Examples:

• • When a patient sued after a fall in Sarah’s clinic, her PT corporation’s limited liability protected her house and personal savings.
  • By electing S-corp status, Michael saved over $10,000 per year in taxes compared to operating as a sole proprietorship.
  • Jose found that his practice’s corporate status attracted more physician referrals and gave patients greater confidence in his brand.
  • To finance an expansion into a larger space with aquatic therapy, Jessica’s PT corporation sold shares to a few private investors.
  • When Raj unexpectedly passed away, his physical therapy corporation continued operating seamlessly during the transition to a new owner.

How to Proceed:

• • Consult with a knowledgeable attorney and CPA to identify which corporate advantages apply most to your PT practice’s situation.
  • Run the numbers on potential tax savings from organizing as an S-corp to see if it’s worth the added administrative requirements.
  • Consider the impact a corporate brand identity could have on your marketing efforts and perceived expertise in your PT niche.
  • Evaluate your future expansion plans and need for outside funding that selling corporate shares in your practice could facilitate.
  • Develop a succession plan for your corporation’s ownership and management to ensure its longevity beyond your involvement.

FAQs:

• • Q: How much personal liability protection does a PT corporation provide?
    A: While a corporation generally protects your personal assets from the company’s debts and liabilities, it doesn’t shield you from personal responsibility for your own professional negligence or malpractice. If a patient sues you individually for substandard care that you provided, your personal assets could still be at risk, regardless of your corporate status. That’s why it’s crucial to maintain adequate malpractice insurance coverage even if you practice through a corporation.
    
  • Q: Do I have to elect S-corp status for my PT corporation?
    A: No, you can be taxed as a regular C-corporation, but most small businesses find the S-corp advantages preferable.
  • Q: Will being a corporation affect my relationship with patients?
    A: In most cases, a carefully structured PT corporation can actually enhance patient perception and confidence in your practice.
  • Q: Is it hard to transfer ownership of a physical therapy corporation?
    A: Transferring corporate shares is typically easier than assets of a sole proprietorship or partnership, but requires proper valuation and legal filings.
  • Q: Are there any disadvantages to incorporating a PT practice?
    A: Added formalities and paperwork are required, and a corporation may not be ideal for small practices with limited income and growth plans.

Examples:

• • Nick and Anita, both licensed PTs, are eligible to be the sole shareholders of their PT corporation, with Nick serving as president and Anita as secretary.
  • Carolina and her PT partners abandoned their plan to form a PLLC when they learned California only allows them to create a professional corporation.
  • The 4 PTs at Rehab United PT Corp. decide to make an MD and a DC shareholders, since together they’ll own less than 49% and not outnumber the PTs.

How to Proceed:

• • Verify that all potential shareholders, officers, and directors hold active California PT licenses in good standing.
  • Confirm you are forming a professional corporation, not a PLLC or general corporation, to comply with California law.
  • Limit your number of shareholders to 8 individuals max, and ensure any non-PT shareholders don’t exceed 49% ownership collectively.
  • Double check that any non-PT shareholders are California-licensed healthcare providers and their numbers don’t exceed the number of PT owners.
  • If you provide DPT services, ensure you follow the distinct naming and ownership requirements for a DPT corporation.

FAQs:

• • Q: What if one of our PT shareholders lets their license lapse?
    A: A PT shareholder who loses their license can’t provide PT services or receive profits until it’s reinstated. Voting rights are also suspended.
  • Q: Can my PT corporation have an unlimited number of non-PT employees?
    A: Yes, only shareholders, officers, and directors are subject to the PT license restrictions and ratios – not regular employees.
  • Q: What if our PT corporation accidentally has 9 shareholders?
    A: You’ll need to rectify the situation immediately to avoid violating the Corporations Code, likely by having a shareholder divest their shares.
  • Q: Is a regular (non-professional) corporation an option for California PTs?
    A: No, California requires PTs must form a professional corporation if the corporation is being used to engage in the practice of physical therapy.
    
  • Q: What kind of licensed professionals can be minority shareholders in a PT corporation?
    A: Any California-licensed healthcare provider, such as MDs, DOs, DCs, OTs, RNs, can own up to 49% collectively.

Examples:

• • “Smith Physical Therapy Corporation” satisfies California’s naming rules for PT corps.
  • “Jane Smith, Doctor of Physical Therapy, a Professional Corporation” is an acceptable name for a California DPT corporation.
  • The potential owners of Oceanviews Physical Therapy, Inc. had to choose a new name when they learned there was already an “Ocean View Physical Therapy, Inc.” registered.
  • Unsure if their top name choice would be available, the partners of Precision PT reserved “Precision Physical Therapy, Inc.” for 60 days while preparing their filing.

