California Corporate Practice of Medicine Rules (2026 Guide)

California enforces one of the strictest corporate practice of medicine (CPOM) bans in the country, and as of October 2026 it is more explicit than ever. Business and Professions Code section 2400 says corporations have no professional rights, privileges, or powers. SB 351 now writes the Medical Board's list of physician-only decisions into statute for private equity and hedge fund deals, and AB 1415 pulls certain management services organizations (MSOs) into state transaction review.

For a non-physician founder: you cannot own any share of a California medical corporation. The workable route is a physician-owned professional corporation (the "friendly PC") plus an MSO you own, under an agreement that leaves clinical judgment and key business decisions with the physician. NPs and PAs can hold minority stakes in a medical corporation. They cannot control one.

This is general information, not legal advice. Confirm the current rules with a healthcare attorney licensed in California.

Last reviewed October 2026. State rules change often; statute and case references are summaries, not quotations.

Key takeaways

California Business and Professions Code section 2400 denies corporations any professional rights, and section 2052 makes unlicensed practice, including aiding it, a public offense.
Only licensed persons may own a California medical corporation, and allied licensees such as nurses and PAs may together hold no more than 49% of the shares.
SB 351 bars private equity groups and hedge funds from interfering with physicians' clinical decisions such as test selection and referrals.
AB 1415 requires certain MSOs and investors to give the Office of Health Care Affordability advance notice of covered transactions. Confirm the current definitions and notice timing.
California has no out-of-state telehealth registration, so physicians treating California patients need a full California license.

Does California have a corporate practice of medicine doctrine?

Yes, and it rests on statute, not just case law or board opinion.

The statutes. Business and Professions Code section 2400 provides that corporations and other artificial legal entities have no professional rights, privileges, or powers. Section 2052 makes unlicensed practice a public offense and reaches anyone who aids or abets it. A lay company that hires doctors to treat patients is the company practicing medicine.

The Medical Board's decision list. The Medical Board of California names two groups of physician-only decisions. Clinical: diagnostic test selection, referrals, and responsibility for overall patient care. Business: ownership of patient records, hiring and firing clinical staff, payer contract parameters, coding and billing, and approving medical equipment. A physician may consult lay staff on the business items but must keep final approval. They cannot be delegated to an MSO.

SB 351. SB 351 writes that list into law for private equity groups and hedge funds involved with physician and dental practices. Per Sidley and other firm summaries, those investors cannot interfere with test selection, referrals, patient or hour quotas, records, clinical hiring, payer contracting, coding and billing, or equipment approval. Their agreements cannot bar providers from competing after they leave or from criticizing care quality. The Attorney General can sue for injunctive relief. Most firms read SB 351 as codifying existing doctrine, but enforcement now has an explicit statutory hook.

AB 1415. AB 1415 requires certain MSOs, private equity groups, and hedge funds to notify the Office of Health Care Affordability of covered transactions in advance of closing. Which MSOs are covered, how far ahead notice is due, and the status of OHCA's implementing regulations should all be confirmed with counsel before your MSO signs a practice deal.

Who can own a medical practice in California?

Physicians practice through a professional medical corporation formed under the Moscone-Knox Professional Corporation Act and the Medical Practice Act.

Licensed owners only. Under B&P section 2408, each shareholder, director, and officer of a medical corporation must be a licensed person, apart from assistant secretaries and assistant treasurers. There is no percentage an unlicensed investor may hold.
The 51/49 rule. Corporations Code section 13401.5 lets certain other licensees, including podiatrists, psychologists, registered nurses, and physician assistants, own shares. Together they may hold no more than 49%, and their headcount cannot exceed the number of physician shareholders.
Narrow exceptions. Section 2400 itself carves out certain charitable clinics that do not charge for services, and other statutes allow limited physician employment by specified entities. Most California hospitals still cannot employ physicians directly. None of the exceptions is designed for a venture-backed telehealth brand.

Can nurse practitioners and physician assistants own a practice in California?

California's NP practice authority is classified as restricted, though that is shifting.

