Examples:

• • As a solo practitioner, Lynn felt uncertain about putting her personal savings at risk, so she formed an MFT corporation to separate her business and personal assets.
  • Roberto’s accountant advised that as a corporation, his MFT practice could provide him with health insurance and retirement plan contributions tax-free as an employee benefit.
  • Valerie believed having “PC” after her practice name would signal her business’s professional, established nature to potential clients.
  • Jamal wasn’t thrilled about the added paperwork of holding corporate board meetings and keeping meeting minutes, but felt the liability and tax benefits were worth the tradeoff.
  • Incorporating Lisa’s practice cost nearly $1000 in state filing fees, legal costs for drafting bylaws, and accounting fees for corporate tax returns.

How to Proceed:

• • Consider whether the benefits of limited liability, tax savings, and name protection are worth the costs and ongoing formalities required.
  • Consult your accountant about potential tax advantages of a corporation over a sole proprietorship in your individual circumstances.
  • Ask peers about their experience with operating as a corporation and whether they feel the tradeoffs have been worthwhile for their practice.
  • Calculate and budget for estimated formation costs including filing fees, any legal/accounting assistance, and corporate materials like a minute book and seal.
  • Assess your comfort level with additional administrative tasks like holding required meetings, keeping corporate records, and filing annual reports.

FAQs:

• • Can MFTs form a regular corporation or LLC in California? No, CA law only allows MFTs to form a professional corporation, not a regular corporation or limited liability company for their practice.
  • Does a professional corporation shield me from malpractice liability? No, you are still personally liable for any malpractice you commit, but not for malpractice by co-owner MFTs or employee MFTs.
  • Can forming a corporation save me money on taxes? Possibly, if you can take advantage of tax-free health insurance, retirement plans, and HSA contributions as an employee. Consult your tax advisor.
  • Should I have an attorney form my MFT corporation? It’s not legally required but highly recommended to ensure proper setup and tailored bylaws/documents for your needs and situation.

Examples:

• • Compliant Name: Bay Area Family Counseling, A Professional Corporation
  • Non-Compliant Name: John Smith Enterprises, Inc. (doesn’t contain any required terms)
  • Similar Names: Sunshine Family Therapy PC vs. Sunshine MFT Corp. (too similar, even with different corporate designators)
  • Deceptive Name: LA Psychiatric Medical Group, A Prof. Corp. (improperly implies psychiatry/medical services)
  • Official vs. DBA Name: Healthy Minds Counseling PC (official) DBA Shawn Smith Therapy (fictitious business name)

How to Proceed:

• • Brainstorm name options containing the key psychology-related terms required by law.
  • Add one of the required corporate designations like “A Professional Corporation” or “MFT Corp.”
  • Search the Secretary of State’s business entity database at businesssearch.sos.ca.gov to check if your proposed name is available.
  • Avoid names that could mislead clients about your services, credentials, or number of therapists.
  • If you want to use a simpler fictitious name for marketing, file a DBA statement in the county where you practice.

FAQs:

• • Does my MFT corporation name have to be the same as my practice name? No, you can register a fictitious business name (DBA) to use for your practice while maintaining a different official corporate name.
  • What if I pick a corporation name that’s too similar to an existing business? The Secretary of State’s office may reject your filing, forcing you to start over with a new name and pay filing fees again.
  • Can I change my corporation name later if needed? Yes, you can amend your Articles of Incorporation and change the corporation name by filing a Certificate of Amendment and paying a fee to the Secretary of State.
  • Do I need to trademark my corporate name? Not typically, as registering the name with the state provides some common law trademark rights, but you can seek a state/federal trademark if desired.
  • Can the MFT corporation name contain my own name? Yes, but you must still include one of the required corporate designators like “PC” or “Professional Corporation” at the end.

Examples:

• • Andrea’s Articles state the purpose of her corporation is “to engage in the profession of marriage and family therapy,” to meet the requirements of the MFT Corp. Act.
  • For his registered agent, Miguel designated a professional registered agent company that will reliably receive legal notices and forward them to him.
  • Javier’s Articles authorize the issuance of 10,000 shares so he has flexibility to bring on other MFT shareholders in the future if desired.
  • Priya mailed her Articles, cover sheet, and filing fee in duplicate to the Secretary of State’s Sacramento office, and received confirmation of filing within a few weeks.
  • At his initial board meeting, Theo appointed himself as sole director, issued all the authorized shares to himself, and adopted his attorney-drafted bylaws.