How to Proceed:

• • Brainstorm multiple name options that include “Physical Therapy” or “Physical Therapist” plus a corporate identifier like “Inc.” or “Corp.”
  • If you provide DPT services, ensure your proposed name includes “Doctor of Physical Therapy” spelled out in full.
  • Search California’s business entity database to confirm your desired name isn’t too similar to an existing registered business.
  • Secure any necessary written consent if your name references other people, entities or trademarks to avoid legal issues.
  • Capture your preferred corporate name via a reservation request to the Secretary of State. This grants you exclusive rights to the name for 60 days, giving you ample time to finalize and file your articles of incorporation without fear of losing the name to another entity.

FAQs:

• • Q: Can I use my personal name in my PT corporation’s business name?
    A: Yes, as long as you include the required “Physical Therapy/Therapist” identifier and corporate designation too.
  • Q: Will an out-of-state company using my desired PT corporation name prevent me from using it in California?
    A: California only requires your PT corp name to be distinguishable from other entities registered in the state, so an out-of-state conflict may not bar you from using the name. However, trademark laws might create a barrier.
    
  • Q: How do I get consent to use someone else’s name in my PT corporation name?
    A: You’ll need to contact the person or entity directly and get their signed written permission to reference them in your corporate name.
  • Q: What corporate designators can I use besides “Inc.” or “Corp.”?
    A: California allows you to select from several variations, such as using the complete words “Incorporated” or “Corporation” spelled out. Alternatively, you may opt for the abbreviations “Ltd.” to signify Limited or “Co.” as a shorthand for Company. The key is to consistently use your chosen designator on all official company documents and filings.
  • Q: How do I know if my PT corporation name is acceptable to the state?
    A: The Secretary of State’s office will review your articles of incorporation and notify you if your name doesn’t comply with the rules.

Examples:

• • Lakeview PT’s articles stated its purpose was “to engage in the profession of physical therapy” to comply with California requirements.
  • In the mandatory statutory statement, CORE PT declared it “will not act in a manner contrary to CA physical therapy law.”
  • Action PT authorized 10,000 shares at $10 par value each, for a total authorized capital of $100,000 to fund its start-up.
  • Opting for the expedited 24-hour processing saved Millennium PT weeks of waiting for the standard turnaround.
  • While Jane listed herself as the registered agent on The Next Step PT’s articles, she later hired a professional company to handle it.

How to Proceed:

• • Draft your articles to include all the required information, statements, and statutory language for a PT corporation.
  • Carefully decide on your number of authorized shares, which can impact future growth, taxation and financial reporting.
  • Select either a responsible individual (like yourself or a trusted employee) or a professional registered agent service to receive crucial legal documents and official correspondence on your corporation’s behalf.
  • Have your designated incorporator sign the articles and submit them by online or via mail to the CA Secretary of State along with the filing fee.
  • Request expedited processing if you need faster turnaround and are willing to pay an additional $250-$500.

FAQs:

• • Q: Where can I find the mandatory statutory statement language for PT corps?
    A: California Corporations Code section 13404(b) provides the specific wording you must include verbatim.
  • Q: How much should I authorize in shares for my PT corporation?
    A: It depends on your expected capital needs, ownership plans and tax strategy. An attorney and CPA can advise on an appropriate number.
  • Q: Am I allowed to serve as the registered agent for my own PT corporation?
    A: You can serve as your own agent if you have a physical California address, but using a professional service can provide more privacy and reliability.
  • Q: What happens after I file my PT corporation articles?
    A: The Secretary of State will process your filing and, if approved, send you a stamped copy of your articles, which you’ll need for other start-up tasks.
  • Q: Can I amend my articles of incorporation later if needed?
    A: Absolutely. If you need to adjust your corporation’s name, authorized shares, or other key provisions down the road, simply submit an amendment filing to the Secretary of State. This allows your articles to evolve as your practice grows and changes. Just be prepared to pay a filing fee and ensure any amendments still comply with California’s rules for PT corporations.

Examples:

• • Rapid Recovery PT’s bylaws require shareholders to sell back shares within 90 days of becoming disqualified to hold them.
  • To ensure efficient management, Pinnacle PT’s bylaws allow the CEO to make purchasing decisions up to $10,000 without board approval.
  • ProSport PT Corp.’s bylaws specify 3 of the 5 directors must be PTs and only PT directors can vote on clinical policies.
  • The bylaws for Dr. Patel’s DPT practice require patient complaints be reported to the board and investigated by an outside expert.
  • When Oceanside PT’s owners had a falling out, one partner exercised the mandatory share buyout clause in the bylaws to exit the company.