Nurse practitioners. AB 890 created two optional NP categories, described by the Board of Registered Nursing. A "103 NP" (B&P 2837.103) may practice without standardized procedures, but only in a group setting with at least one physician. A "104 NP" (B&P 2837.104) may practice independently within their certified population focus. Each step requires transition-to-practice experience, generally 4,600 hours or three full-time-equivalent years.

An NP can be a minority shareholder in a medical corporation under the 49% cap. How far a 104 NP's own practice entity can go is still being worked out, so get specific advice before building a brand on NP-owned care.

Physician assistants. PAs practice under a practice agreement with a physician. They can hold minority shares within the same 49% cap but cannot control a medical corporation. See our guide to collaborating physicians.

How does the friendly PC-MSO model work in California?

The friendly PC-MSO model works in California, but the margin for error is thin.

Fees. B&P section 650, California's anti-kickback and fee-splitting statute, generally permits a percentage-of-gross-revenue fee for services other than referrals if it is commensurate with the value of the services. California appellate courts have reportedly applied that reading to MSO fees, including in Epic Medical Management, LLC v. Paquette; confirm the citation and holding with counsel before relying on it. The real test is fair market value, and a flat fee can fail it too.

Control. Your management services agreement should track the Medical Board's list item by item. The physician owner approves coding and billing policies, payer contract parameters, clinical hiring, equipment, and records custody. The MSO prepares, recommends, and executes. With private equity or hedge fund money, SB 351 makes these limits statutory.

Stock transfer controls. Many California structures let the MSO require the PC owner's shares to move to another physician. After SB 351, have counsel confirm those controls and any security interests do not read as investor control.

What does this mean for a telehealth brand serving California patients?

CPOM follows the patient. If the patient is in California during the visit, California law governs, wherever your company or clinicians sit.

Licensure. California has no out-of-state telehealth registration. Every physician, NP, and PA treating California patients needs a full California license. See telehealth licensing by state.
Entity. Bill California care through a California medical corporation owned by a California-licensed physician. A Delaware C-corp cannot employ the clinicians.
Diligence. Expect investors to ask about SB 351 and AB 1415 compliance in any financing.
NP-led models. A 103 NP needs a physician in the group setting. A 104 NP's independence does not let a lay company own the clinical entity.

California CPOM at a glance

Topic	California (as of October 2026)
CPOM enforcement	Strong
Primary legal basis	B&P Code 2400 and 2052; Medical Board guidance; SB 351
Professional entity options	Professional medical corporation (Moscone-Knox); physicians hold at least 51%
Fee-splitting rule	B&P 650; percentage fees allowed if commensurate with value of services
NP practice authority	Restricted (AB 890 103 NP and 104 NP pathways)
Out-of-state telehealth licensing	No; full California license required
Typical structure for non-physician founders	Friendly medical corporation plus MSO; AB 1415 notice for covered transactions

Frequently asked questions

Can a non-physician own a medical practice in California?

No. Every shareholder, director, and officer of a California medical corporation must be licensed, and non-physician licensees are capped at 49% combined. Unlicensed founders typically own an MSO serving a physician-owned medical corporation.

Did SB 351 ban private equity from California healthcare?

No. It bars private equity groups and hedge funds from interfering with physicians' clinical and certain business decisions, and voids some noncompete and nondisparagement clauses in their agreements. Most firms describe it as codifying existing doctrine.

Can an MSO charge a percentage of revenue in California?

Generally yes, if the fee is commensurate with the value of the services and is not payment for referrals, under B&P section 650. Any fee, flat or percentage, should be backed by a fair market value analysis.

Can a nurse practitioner open an independent practice in California?

A 104 NP may practice independently within their certified population focus after meeting AB 890's transition requirements. A 103 NP must work in a group setting with a physician. Ownership structures need case-specific advice.

Do out-of-state doctors need a California license for telehealth?

Yes. California has no telehealth registration or special telemedicine license, so a physician treating a patient located in California needs a full California license.

Sources

For every other state, see our 50-state corporate practice of medicine guide.

Launch in California on a structure that is already built

MyOrbitHealth can form a PC-MSO structure for your brand, supply a physician PC owner or collaborating physician, or let you launch on its existing MSO / friendly-PC structure with 2,400+ licensed providers, where licensed providers make every clinical decision. See PC-MSO formation and physician PC owner services, or book a call.