How to Proceed:

• • Designate a California registered in your Articles to receive service of process and other legal notices for your corporation.
  • Decide on the number of shares to authorize – a symbolic number like 10,000 shares is typical to start for a solo MFT practitioner.
  • Draft your Articles including all required information, or use the Secretary of State’s fill-in Articles form for professional corporations.
  • Mail or hand-deliver your executed Articles, cover sheet, and $100 filing fee to the Secretary of State’s office, or submit online for faster processing.
  • Hold an initial board meeting to formally adopt the Articles, issue shares, appoint officers, and ratify bylaws and any initial contracts.

FAQs:

• • Do I need to hire a lawyer to prepare my MFT corporation’s Articles? It’s not required, but highly advisable to ensure your Articles are properly drafted, include all necessary provisions, and are tailored to your business needs.
  • Articles of Incorporation processing and approval time? Depending on the time of year, filings typically take approximately 7-10 business days.
  • Hire a registered agent or serve myself? You can serve as your own agent using your CA business address, but hiring a professional registered agent service ensures reliable receipt of time-sensitive notices.
  • What happens at the initial board meeting? Even if you’re the sole director, you should formally document the meeting and actions taken, such as issuing shares, appointing officers, and adopting bylaws.
  • Besides my Articles, what other documents do I need? You’ll also need bylaws outlining your corporation’s governance procedures, and a shareholder agreement if there are multiple owners.

Examples:

• • After forming her MFT corporation, Lila applied online for an EIN to open corporate bank accounts and file employment tax returns.
  • Marco nearly forgot to file his Statement of Information, but his attorney reminded him the 90-day deadline was approaching to avoid fines.
  • Amir visited his LA city finance office and county tax collector to determine what local business licenses and permits his new MFT corp. needed.
  • Since Gina filed her BOIR immediately after incorporating.

How to Proceed:

• • Apply for your EIN online at IRS.gov as soon as your Articles are filed – it only takes a few minutes to complete the application.
  • Mark your calendar to submit your initial and then annual Statement of Information with the CA Secretary of State to avoid penalties.
  • Call your city and county tax/license offices to determine and satisfy all local licensing or registration requirements.
  • File your BOIR online with FinCEN.

FAQs:

• • Does my MFT corporation need its own EIN separate from my SSN? Yes, your corporation is a separate legal entity and must obtain its own federal EIN for tax filings and other business purposes.
  • File the Statement of Information annually? Yes, CA law requires all corporations to submit this annual informational filing to remain in good standing.
  • How do I find out my city/county’s business license requirements? Start by calling the city clerk, county clerk, and/or county tax collector’s offices and explaining your business type and location.

Examples:

• • After letting her annual meeting lapse last year, Jane made sure to hold this year’s meeting and approve an updated set of corporate bylaws.
  • Carlos’ accountant stressed not paying any personal expenses from the corporate account to maintain the liability shield between the company and his personal assets.
  • Ashley’s corporation broke even in its first year, but she still had her CPA file the annual federal and CA tax returns to meet IRS and FTB requirements.
  • Raman visited his county tax office to renew his MFT corporation’s local business license for the new year and pay the annual renewal fee.
  • When Jorge’s corporation moved offices, he filed a Change of Address form with the Secretary of State to update his registered office and agent address.

How to Proceed:

• • Schedule and hold your annual board and shareholder meeting each year, preparing minutes to document all decisions made.
  • Open separate bank accounts and credit cards in the corporation’s name and pay only legitimate business expenses from those accounts.
  • Engage a CPA experienced with corporations to prepare and file your state and federal corporate tax returns each year.
  • Mark your calendar to renew any local business licenses/permits when due and budget for the associated fees.
  • If your corporation’s registered office or agent changes, promptly file the appropriate form with the Secretary of State to update their records.