How to Proceed:

• • Consult sample bylaws and consider engaging an attorney to ensure yours cover all key areas and comply with California’s PT corp rules.
  • Involve all founding shareholders in defining your bylaws and tailor them to reflect your shared vision and values as healthcare providers and business owners.
  • Establish clear processes for leadership selection, oversight, financial management and conflict resolution that set your PT practice up for success.
  • Vote to formally adopt your bylaws at your initial board meeting and set a regular schedule for reviewing and updating them as needed.
  • Safeguard signed copies of your bylaws with your other vital corporate records, like your articles, minutes, stock certificates, etc.

FAQs:

• • Q: Are PT corporation bylaws filed with the state like articles are?
    A: No, bylaws are an internal document, not filed with the state, but they are just as important for governing your company.
  • Q: Do my bylaws need to be signed by all the shareholders?
    A: Typically just the incorporator or initial board signs them upon adoption, but all shareholders should review and agree to abide by them.
  • Q: Can I just use standard corporation bylaws or do I need PT-specific ones?
    A: Using generic bylaws risks violating PT corporation rules on ownership, duties, etc. – it’s best to adapt your bylaws to your unique professional entity.
  • Q: How detailed do my PT corporation bylaws need to be?
    A: Bylaws should be thorough enough to address key governance and operational issues, but not so specific that you’re constantly having to amend them.
  • Q: Where can I find sample bylaws as a starting point for my PT corporation?
    A: Your business attorney likely has templates and the CPTA or APTA may have sample bylaws for PT-owned practices too.

Examples:

• • At its first meeting, Valley PT Inc.’s 4-member board elected Sandy as President, Amir as VP and Jenna as Secretary/Treasurer.
  • The directors of Wellness PT unanimously voted to adopt the bylaws, authorize 1,000 shares at $1 each, and open a corporate checking account.
  • With 2 directors traveling, Ortho PT Clinic held its annual meeting via Zoom so all 5 board members could participate.
  • With proper notice, Mobile PT’s directors met on short notice to vote on emergency expenditures to replace a broken X-ray machine.
  • By a 4-1 majority vote, the board of Five Star PT approved expanding the practice to a new location.

How to Proceed:

• • Appoint at least 1 director who is a licensed physical therapist.
    
  • Prepare an agenda covering all essential start-up actions and circulate it along with formal meeting notice and materials to all directors in advance.
  • Hold your initial meeting in person if possible to build rapport, but utilize remote options as needed to ensure full participation and establish a quorum.
  • Have all directors vote on key resolutions like adopting bylaws, appointing officers, issuing shares, setting up finances, etc.
  • Keep detailed minutes of all board discussions and actions and maintain them with your other corporate records.

FAQs:

• • Q: How soon after incorporating does the initial board meeting need to happen?
    A: ASAP to handle critical start-up business, typically within a few days to a few weeks of filing your articles.
  • Q: Can the board make decisions without a formal meeting?
    A: Yes, if all directors sign a unanimous written consent listing the actions taken, it carries the same weight as a meeting vote.
  • Q: What’s the board’s role vs. the officers’ and shareholders’?
    A: The board oversees big-picture strategy, officers handle day-to-day operations, and shareholders vote on major corporate changes.
  • Q: How long do directors serve on a PT corporation board?
    A: Director terms can vary, but most serve for 1-2 years before coming up for re-election by shareholders.
  • Q: Who should take minutes at our board meetings?
    A: Typically the Secretary records minutes, but the board can delegate it to another attendee or a professional minute-taking service.

Examples:

• • Sports PT Specialists filed its initial statement of information on time to avoid the $250 late penalty.
  • After forming her corporation, Dr. Miller applied for an EIN so she could open a bank account and start hiring staff.
  • Before signing a lease, Cornerstone PT checked that the space was zoned for a physical therapy clinic and had accessible parking.
  • At each of its 3 locations, Peak Performance PT prominently displays copies of every owner and employee’s PT license for patients to see.
  • Though it cost a bit more, CORE Physical Therapy maintains $1M in liability insurance for extra security in case of a major malpractice claim.

How to Proceed:

• • Appoint a compliance officer to track and complete all required corporate filings, licenses and permits by their respective deadlines.
  • Obtain an EIN from the IRS, even if you don’t plan to hire right away, as you’ll likely need it for banking and other business tasks.
  • Contact your local agencies to determine all requirements for legally operating a PT practice in your area and build in ample time to complete them.
  • Collect copies of all owners’ and employees’ PT licenses and post them in a visible area along with your corporation’s business licenses and permits.
  • Consult your malpractice carrier to determine optimal coverage limits for your corporation’s size and specialty to ensure sufficient security.

