Frequently Asked
Frequently Asked Questions: California Healthcare Business Structures
Thirty direct answers to the questions California clinicians, founders, and operators actually ask — about professional corporations, MSOs, management agreements, physician collaboration, and the structures behind med spas and clinics. Each answer links to the page that goes deeper.
Professional Corporations
Do I need a professional corporation to run a healthcare practice in California?
If clinical services are delivered through an entity, that entity must generally be the appropriate professional corporation — an LLC or ordinary corporation can’t lawfully hold the practice. The requirement follows the services: if the work requires a clinical license, the entity holding it needs to be the professional form for that profession. Professional Corporations →
Who’s allowed to own a California medical corporation?
Licensed physicians must hold the majority, a statutory list of other licensed professionals may hold capped minority interests, and non-licensees can never own shares at all. Investors and non-clinician founders participate through a management services organization instead — never through practice equity. (Ownership rules — depth page coming.)
Why can’t my practice just be an LLC?
California generally bars licensed professionals from delivering professional services through an LLC — the boards don’t recognize it as a practice entity. The LLC still has a lawful role in healthcare structures: as the management services organization on the business side, not as the practice.
What makes a professional corporation different from a regular one?
Professional requirements layered onto corporate law: licensed-only ownership, licensure rules for directors and officers, board-compliant naming, and registration with the profession’s licensing board. Functionally, it’s the entity that is the practice — patient relationships, records, billing, and every clinical decision live inside it.
Can my practice operate under a brand name?
Usually yes, with fictitious-name authorization from the licensing board — that’s how a consumer brand lawfully fronts a licensed professional corporation. Operating under a name the board never permitted is one of the most common, and most avoidable, compliance gaps in growing practices. (Naming requirements — depth page coming.)
Can a nurse own a clinical practice in California?
Yes — through a professional nursing corporation, majority-owned by registered nurses, delivering the services the nurses’ status and governance documents authorize. Physician ownership is optional and minority-only, not a requirement; what NP practices do need is the correct clinical-governance layer, which is separate from ownership. Nursing Corporations →
Structural question about your entity? Speak with MedBiz Law
MSOs & Management Agreements
What is an MSO in healthcare?
A management services organization is an ordinary business entity that provides non-clinical support — facilities, non-clinical staff, billing services, marketing, technology — to a clinician-owned practice under a management services agreement. It’s the lawful home for non-clinician ownership and outside capital in California healthcare. What is an MSO →
Who can own an MSO?
Anyone — founders, investors, private equity, clinicians, or any mix. Because the MSO isn’t a licensed clinical entity, California’s professional-ownership restrictions don’t apply to it; they apply to the professional corporation the MSO serves. MSO Structures →
What can an MSO do — and what can’t it?
It can run the business side: space, equipment, non-clinical staffing, billing support, marketing, IT, and back-office operations. It cannot make clinical decisions, hire or fire clinicians for clinical reasons, control the practice’s revenue unilaterally, or set standards of care — those stay with the practice. Can an MSO Operate a Practice →
Can an MSO employ the doctors or nurses?
Not for clinical work — clinicians delivering or supervising care belong with the professional corporation. An MSO may employ a licensed person in a genuinely non-clinical business role, but clinical employment routed through the management company is a core corporate-practice violation.
What is a management services agreement?
The MSA is the contract connecting the practice and the MSO: it inventories the non-clinical services provided, sets a fee at fair market value, and reserves all clinical authority to the practice. It’s the first document a regulator, payer, or buyer reads — and the wrong place for a downloaded template. MSAs →
How should an MSO’s fee be set?
At fair market value for the services actually delivered — flat and cost-plus structures are easiest to defend. Percentage-of-revenue fees need genuine fair-market-value support, because a fee functioning as a profit share raises fee-splitting and disguised-ownership concerns. A fee that leaves the practice no real economics is the loudest red flag a structure can wave. (Fees & FMV — depth page coming.)
Can the management company control the practice’s bank account?
No — clinical revenue and the practice’s accounts belong to the professional corporation. The MSO can provide billing and treasury services under the practice’s authority; unilateral MSO control of practice funds is one of the specific patterns California treats as de facto ownership.
Agreement on your desk? Request a legal review
CPOM & Compliance
What is the corporate practice of medicine doctrine?
CPOM is California’s rule that corporations and unlicensed persons may not practice medicine or interfere with a physician’s professional judgment. It’s why non-clinicians can’t own practices, why MSO authority stops at the clinical line, and the lens every PC-MSO structure is examined through. CPOM Explained →
What is a “friendly PC”?
