Choosing the right structure for your professional practice

On Behalf of | May 6, 2019 | Business Law

Whether you’re starting a dental practice, an accounting firm or another professional practice, one of the first decisions you need to make is how you wish to structure your business. Today, we discuss three of the most common structures for professional practices in California: sole proprietorship, partnerships and professional corporations.

Sole proprietorships

Solo practice is an attractive option for many professionals since they are easy to form. The solo practitioner retains full control over their business. However, they are also personally liable for all liabilities and losses.


Partnerships come in several forms. The term “general partnership” usually is used to describe organizations that are not formalized through some sort of agreement. Limited partnerships rely on one partner for everyday operations, while other “silent” partners provide capital contributions. Partners who are limited to financial contributions are not liable for anything other than the capital they contribute.

A more common form of partnership for professional practices is the limited liability partnership (LLP). Attorneys, accountants and engineers often choose this structure. Profits and losses pass through to partners, and each partner is liable only for their own negligence or malpractice. However, that liability also extends to employees working directly under a professional’s supervision.

Professional corporations

Professional corporations (P.C.’s) require registration with the state. Certain limitations apply under the California Business and Professions code, as well. For example, any directors or shareholders of the professional corporation must be licensed to practice in the given profession. Forming a professional corporation helps to limit liability for things other than malpractice. It also can reduce costs relating to health and disability insurance.

Choosing the right structure for your professional practice is essential to your success. Consider the pros and cons of each option as well as your business goals before jumping in to one particular structure.