FAQs:

• • Annual meeting if I’m the only shareholder? Yes, you should still hold an annual meeting and prepare minutes to maintain proper corporate formalities, even if you’re the sole shareholder.
  • What happens if I accidentally commingle personal and business funds? This can jeopardize your corporation’s liability shield, so avoid it as much as possible and promptly rectify any accidental commingling.
  • Can I file my personal and corporate taxes together? No, your MFT corporation is a separate taxable entity and must file its own federal and state tax returns each year.
  • What if I move or change registered agents? File a Statement of Information to update your new registered office or agent address as soon as the change occurs. There’s no fee if submitted outside your regular annual filing period.
  • Do I need to renew my MFT license annually also? Yes, in addition to maintaining your corporate registrations/licenses, you must also keep your individual MFT license current per BBS requirements.

Questions: MFT Professional Corporation Basics

• • 1. What type of corporation can LMFTs form to practice in California?
    • A) General stock corporation
    • B) Non-profit corporation
    • C) Professional corporation
    • D) Limited liability company (LLC)
  • 2. What’s a key benefit of forming a professional corporation?
    • A) Personal asset protection from business liabilities
    • B) Exemption from corporate taxes
    • C) No requirement for malpractice insurance
    • D) All of the above
  • 3. Which terms must be included in an MFT corporation’s name?
    • A) “Counseling” or “Counselor”
    • B) “Medical” or “Medicine”
    • C) The name(s) of the owner(s)
    • D) The word “Incorporated”
  • 4. Where are a corporation’s governing rules typically contained?
    • A) Articles of Incorporation
    • B) Corporate Bylaws
    • C) Meeting Minutes
    • D) Statement of Information
  • 5. Which professionals can be shareholders in an MFT corporation?
    • A) Only LMFTs
    • B) Any licensed mental health provider
    • C) LMFTs, LCSWs, LPCCs, and Licensed Psychologists
    • D) Anyone the LMFT owner chooses

Answers: MFT Professional Corporation Basics

• • 1. C) LMFTs must form a professional corporation, not a regular corporation or LLC, to provide therapy services.
  • 2. A) Professional corporations provide personal liability protection from business debts and obligations unrelated to malpractice.
  • 3. A) MFT corporations must include either “marriage,” “family,” or “child” and either “counseling,” “counselor,” “therapy,” or “therapist” in their name.
  • 4. B) The bylaws contain the corporation’s governance rules, while the Articles, minutes, and Statement of Information serve other purposes.
  • 5. C) In addition to LMFTs, LCSWs, LPCCs and Licensed Psychologists can be shareholders in an MFT corporation, subject to certain restrictions.

Questions: MFT Corporation Formation & Maintenance

• • 1. What state agency handles the filing of Articles of Incorporation?
    • A) Board of Behavioral Sciences
    • B) Franchise Tax Board
    • C) Secretary of State
    • D) Department of Consumer Affairs
  • 2. How often must a corporation file a Statement of Information?
    • A) Once, within 90 days of formation
    • B) Every 6 months
    • C) Annually
    • D) Only when information changes
  • 3. Which of the following formalities must corporations typically observe?
    • A) Holding annual meetings
    • B) Keeping corporate records
    • C) Maintaining separate financial accounts
    • D) All of the above
  • 4. A professional corporation’s registered agent is responsible for:
    • A) Filing the corporation’s taxes
    • B) Receiving service of process
    • C) Acting as the corporation’s therapist
    • D) Managing the corporation’s investments

Answers: MFT Corporation Formation & Maintenance

• • 1. C) Articles of Incorporation are filed with the California Secretary of State with a $100 filing fee.
  • 2. C) A Statement of Information must be filed annually, as well as an initial report within 90 days of forming.
  • 3. D) Holding meetings, keeping records, and maintaining financial separation are all key corporate formalities.
  • 4. B) A registered agent’s responsibility is to receive service of process and other official notices on the corporation’s behalf.

Disclaimer

The legal information provided in this article discussing MFT professional corporations in California is for general informational purposes only.

For personalized guidance on forming and operating your MFT professional corporation, please consult a licensed business attorney and certified public accountant with experience advising mental health professionals in your jurisdiction.