Examples:

• • Three LCSWs form a corporation, each owning 30% of the shares, for a total of 90% LCSW control.
  • An LCSW holds 75% ownership in a corporation they founded, with a licensed psychologist owning the other 25% of shares.
  • When a 60% LCSW shareholder has their license suspended, the company has 90 days to buy back shares or bring on another LCSW to maintain 51% control.
  • The two LCSW owners serve as the sole corporate directors to ensure they can make all governance and management decisions.
  • Insight Clinical Social Work, A Licensed Clinical Social Worker Corporation, puts its professional designation front and center in its legal name.

How to Comply:

• • Make sure at least 51% of all issued shares or membership interests with voting rights are held by licensed LCSWs.
  • Appoint LCSWs as the majority of the board of directors so they can independently control all decisions.
  • Confirm each LCSW owner has an active license in good standing with no disciplinary action in the 5 years before acquiring their ownership stake.
  • If an LCSW’s license is revoked or ownership falls below 51%, act quickly to restore compliance or cease services until resolved.
  • Choose a name that clearly identifies the entity as an LCSW corporation to the public.

FAQs:

• • What if LCSW owners’ licenses expire? The corporation has 90 days to bring in other LCSW owners or it must halt services.
  • Can LCSWs from out of state count toward the 51%? No, only LCSWs licensed in California qualify under Corp C § 13401.5.
  • How can an LCSW corporation raise money? Selling up to 49% of shares to other permitted licensed professionals or taking on debt that doesn’t affect equity and control rights.
  • Are there any ownership transfer restrictions? Shares can typically be sold or gifted to other LCSWs freely, but transfers to non-LCSWs may require approval if over a certain threshold.
  • What happens if LCSW ownership drops too low? The corporation may need to suspend operations, buy back outsiders’ shares, or convert to a regular corporation.

Examples:

• • Two LCSWs each own 30% of shares, a psychologist owns 20%, and an RN owns 10%, adding up to 60% LCSW control and 40% permitted non-LCSW ownership.
  • A group of MDs forms a professional medical corporation that then purchases a 20% stake in an LCSW corporation.
  • When a physician owner loses her license, she cannot receive any portion of profits earned from patient services until it is restored.
  • The office manager, who is not a licensed professional, cannot be given an ownership interest based on her employment alone.

How to Structure Ownership:

• • Decide what blend of LCSW and non-LCSW licensed professionals as shareholders is desired, ensuring LCSWs will hold at least 51% of voting interests.
  • Consider bringing on investors or partners with complementary expertise to help grow and manage the business, as long as they hold qualifying licenses.
  • Work with a lawyer to draft bylaws, shareholder agreements and other governance documents to protect LCSW control and restrict ownership to authorized persons.

FAQs:

• • Can an LCSW corporation have just one owner? Yes, as long as that sole shareholder is a licensed LCSW in California.
  • Is foreign ownership of LCSW corporations allowed? Only if the foreign owners hold licenses as LCSWs or other permitted professionals, and their total ownership is under 49%.
  • What if a shareholder dies or becomes incapacitated? Their shares typically must be sold back to the company or other shareholders within a set timeframe.
  • Can an LCSW corporation offer stock options? Yes, as long as any options exercised by non-LCSWs don’t exceed the 49% ownership cap and go to permitted licensed professionals only.
  • Can a larger corporation purchase an LCSW corporation? Only if the acquiring company is a professional corporation owned by LCSWs and other permitted licensed professionals, and it doesn’t push non-LCSW ownership over 49%.

Questions:

1. 1. What percentage of shares in an LCSW corporation must be owned by LCSWs?
      • A. At least 25%
      • B. At least 51%
      • C. At least 75%
      • D. 100%
   2. Which of the following professionals may own upto 49% of an LCSW corporation?
      • A. Licensed psychologists
      • B. Registered nurses
      • C. Licensed acupuncturists
      • D. All of the above
   3. Can non-licensed employees hold shares in an LCSW corporation?
      • A. Yes, as long as their ownership is less than 49%
      • B. No, only licensed professionals can be shareholders
   4. What happens if an LCSW shareholder loses their license?
      • A. The corporation must immediately cease operations
      • B. The shareholder must sell their shares within 90 days
      • C. The corporation has 90 days to restore 51% LCSW ownership
      • D. Nothing, as long as other LCSWs still own 51%
   5. Which of the following is a valid name for an LCSW corporation in CA?
      • A. Wellness Clinical Services, Inc.
      • B. Smith Family Counseling, A Professional Corporation
      • C. Cognitive Therapy Associates, An LCSW Corporation
      • D. Jane Doe, Licensed Clinical Social Worker, A Prof. Corp.

Answers:

1. 1. B. The 51% rule mandates that LCSWs maintain majority ownership of their professional corporations in California.
   2. D. Psychologists, nurses, and acupuncturists are among the licensed professionals who can own up to 49% of shares per Corp C § 13401.5.
   3. B. Only licensed professionals – not unlicensed employees – can be shareholders in an LCSW corporation.
   4. C. If an LCSW owner is disqualified, the company has 90 days to bring in another LCSW shareholder or must suspend clinical services.
   5. D. California LCSW corporations must include a reference to “Licensed Clinical Social Worker” or “LCSW” in their legal name.