This is a free visual guide to the full process of forming a California professional corporation with S-Corp tax status. In California, therapists do not form an S-Corp directly. You form a professional corporation with the California Secretary of State, then file Form 2553 with the IRS to elect S-Corp tax status. The professional corporation is the legal entity; the S-Corp election is what makes it financially worthwhile. California therapists in private practice cannot form an LLC. Your options are sole proprietorship or professional corporation. At a certain income level, the S-Corp election saves you meaningful money on self-employment taxes and opens the door to hiring associates under your own entity. This guide covers the full process for LMFTs, LCSWs, and LPCCs converting an existing sole proprietorship, from incorporation through EHR migration and NPI update.
This guide uses LegalZoom for incorporation and Heard for bookkeeping and payroll, both services I use personally. Any bookkeeper familiar with S-Corps for therapists will work. Confirm before you start that yours will prepare Form 2553.
This is not legal or tax advice. Consult your CPA and an attorney before making structural changes to your practice.
How to use this guide
The interactive guide below is built in Miro, a free online whiteboard tool. You do not need a Miro account to view it here, but to use it as intended, where you can change colors as you complete tasks, you will need to download your own copy below.
The guide reads left to right. Each rounded rectangle is a task, and arrows show what has to happen before the next thing can. Zoom in with the + - in the bottom right, then pan by clicking and dragging, and scroll across to follow the full process in order.
Made by Robin Levick, LMFT
I'm a licensed marriage and family therapist in California. I work with individuals who feel like misfits in their culture or family, and with couples navigating intercultural relationships. I also supervise associate therapists, and offer consultation to licensed clinicians working at the intersection of psychodynamic and somatic approaches.
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