The Key Features of the Corporate Practice of Optometry in Los Angeles, California

Forming a Professional Optometry Corporation in Los Angeles, CAIn California, forming and practicing as a professional optometry corporation may provide legal advantages over practicing as a sole proprietor or optometry partnership. However, incorporating a professional corporation is a tricky procedure, requiring strict compliance with state and federal statutes. Outlined below are some of the key features and reasons for forming a California professional optometry corporation. 


What Is a Professional Optometry Corporation?

A professional optometry corporation is created under California state law and is designated to practice the profession of medicine. California professional optometry corporations are governed by the Moscone-Knox Professional Corporation Act (Corp C §§1340013410), the general provisions of the California Corporations Code, and regulators promogulated by the California Board of Optometry. Contact your Los Angeles optometry attorneys for more information.

What Are Some Advantages of a Professional Optometry Corporation?

Forming a Professional Optometry Corporation in Los Angeles, CALegal Protection – A professional optometry corporation allows for the separation of personal assets from business assets, limiting personal liability against lawsuits and creditors. While a professional corporation cannot protect a doctor from malpractice claims (professional liability), if formed and operated correctly, it may protect the doctors’ personal assets from claims arising from the malpractice of colleagues, some commercial claims, or employee-related lawsuits. This is especially important for a doctor running their own optometry practice. 

Business Credit – Building business credit under a professional optometry corporation can be beneficial when it comes time to form a partnership or sell your business. It also may avoid the need for personal guarantees. 

Taxation – By electing your professional optometry corporation as an S-Corp, profits and losses pass through to shareholders, which avoids double taxation. S-Corp election also reduces self-employment taxes on shareholders who draw distributions. 

Fringe Benefits – Optometry care and retirement plans are available under a professional optometry corporation.  

Improper Formation: What Can Go Wrong?

Forming a Professional Optometry Corporation in Los Angeles, CAThe consequences of improperly forming a professional corporation include:

• Forming an entity that doesn’t offer the protection or benefits you need.

• Missing the timeframe to file an S-Corp election.

• Falling out of compliance and losing the protection you formed the corporation to ensure. 

• Monetary Penalties.  

• Determination that the corporation is a de facto corporation.

What is Needed to Form a Professional Optometry Corporation?

Forming a Professional Optometry Corporation in Los Angeles, CASeveral steps must be taken to form a professional optometry corporation in California. The California Secretary of State has certain naming restrictions that professional corporations must meet in order to be approved. After deciding on a compliant name for the corporation, articles of incorporation must be drafted to contain several mandatory provisions and filed with the Secretary of State. 

Next, corporate bylaws, which identify the structure of the corporation and the rules by which it will function, must be prepared. 

Other steps include:

  • Conducting initial corporate meetings to issue shares and elect officers and directors. 
  • Obtaining an EIN number (federal tax id) from the IRS.
  • Opening a corporate bank account.
  • Filing an S-Corp Election with the IRS (if applicable). 
  • Filing a statement of information with the Secretary of State.
  • Applying for a business license. 
  • Applying for a fictitious business name (if applicable).


What Are the Restrictions of a Professional Optometry Corporation?

Forming a Professional Optometry Corporation in Los Angeles, CAA California professional optometry corporation may only render services in medicine. Generally, the professionals must be licensed in the practice of medicine to be a shareholder of the California professional optometry corporation (California Corporations Code §13401(b), (d)). 

However, other licensed professionals are eligible to be shareholders, officers, directors, or professional employees of a California optometry corporation provided: 

  • The shares owned by these other members of similar professions do not hold shares totaling more than 49% of the total stock of the California professional optometry corporation.
  • The licensed doctor shareholders outnumber the non-doctor shareholders. 

The following are permissible shareholders and directors of California professional optometry corporations (California Corporations Code §13401.5(j)):

  • Licensed physicians and surgeons.
  • Licensed doctors of podiatric medicine.
  • Licensed psychologists.
  • Registered nurses.
  • Licensed chiropractors.
  • Licensed acupuncturists.
  • Naturopathic doctors.

California professional optometry corporations that have only one shareholder must have only one director, (who must be that shareholder). That shareholder is required to also serve as the president and treasurer of the corporation (California Corporations Code §13403). 

A California professional optometry corporation with only two shareholders must have only two directors (who must be those shareholders). The two shareholders are required to fill the offices of the president, vice president, secretary, and treasurer (California Corporations Code §13403).

Taxation of Professional Optometry Corporations

Forming a Professional Optometry Corporation in Los Angeles, CAThere are two ways for California professional optometry corporations to get taxed, as a C-corp or as an S-corp. All California professional optometry corporations are C-corp by default unless they elect as an S-corp. 

C-Corp –The net income of a California professional optometry corporation is taxable by the federal and state governments’ corporation tax rates. If any dividends are distributed to shareholders, the shareholders must report the dividends, which will be subject to income taxes. Taxation of dividends is commonly referred to as “double taxation” because the income is taxed once at a corporate level and then again when the profits are distributed to shareholders. 

S-Corp – A professional optometry corporation that elects as an S-Corp becomes a pass-through entity for income tax purposes. Business income, deductions, loss, and tax credits, are passed through to the shareholders, rather than being taxed at the corporate level, thus avoiding double taxation.

Conducting Business as a Professional Optometry Corporation

In order to ensure the shareholders of an optometry corporation maintain liability protection should the optometry corporation be unable to pay its creditors or be sued, it is essential that an optometry corporation maintains separate bank accounts from those of its owners. Further, any payments should be made to the optometry corporation, with all checks made payable to the corporation and not to its shareholders. For the same reason as the previous point, the optometry corporation should be sure to conduct all corporate business in the corporate name and not in the individual name of any director, officer, or shareholder.

Maintaining a Professional Optometry Corporation

Forming a Professional Optometry Corporation in Los Angeles, CASeveral actions must be taken in order to protect and maintain compliance with your professional optometry corporation. 

Shareholders’ Meetings – California requires professional optometry corporations to hold annual shareholders’ meetings. During these meetings, the chair presents different agenda items, and the shareholders’ vote. Agenda items may include: appointing directors to the board, removing directors, voting on shareholder initiatives, and board-initiated transactions that require shareholder approval, such as mergers, sale of assets, or dissolution.    

Board of Directors Meetings – Board of directors’ meetings revolve around the management of a professional optometry corporation, as that is the responsibility of the board of directors. Typically, directors establish broad policies and objectives for the organization of the corporation; select, support, and review the performance of the CEO, ensure the adequacy of financial resources, and approve the annual budget. 

Minutes – Both shareholders’ meetings and board of directors’ meetings should be documented by minutes. Minutes are essential, as they are used as an official account of the decisions made during a meeting. 

Statement of Information – California requires corporations to file a statement of information with the Secretary of State annually. This can be done, at no cost, through the Secretary of State’s website ( 

Forming a professional optometry corporation in California can seem like a complicated process, but the result can bring many advantages over other corporate entities. Pacific Health Law Group is focused on making the process streamlined and worry-free. We have the knowledge and experience to ensure all corporate documents are compliant and filed properly so that you can enjoy the excitement that comes from starting your own professional optometry corporation. Call your Los Angeles optometry corporation attorneys to find out how we can help you!

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