Physicians Targeted by Professional Corporation "Compliance" Scams
[Posted 03/23/06]

Physician offices frequently receive official-looking mail telling them that they need to send money to keep their professional corporations “in compliance with state law.” Such solicitations often appear at first glance to come from legitimate sources and imply that if you don’t act quickly to keep your “corporate status” you may be exposed to lawsuits or audits. Don’t be fooled by these scams.

California law does require that each corporation keep accurate books and records of its board, committee, and shareholder meetings. Corporations are also required to annually file a Statement of Interest with the Secretary of State’s office and pay a $25 filing fee. The form can be filled out electronically at the Secretary of State’s website.

Professional corporations are also required to pay an annual franchise tax. For information on this obligation, go to the California Franchise Tax Board’s website and talk with your tax adviser.

Professional corporations are not required, as some solicitations imply, to file official minutes with the state or use “one size fits all” corporate documents. Because the specific needs of each corporation differ, CMA recommends that physicians consult with an attorney familiar with corporate law to be sure that their corporate records are properly kept.

If you receive a solicitation that you suspect may be a scam, send it to CMA by e-mail (legalinfo@cmanet.org) or by fax (415/882-5143). CMA will forward these solicitations to the California Attorney General’s office and the U.S. Postal Inspector.

For more details on the legal requirements for physician corporations, see CMA ON-CALL. Document #0230, “Medical Partnerships and Corporations,” provides a general overview of medical corporations; document #0214, “Statutory Close Corporations,” discusses the relaxed corporate requirements for “close” corporations, which apply to most small physician practices. For more information on false or misleading advertising and how to report fraud, see CMA ON-CALL document #1318, “False or Misleading Health Product Advertising.”

ON-CALL documents are available free to members at CMA’s members-only website. Nonmembers can purchase ON-CALL documents for $2 per page at the CMA Bookstore.

Contact: CMA’s legal information line, 415/882-5144 or legalinfo@cmanet.org.