Attorneys, physicians, accountants, and other licensed professionals may own businesses whose continued operation depends on professional licensing and regulatory requirements. Their estate plans must address more than who receives the financial value of the practice.

A death or incapacity can create immediate problems involving employees, client records, ongoing services, and ownership restrictions.

Professional Ownership Restrictions

California imposes special rules on ownership and operation of many licensed professional practices.

A professional corporation cannot necessarily transfer its ownership and operating authority to an unlicensed family member in the same manner as an ordinary business.

The firm's governing documents and professional licensing rules should be reviewed before including practice ownership in a living trust.

Planning for Incapacity

An unexpected incapacity may leave a practice without someone authorized to handle important decisions.

The owner should determine who can lawfully manage business operations, access necessary records, communicate with clients or patients, and arrange continuity of professional services.

A durable power of attorney does not automatically authorize an agent to practice a regulated profession or exercise every power reserved for licensed individuals.

Protecting Clients and Records

Professional practices often maintain confidential or privileged information.

Succession planning should address who may access records, how confidentiality will be maintained, and what notices or regulatory procedures may be required.

The rules governing an attorney's client files may differ significantly from those governing medical records or accounting files.

Valuing and Transferring the Practice

The economic value of a professional practice may include equipment, receivables, goodwill, contractual rights, and other assets.

Nevertheless, ethical rules, licensing restrictions, and buy-sell agreements may limit how the business can be transferred.

A plan for sale, orderly transition, or closure may be necessary to preserve value while protecting clients and employees.

Key takeaways

• Identify professional licensing and ownership restrictions before planning a transfer.

• Establish a lawful continuity plan for death or incapacity.

• Address confidentiality, business valuation, and contractual obligations.

For Ventura County professionals, California professional practice estate planning should coordinate the living trust with corporate documents, professional regulations, and an operational succession plan.

This article provides general information, not legal advice. For questions involving estate planning for a professional practice, call Westlake Law Group at (818) 444-2022. 30699 Russell Ranch Road, North Building, Suite 210, Westlake Village, California. Virtual consultations are available throughout Southern California.

Educational links:

• https://www.dca.ca.gov/

• https://www.calbar.ca.gov/

• https://leginfo.legislature.ca.gov/faces/codes.xhtml