top of page

Why LMFTs and LPCCs Should Consider Incorporation in California

Writer's picture: Anna Jerden, Esq.Anna Jerden, Esq.
Business savvy Licensed Marriage and Family Therapists and Licensed Professional Clinical Counselors in California can form Professional Corporations to take advantage of important tax and retirement savings.
Business savvy Licensed Marriage and Family Therapists and Licensed Professional Clinical Counselors in California can form Professional Corporations to take advantage of important tax and retirement savings.

Licensed Marriage and Family Therapists (LMFTs) and Licensed Professional Clinical Counselors (LPCCs) in California might consider incorporating (forming a professional corporation) for several reasons, including legal, financial, and professional benefits. Here are some key points to consider:


1. Legal Protection

• Limited Liability: Incorporation separates personal and business assets. While professionals remain personally liable for malpractice, other business-related liabilities (e.g., rent, employee disputes) may not affect personal assets.

• Compliance: California requires LMFTs and LPCCs who practice as a group or hire other licensed professionals to form a professional corporation under the state’s laws (California Corporations Code §13401).



2. Tax Benefits

• Flexible Tax Structure: Professional corporations (PCs) can elect to be taxed as an S-corporation, which may reduce self-employment taxes by splitting income into salary and dividends.

• Business Deductions: Incorporation allows for deductions of legitimate business expenses, such as rent, utilities, professional development, and retirement contributions.


3. Credibility and Professionalism

• Operating under a professional corporation adds legitimacy to your practice and may enhance trust among clients and referral sources.


4. Retirement and Benefits

• Incorporation allows for tax-advantaged retirement plans (e.g., SEP-IRA or 401(k)) and other employee benefits that may not be available to sole proprietors.


5. Growth and Scalability

• A corporation provides a structured framework for expanding your practice, such as hiring other therapists, entering partnerships, or diversifying services.


Considerations Before Incorporating

• Costs: Forming and maintaining a corporation involves filing fees, annual taxes (minimum $800 franchise tax), and administrative overhead. Many therapists find that the benefits to operating as a professional corporation in California far outweigh these formalities.

• Professional Obligations: In California, LMFTs and LPCCs must adhere to strict rules regarding ownership, as only licensed professionals can own shares in the corporation.


Incorporating can be a strategic move, but consulting a tax professional or attorney familiar with California law is crucial to ensure it aligns with your goals.

Kommentare


HELPFUL LINKS

​

*This site is for informational purposes only. The use of this site does not constitute legal advice nor does it create an attorney-client relationship. By submitting your contact details, you are only requesting information. Any initial phone or video calls, or electronic mail queries will be screened by Relate Law to determine if a potential relationship will be formed. Use of any form on this website does not provide any confidentiality. Please do not submit any confidential information through this site. This website lists areas in which the firm practices law but there is no claim of expertise or board certification in any particular areas. Relate Law is not associated with any third parties and any links or references to third party sites are provided for informational purposes only. Relate Law has no control or management over the accuracy of any information that appears on third party sites nor does it claim ownership of such information. Relate Law, APC is licensed to practice in California.

© 2024 by RELATE LAW, APC. All Rights Reserved. 

6320 Canoga Avenue,15th Floor

Woodland Hills, California 91367

bottom of page