FORMATION OF PROFESSIONAL SERVICE CORPORATION TO PROVIDE HEALTH CARE SERVICES

CORPORATIONS ‑- PROFESSIONAL SERVICES ‑- FORMATION OF PROFESSIONAL SERVICE CORPORATION TO PROVIDE HEALTH CARE SERVICES

(1) It is not permissible for a professional services corporation organized under chapter 18.100 RCW for the purpose of providing medical services to admit as a shareholder a non-physician health care professional such as a psychologist or midwife who is licensed under applicable provisions of the Revised Code of Washington.

(2) It would likewise not be permissible to organize a professional services corporation to provide a broad range of health care services thereafter admitting as shareholders persons licensed to provide any of such health care services.

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                                                                   April 25, 1980

Honorable R. H. Bob Lewis
State Sen., 5th District
3308 Columbia Circle
Spokane, Wa 99205                                                                                                               Cite as:  AGLO 1980 No. 18

Dear Sir:

            By letter previously acknowledged you requested our opinion on the following two questions:

            "1. Is it permissible for a professional services corporation organized under chapter 18.100 RCW to provide medical services to admit as a shareholder a non-physician health care professional such as a psychologist or midwife who is licensed under applicable provisions of the Revised Code of Washington?

             [[Orig. Op. Page 2]]

            "2. Would it be permissible to organize a professional services corporation to provide a broad range of health care services thereafter admitting as shareholders persons licensed to provide any of such health care services?"

            We answer both questions in the negative for the reasons set forth in our analysis.

                                                                     ANALYSIS

            InState ex rel. Standard Optical Co. v. Superior Court, 17 Wn.2d 323, 135 P.2d 839 (1943), the Washington Supreme Court followed the common law rule that a corporation cannot engage in the practice of a "learned profession" through licensed employees unless legislatively authorized.  In so ruling the Court further concluded that optometry constituted one of those learned professions along with the professions of law, medicine and dentistry.

            Subsequently, the legislature enacted chapter 122, Laws of 1969 (now codified as chapter 18.100 RCW), to which your questions refer. The primary purpose of that act, denominated the Professional Services Corporation Act, was to grant legislative authorization for the corporate practice of those professions ". . . which prior to the passage of this chapter and by reason of law could not be performed by a corporation . . ." See, RCW 19.100.030. This authorization, however, was coupled with certain restrictions. First, RCW 18.100.030(2) provides that:

            "(2) The term 'professional corporation' means a corporation which is organized under this chapter for the purpose of rendering professional service andwhich has as its shareholder or shareholders only individuals who themselves are duly licensed or otherwise legally authorized within this state to render the same professional service as the corporation."  (Emphasis supplied)

            And secondly, the same requirement that only individuals holding a license to render the same professional service can be shareholders of a professional service corporation is also stated in RCW 18.100.050 as follows:

             [[Orig. Op. Page 3]]

            "An individual or group of individuals duly licensed or otherwise legally authorized to render the same professional services within this state may organize and become a shareholder or shareholders of a professional corporation for pecuniary profit under the provisions of Title 23A RCW for the purpose of rendering professional service: PROVIDED, That one or more of such legally authorized individuals shall be the incorporators of such professional corporation: PROVIDED FURTHER, That notwithstanding any other provisions of this chapter, registered architects and registered engineers may own stock in and render their individual professional services through one professional service corporation."

            Both of these provisions‑-the definition of a professional service corporation in RCW 18.100.030(2) and the limitation on shareholder privileges in RCW 18.100.050‑-clearly show that the legislature intended, with but one exception not here pertinent,1/ that only individuals who hold the same professional license can either join to become shareholders in the formation of a given professional service corporation or become shareholders therein at any time after its formation. Accordingly, it would not be legally permissible for a professional services corporation organized by licensed physicians to admit non-physicians as shareholders either at the time of formation (thus necessitating a negative answer to your second question) or at any time later (thus also necessitating a negative answer to your first question).