensed persons owning shares in the professional corporation so designated herein does not exceed the number of persons licensed by the governmental agency regulating the designated professional corporation:

(a) Medical corporation.
(1) Licensed doctors of podiatric medicine.
(2) Licensed psychologists.
(3) Registered nurses.
(4) Licensed optometrists.
(5) Licensed marriage and family therapists.
(6) Licensed clinical social workers.
(7) Licensed physician assistants.
(8) Licensed chiropractors.
(9) Licensed acupuncturists.
(10) Naturopathic doctors.

I hope this is helpful to you.

Customer: replied 4 years ago.

Yes to which part? 1) the dr has to own 100% in order to allow the assistant sec or treas? 2) the dr. may own 51%, RN 49% and a lay person still serve as the asst treasurer/sec? I understand the "sum of all parts". Clarification as to whether a lay person may still be the assist sec/treas when there is a split such as 51DR/49RN.

Sorry for the confusion. Yes to 2. The doctor must maintain the controlling interest, but any licensed healthcare professional on the list may have a minority stake up to 49%. Regardless, an unlicensed layperson may serve as asst secretary or asst treasurer.

Thank you.


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