By: Tony Mauriello, Esq.
As the world emerges from the shadows of a global pandemic, the role of nurses has never been more celebrated or vital. In California, these healthcare heroes are not only the backbone of medical services but also innovators and leaders in a field that has been forever transformed by recent challenges. The establishment of a nursing corporation in this new era represents an unprecedented opportunity for nurses to capitalize on their expertise to redefine and enhance healthcare delivery.
Introduction
The creation of nursing corporations provides a channel for these professionals to consolidate their critical contributions into a formalized structure. This guide outlines the journey of forming a nursing corporation in California, combining legal intricacies with actionable steps.
The Formation Process
Legal Framework
At the heart of the legal framework for nursing corporations is the Moscone-Knox Professional Corporation Act, codified in Sections 13400-13410 of the California Corporations Code. This Act details the statutory requirements for professionals who wish to offer their services through a corporation. Additionally, the California Business and Professions Code provides governance for the standards of practice and licensure of healthcare professionals, including nurses. Nursing corporations must ensure they are established with the appropriate legal and ethical guardrails.
Filing Articles of Incorporation
Corporate formation begins with filing Articles of Incorporation (also known as the charter) with the California Secretary of State. This charter document must include the corporation’s name, its purpose, agent for service of process, and the initial persons on the board of directors, among other statutory requirements.
Registration and Compliance
Once incorporated, the corporation must register with the California Board of Registered Nursing (BRN). The BRN serves as the regulatory authority, enforcing compliance with the Nursing Practice Act—Sections 2700-2838 of the California Business and Professions Code—which sets forth the scope of practice, educational requirements, and licensure regulations for nursing professionals in the state.
Governance and Management
Next, the corporation must establish its bylaws and governance structure. These dictate the operational and managerial framework of the corporation, detailing the election of directors, the appointment of officers, shareholder rights, meeting protocols, and other key governance processes.
Ownership Structure
In California, a nursing corporation’s ownership structure is legally mandated to be majority-owned (51% or more) by licensed nursing professionals. This requirement, in Section 13401.5 of the California Corporations Code, ensures that those with the requisite expertise and licensure are in control of the entity.
Taxation and Financial Planning
Choosing whether the corporation will be taxed as a C Corporation or S Corporation has significant financial implications. A certified public accountant or tax attorney can provide advice based on the corporation’s specific financial picture.
Professional Liability Insurance
Professional liability insurance is indispensable for nursing corporations, offering a layer of protection that extends beyond the legal shield of corporate structure. It addresses potential malpractice claims and other liabilities that could arise from nursing services, safeguarding both the corporation’s financial health and the professional standing of its members.
Ongoing Legal and Regulatory Compliance
A nursing corporation must comply with state laws and regulations. This includes conducting annual meetings, filing Statement of Information reports with the Secretary of State, and ensuring that the corporation’s practices are consistent with the standards set forth by the BRN.
Conclusion
The formation of a nursing corporation in California provides legal, financial, and possibly professional rewards. By following the steps laid out in this guide, nurses can embark on this journey with a clear vision and solid footing, ready to meet the demands of the corporate world.
Tony Mauriello is a corporate attorney in San Diego specializing in professional corporations including nurses, dentists and doctors.
This blog is written as of March 2024. Recommendations and legal requirements are changing rapidly, so please continue to review our legal updates or review postings on relevant government websites.
All blogs on this site are for educational purposes only, do not constitute legal advice or opinion, and should not be applied to your situation, or any specific situation, without consultation with counsel. Strategy Law, LLP does not provide any legal advice concerning any matter discussed in a blog except upon formal engagement including, without limitation, execution of Strategy Law, LLP’s formal legal services agreement, and with respect to specific factual situations. No blog constitutes a guaranty, warranty, or prediction regarding the result of any legal matter discussed in the blog or any representation.
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