Medical & Dental Practices: PLLCs, MSOs, and Corporate Practice Rules

What to know

• California bars most clinicians from LLCs: professional corporations only.
• MSO/friendly-PC structures split clinical and business entities for compliance.
• Hiring across states triggers the same nexus + payroll registration as tech.

California's professional corporation rule

California does not allow LLCs to render professional medical services. Physicians practice through a professional medical corporation under the Moscone-Knox Professional Corporation Act, with at least 51% of shares owned by physicians and the rest only by specified allied licensed professionals. The same corporate form applies to dentists and several other licensed professions.

Corporate practice of medicine

California and several other states prohibit non-physicians from owning medical practices or controlling clinical decisions. Investor-backed practices commonly use a management services organization (MSO) owned by investors that contracts with a physician-owned professional corporation for non-clinical services. Structuring those agreements takes healthcare counsel.

Tax and payroll

A professional corporation pays California's $800 minimum or 8.84% of income (1.5% if it elects S status). Practices with clinicians in several states register and run payroll in each one, the same as any employer.