California Med Spa Structure: Why a Physician-Owned PC Is Required, and What Changed in 2025 and 2026
California is among the strictest corporate-practice states. A physician-owned PC is required, the Medical Board reads control broadly, and 2025 and 2026 added new limits on private equity and management companies.
Key Highlights
- California's Business and Professions Code bars general corporations from holding professional rights, privileges or powers, which is why a physician-owned PC is required.
- The Medical Board's position is that corporations generally cannot practice medicine directly or indirectly, and a physician serving as medical director of a lay-owned business can be treated as aiding unlicensed practice.
- SB 351 (effective January 1, 2026) bars private equity and hedge fund interference with clinical judgment, and AB 1415 requires 90 days' notice before certain health care transactions.
- In June 2026 the California attorney general's settlement with Carbon Health, which included a bar on MSO ownership interests in PCs, was described by law firms as another action aimed at the friendly-PC model.
The Core Rule
California is among the strictest corporate-practice states. Its Business and Professions Code declares that corporations have no professional rights, privileges or powers, and the Medical Board's view is that a corporation generally cannot practice medicine either directly or indirectly. In practice, a med spa that is not physician-owned needs a physician-owned professional corporation to hold the license and the patients, with the management company limited to non-clinical services.
Control Is Read Broadly
California regulators look at control, not just ownership. Hiring and firing clinicians, setting fees, and steering clinical protocol can all be read as practicing medicine through a corporation. State research has listed arrangements in which a med spa's medical director is effectively an employee of a lay owner, and MSOs that arrange or provide medical services themselves, among the structures the doctrine reaches. The Medical Board's guidance also treats a physician who acts as medical director of a lay-owned business as aiding unlicensed practice.
What Changed in 2025 and 2026
- SB 351: Signed October 6, 2025 and effective January 1, 2026, it bars private equity and hedge fund interference with clinical judgment, and the attorney general can seek injunctive relief.
- AB 1415: Signed October 11, 2025, it requires 90 days' pre-transaction notice to the state's Office of Health Care Affordability for certain health care transactions.
- Carbon Health settlement: On June 26, 2026 the attorney general announced a settlement with Carbon Health totaling $4.4 million that included a bar on MSO ownership interests in PCs, reported by law firms as another action aimed at the friendly-PC model.
What a California Clinic Should Do
Make the physician ownership real and the paper match practice: a licensed owner who participates, protocols and delegation written by the physician, board minutes that record clinical decisions as the PC's, separate accounts, and a flat fair-market management fee rather than anything tied to revenue. If you are considering a sale or outside investment, remember the new notice and clinical-independence rules, and talk to counsel early.
Disclaimer
This article is general educational information, not legal advice. State law changes and depends on the facts of a clinic's structure, so confirm the specifics with health care regulatory counsel in the state before you rely on them.
MedGrid MSO provides management services to independently owned practices; it does not practise medicine and does not direct clinical decisions. Requirements vary by state and by service, and change over time — nothing on this page is legal or medical advice. Talk to us or your own counsel before making a structural decision for your clinic.