Professional Corporations: Part 1

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Avoiding Liability Bulletin – August 2006

MFTs and other licensed professionals sometimes conduct their practices as professional corporations rather than as sole proprietorships. I have spoken to many practitioners who have told me that they incorporated with the assistance of an attorney. When I inquire about the name of the corporation and who owns shares in the corporation, I am sometimes able to tell from the answer given that the wrong kind of corporation has been formed. It occasionally turns out that the attorney wasn’t aware that if certain kinds of health practitioners want to do business in the for-profit corporate form, they must form a professional corporation. Because the law varies from state to state, one must proceed carefully and must be sure that they determine what kind of corporation is legally permissible to render the kind of mental health or other services involved.

When non-healthcare businesses form corporations, they often form what is referred to as a “general business corporation.” One of the reasons why businesses incorporate is to limit their liability. In other words, they are seeking to avoid unlimited personal liability and are hoping to only have corporate liability should the corporation or its employees act in a negligent manner. Generally, healthcare practitioners cannot limit their liability for professional negligence, even when they form a professional corporation. I again caution that because the law varies from state to state and from profession to profession, it is important to ascertain what the law is in your state, and what is permissible (or required) when it relates to doing business in the corporate form.

To read a more recent Avoiding Liability Bulletin regarding professional corporations, click here.

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Richard Leslie

"At the Intersection of Law and Psychotherapy" Richard S. Leslie is an attorney who has practiced at the intersection of law and psychotherapy for the past twenty-five years. Most recently, he was a consultant to the American Association for Marriage and Family Therapy (AAMFT), where he worked with their various state divisions to develop and implement their legislative agendas. He also provided telephone consultation services to AAMFT members regarding legal and ethical issues confronting practitioners of diverse licensure nationwide. Additionally, he wrote articles regarding legal and ethical issues for their Family Therapy Magazine and presented at workshops on a variety of legal issues. Prior to his work with AAMFT, Richard was Legal Counsel to the California Association of Marriage and Family Therapists (CAMFT) for approximately twenty-two years. He was director of Government Relations for CAMFT, and as such was the architect of CAMFT’s widely regarded and successful legislative agenda. He represented CAMFT before the regulatory board (the Board of Behavioral Sciences) and was a tireless advocate for due process and fairness for licensees and applicants. He was a regular presenter at workshops and was consistently evaluated as CAMFT’s most highly rated presenter. He also sat with the CAMFT Ethics Committee and acted as their advisor on matters pertaining to the enforcement of ethical standards. Richard is an acknowledged expert on matters pertaining to the interrelationship between law and the practice of marriage and family therapy and psychotherapy. For many years, he taught Law and Ethics courses for a number of colleges and universities in their marriage and family therapy degree programs. While at CAMFT, he provided telephone consultation services with thousands of therapists in California and elsewhere for over twenty years. He is highly regarded for his judgment, his expertise, his direct style, and his clarity. Richard has been the driving force for many of the changes and additions to the laws of the State of California that affect MFTs. In 1980, he was primarily responsible for achieving passage of the "Freedom of Choice Law" that required insurance companies to pay for psychotherapy services performed by MFTs. Passage of that law allowed MFTs to earn a living, allowed them to better compete in the marketplace, and strengthened the profession in California by leading to a great increase in the number of licensees and CAMFT membership. Currently, about half of the licensed marriage and family therapists in the country are licensed in California. While at CAMFT, Richard was primarily responsible for, among other things, the successful effort to criminalize sex between a patient and a therapist. He was successful in extending the laws of psychotherapist-patient privilege to MFTs, thereby giving patients the same level of privacy protection as when seeing a psychiatrist or psychologist. He fought tirelessly and successfully for the right of MFTs to refer to themselves as "psychotherapists," to perform psychological testing services, to be appropriately reimbursed by California’s Victims of Crime Program, and to be employed in county mental health agencies throughout California. Richard was admitted to the Bar in New York (1969) and in California (1973). While practicing in New York, he served as a public defender, and later, as an Assistant District Attorney. Shortly after moving to California, he worked for the San Diego County Human Relations Commission as their Law and Justice Officer. While there, he worked successfully to achieve greater racial diversity in the criminal jury selection system and to expose and stop police abuse. For such work with that agency, he was the recipient of the Civil Libertarian of the Year Award by the San Diego Chapter of the American Civil Liberties Union.

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