The decision to go into private practice as an LCSW can be an exciting but daunting process. Once you decide to take the plunge, you need to choose how you will run your business. As a licensed clinical social worker in California going into private practice, you may ONLY organize as a sole proprietorship or a professional corporation. However, practicing as a professional corporation taxed as an S Corp has several key advantages.
LCSW professional corporations have their own procedure that they need to follow. Below I will take you through each step involved in starting your LCSW professional corporation so you can have a clear idea of the process.
If you’re a licensed clinical social worker looking to start your Professional Corporation, book an appointment to speak with me here, email me at ariel@miragelaw.com or talk to me directly at 424-256-6686
What is a Professional Licensed Clinical Social Worker Corporation?
A Professional Licensed Clinical Social Worker Corporation is a professional corporation which is registered with the California Secretary of State and formed under the Moscone Knox Professional Corporation Act. The Moscone Knox Professional Corporation Act is the official law which governs the running of all professional corporations in California, which says that certain types of professionals must be licensed to practice in the state and must incorporate as a professional corporation to do so. All of these corporations are governed by the Moscone-Knox Professional Corporations Act. A clinician who is starting their own California Professional Licensed Clinical Social Worker Corporation must also hold a certificate of registration from the California Board of Behavioral Sciences.
Can A Licensed Clinical Social Worker Practice Under An LLC In California?
A Licensed Clinical Social Worker Corporation CANNOT open a private practice as an LLC in California. The California Corporations Code does not certify LLCs (Limited Liability Companies) for the purpose of practicing licensed clinical social work. For a licensed clinical social worker to provide professional services in California, they must open a Professional Corporation.
Benefits of Incorporating
The main advantages of incorporating is that the corporation will limit your personal liability against creditors and lawsuits, minimize the self-employment taxes of the shareholders, allow you to build corporate business credit, and much more.
What to Name Your LSCW Corporation
The Licensed Clinical Social Worker Corporation’s name must include the words “licensed clinical social worker.” It must also include a corporate ending such as: “A Professional Corporation”, “Professional Corporation”, “APC”, “A.P.C.” “PC”,”P.C.”,”Prof. Corp.”,”Inc.”, “Incorporated”, “Corporation”, “A California Professional Corporation”. “LLC” is not permitted as a corporate designation.
You must also tell your patient at the outset of treatment that the business is conducted by a Licensed Clinical Social Worker corporation.
Who Can Be A Shareholder Of The Professional Licensed Clinical Social Worker Corporation?
In a Licensed Clinical Social Worker corporation, an LCSW must own at least 51% of the corporation’s shares. The remaining 49% of the shares can be owned by other LCSW’s, licensed physicians, licensed psychologists, licensed marriage and family therapists (MFT), registered nurses, licensed chiropractors, licensed acupuncturists, or naturopathic doctors. Any shares issued to others who do not are not the professionals listed above are void.
Who Can I Transfer Shares to?
Shares of the LCSW corporation may only be transferred to those who are licensed to practice marriage and family therapy (MFT), to a shareholder of the corporation or to the professional marriage and family therapy corporation itself. Also, If a shareholder becomes ineligible to practice licensed clinical social work in California or is legally disqualified from rendering professional services to the Licensed Clinical Social Worker corporation, she must sell or transfer her shares to a qualified shareholder within 90 days of her ineligibility or disqualification.
Can A Professional Licensed Clinical Social Worker Corporation Use a DBA Or Fictitious Name?
In California, a Licensed Clinical Social Worker Corporation can use a fictitious name so long as they file a fictitious business name statement within 40 days of starting the Licensed Clinical Social Worker Corporation. You must also make a fictitious name filing in every local county recorder’s office for which you are practicing. Also, Licensed Clinical Social Worker corporations may use fictitious business names, so long as such names are not false, misleading or deceptive.
What is an S Corporation?
When corporations are started, they are taxed as a C-Corporation by default, which pays federal taxes on company profits. However, you would also be responsible to pay personal taxes on your salary, dividends or bonuses. Electing to be taxed as an S Corporation will change the corporation into a pass-through entity, which means that losses from the business will be passed onto your individual tax return. You will also not have to pay self-employment taxes on your dividends. This should not be seen as tax advice. For more information please contact your tax professional.
Steps to follow to form your LCSW Corporation:
1. File the Articles of Incorporation with the Secretary of State and pay the filing fee.
2. Hold a Board of Directors Meeting and Elect Directors
3. Have an attorney draft your corporate bylaws for the LCSW Corporation
4. Apply for an EIN with the IRS
5. File the Statement of Information with the Secretary of State
6. File Form 2553 for S-Corporation Tax Election for the corporation to be treated as an S Corp
7. Pay California Corporate Taxes and Fees to the California Franchise Tax
8. Register with the EDD if you will be hiring employees
9. Apply for local business registration and licenses
10. Hire a business attorney to make sure it is formed quickly and correctly the first time
If you’re a licensed clinical social worker looking to start your professional corporation, book an appointment to speak with me here, email me at ariel@miragelaw.com or talk to me directly at 424-256-6686
What To Do Next
Although it might seem simple to follow the steps above, it would be beneficial to consult with an attorney to make sure you structure the business correctly and to identify what the best course of action for starting your private practice will be. One mistake while creating your Professional Corporation can end up costing you money and time. Get it done right quickly and correctly the first time.
As a Business Lawyer for Professionals, I’ve assisted hundreds of professionals just like you start their private practices and I can definitely help you with yours.
If you have any questions feel free to book an appointment to speak with me here, email me at ariel@miragelaw.com or talk to me directly at 424-256-6686
I look forward to helping you start your business.
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