FAQs:

• • Q: What’s the ongoing requirement for a PT corporation to file statements of information with the state?
    A: California physical therapy corps are required to file Statements of Information within 90 days of formation and on an annual basis. The annual filing period is the calendar month in which the corporation was formed and the immediately preceding five calendar months. So if you filed your articles on September 15th, your filing period would be April 1st to September 30th each year.
    
  • Q: Can I use my SSN for my business or do I have to get an EIN?
    A: If your corp will have employees beyond just you, you need an EIN. But even single-owner corps often get an EIN for privacy and business reasons.
  • Q: How much malpractice insurance should a PT corporation typically carry?
    A: Aim for minimum limits of $1M per incident / $3M aggregate based on typical PT claims, but consider unique factors like your specialties and patient volume.
  • Q: Do I need any special permits if I want to offer fitness or wellness services too?
    A: Depending on your city/county, you may need additional permits for things like gym equipment, saunas, massage, etc. Zoning approval is also key for multi-use facilities.
  • Q: Will my own PT license transfer to my new corporation or do I need a separate one?
    A: As long as you’re current and in good standing with the PTBC, your individual license should carry over for practicing PT at your corporation.

Questions: PT Corporation Benefits, Ownership & Naming

• • 1. What key benefit does a PT corporation provide over a sole proprietorship or general partnership?
    • A) Personal liability protection
    • B) Exemption from income taxes
    • C) No requirement for licenses or permits
    • D) Ability to provide PT services in any state
  • 2. Can a non-PT own shares in a California physical therapy corporation?
    • A)Yes, but only up to 49% collectively and they can’t outnumber PT owners
    • B) No, only licensed PTs can own shares
    • C) Yes, as long as they don’t provide any PT services
    • D) Yes, but they must be a spouse or family member of a PT owner
  • 3. How many directors must a PT corporation have at minimum?
    • A) 1
    • B) 2
    • C) 3
    • D) 5
  • 4. What words must be included in a California PT corporation’s name?
    • A) “Limited Liability Company” or “LLC”
    • B) “Physical Therapy” or “Physical Therapist”
    • C) The names of all PT owners
    • D) No specific wording is required
  • 5. Can a PT corporation provide other wellness services besides physical therapy?
    • A) Yes, with no restrictions
    • B) No, it can only provide PT services
    • C) Yes, but only if it hires non-PT employees for those services
    • D) Yes, but it may need additional permits/licenses for certain services

Answers: PT Corporation Benefits, Ownership & Naming

• • 1. A) A key advantage of a PT corporation is shielding your personal assets like your home, savings and belongings from the company’s liabilities.
  • 2. A) California allows non-PTs to own up to 49% of a PT corporation’s shares collectively, as long as there are at least an equal number of PT shareholders.
  • 3. A) A California PT corporation must have a minimum of 1 director.
  • 4. B) A PT corporation’s name must include “Physical Therapy” or “Physical Therapist” as well as a designation like “Corporation”, “Inc.”, etc.
  • 5. D) PT corporations can provide additional wellness services, but may need extra permits, licenses or zoning approval to do so legally.

Questions: Forming Your PT Corporation

• • 1. California physical therapy corporation articles of incorporation are filed with the:
    • A) Sec. of State
    • B) Franchise Tax Board
    • C) Department of Consumer Affairs
    • D) Board of Equalization
  • 2. Who must your PT corporation’s bylaws be filed with?
    • A) CA Secretary of State
    • B) CA Physical Therapy Board
    • C) County Recorder’s Office
    • D) No one – bylaws are internal documents
  • 3. When must a PT corporation hold its first board of directors meeting?
    • A) Prior to articles of incorporation filing
    • B) Within 90 days of articles filing
    • C) At any time, as long as it’s before seeing patients
    • D) Whenever shareholders sign a unanimous written consent
  • 4. What is the CA physical therapy corp initial statement of information due date?
    • A) 30 days after incorporation
    • B) 90 days after incorporation
    • C) 6 months after incorporation
    • D) 1 year after incorporation
  • 5. Which of the following is NOT expressly required to form a California PT corporation?
    • A) Filing articles of incorporation
    • B) Creating corporate bylaws
    • C) Having a physical office location
    • D) Obtaining an EIN

Answers: Forming Your PT Corporation

• • • 1. A) The California Secretary of State handles the filing of articles of incorporation for PT corporations and all other entity types.
    • 2. D) Corporate bylaws are an internal governance document and are not filed with any state agency, but you must keep them with your official corporate records.
    • 3. B) California corporations should hold an initial board of directors meeting soon after filing articles to take care of key start-up actions and documentation.
    • 4. B) Your PT corporation has a 90-day window from the date of filing to prepare and submit its initial statement of information to the California Secretary of State’s office.
      
  • 5. C) You don’t necessarily need a physical office to incorporate, but you do need a registered agent address for service of process.