A professional corporation whose clinician-owner is aligned with the MSO or its investors, typically bound by transfer and continuity agreements that stabilize the structure. It can be lawful when the clinician’s ownership and authority are genuine — and it’s the arrangement California scrutinizes hardest when they aren’t. Friendly PC-MSO →
Is the MSO model still allowed in California?
Yes — California has tightened the rules around control, particularly investor and MSO influence over clinical matters, without banning the model. Structures with real clinical independence, fair-market-value economics, and documentation matching operations remain workable; the pressure falls on nominal-ownership arrangements. (Current environment — depth page coming.)
What is fee-splitting?
Broadly, sharing professional fees with someone for referrals or in ways California’s rules prohibit — the concern behind much of the scrutiny of percentage-based management fees and revenue-tracking compensation. The practical discipline: price business relationships at fair market value for actual services, not as shares of clinical revenue. (Fee-splitting — depth page coming.)
What do regulators actually look at in a PC-MSO structure?
Substance over form: who really controls clinical decisions, where the economics actually flow, whether the clinician-owner could exercise independent judgment without consequence, and whether daily operations match the documents. Clean paper describing a structure nobody follows is evidence, not protection.
Not sure your structure would read well? Book a consultation
Physician Collaboration
Does my practice need a medical director?
If the operation offers medical services under a brand — a med spa, IV lounge, or clinic service line — a physician with real protocol ownership and oversight duties is typically how the required involvement is delivered. The title without the duties satisfies nothing. (Medical directors — depth page coming.)
What’s the difference between a collaborating physician and a medical director?
Different roles for different requirements: a collaborating physician satisfies the nurse-practitioner standardized-procedure framework; a medical director provides clinical leadership and protocol ownership for a service line. Many operations need both — sometimes filled by one physician, under separate agreements. Physician Collaboration →
What are standardized procedures?
Written policies, developed with physician involvement, authorizing registered nurses — and NPs in the collaboration framework — to perform specific functions that overlap the practice of medicine. They must exist in writing, match the services actually performed, and be maintained as the menu changes. (Standardized procedures — depth page coming.)
Can nurse practitioners practice independently in California?
Some can: AB 890 created pathways for qualifying NPs to practice with expanded autonomy — in defined settings, and independently with further qualification. NPs outside those pathways practice under the standardized-procedure framework with physician collaboration. Confirming which status applies comes before designing anything. (AB 890 pathways — depth page coming.)
How is a medical director supposed to be paid?
Fair market value for actual duties and time — protocol work, oversight, availability. Compensation tracking practice revenue rather than physician work drifts toward fee-splitting territory, and pay wildly out of proportion to duties in either direction signals a nominal relationship.
Can our management company hire the medical director?
No — clinical-governance roles are engaged by the professional corporation. An oversight physician sourced and directed by the management company inverts the structure: the unlicensed entity would control the clinical oversight that exists to constrain it.
Governance layer questions? Speak with MedBiz Law
Med Spas & Practice Types
Can someone who isn’t a doctor own a med spa?
The business side, yes — the brand, locations, equipment, and non-clinical operations, held in a management services organization. The medical operation itself must live in a clinician-owned professional corporation the founder’s company supports at fair market value. Med Spa Structures →
Who’s allowed to do injections at a med spa?
Clinicians within their authority — physicians, NPs and PAs per their frameworks, and RNs under standardized procedures that cover the specific treatments — after a good-faith exam by an authorized provider. Estheticians and unlicensed staff can never perform injections under any arrangement.
What is a good-faith exam?
The evaluation an authorized provider performs before treatment to determine it’s appropriate for that patient — the operational core of med spa compliance. Who conducts it, for which treatments, and how it’s documented belongs in the practice’s governance documents and the booking workflow itself.
Do California’s rules apply to my telehealth company?
If it treats California patients, yes — the doctrine follows the patient, not the platform’s state of incorporation. Multi-state telehealth structures typically need a California professional corporation in the architecture and an MSA drafted for California’s stricter control rules. (Telehealth — depth page coming.)
Working With MedBiz Law
What’s the relationship between MedBiz Law and Bay Legal?
MedBiz Law is the healthcare-business practice brand of Bay Legal, PC, a California law firm — all legal services described on this site are provided by Bay Legal, PC and its attorneys. The brand exists to make one focused area of that work easier to find and understand. About →
What should I bring to a first consultation?
What you’re building or running, and where the open questions sit: current entity documents if any, the service menu, who’s on the team and the cap table, and any agreements in play. Unclear situations are fine — mapping the problem and sequencing the work is what the first conversation is for. Book a Consultation →
Thirty answers in — the thirty-first is about your situation.
The patterns are general; your structure isn’t. Bring the specifics to a conversation.