By Dean Porter, Executive Director CALPCC
Limited Liability Company (LLC)
CALPCC occasionally gets questions about forming a LLC from members looking to set up a private practice. Some states may allow this, but California does not. However, LPCC’s can set up a sole proprietorship, C- or S-corporations, or a nonprofit. Each have their own advantages and disadvantages, including ease of set-up and differing tax liability issues. While CALPCC does not give legal advice, we can direct you to California law and you can ask further questions of an attorney.
The California Legislature has chosen to identify certain careers or professions as “Professional.” These are professions that require a professional license obtained only after satisfying extensive educational, training, and testing requirements. “Professionals” have a greater responsibility due to the nature of their profession and are held to a higher standard than participants of other careers or professions. In order to maintain this high standard of professionalism, the California Legislature prohibits “Professionals” from limiting their liability for mistakes by establishing a Limited Liability Company, or LLC.
California Corporations Code § 13401(a), also known as the “Moscone-Knox Professional Corporations Act,” defines a “Professional” as one who provides any type of professional service that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, (the Chiropractic Act, or the Osteopathic Act.) LPCCs are authorized by the Business and Professions Code.
California Corporations Code – § 17701.04 does not allow a LLC to render professional services as defined above in § 13401 (a).
https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CORP&divisi on=&title=2.6.&part=&chapter=&article=1.
In short, since the California Legislature has determined that LPCCs are “Professionals,” and as such, they cannot operate as a LLC.
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