August 9, 2011
Question:
Jennifer,
I am currently entertaining offers and was not sure if now was the right time to incorporate. If it is, what entity structure do you recommend?
Thanks,
Dr. B
Answer:
Sounds as though now may be as good of time as any! The purpose for adopting a corporate structure is to add an additional layer of protection between yourself, your money and your responsibilities. Of course, any claims of malpractice you would be liable for individually, so the corporate structure you are practicing under would not lend additional protection (which is why many people form additional entities to protect personal assets other than their professional practice and keeping assets in their personal name). If you do elect to incorporate, you have a few options as doctors are authorized to operate as any of the following entities: a sole proprietorship, a professional corporation ("PC"), a professional limited liability company ("PLLC"), or a limited liability partnership (“LLP”). Keep in mind that in New York, the corporate practice of medicine prohibits any non-doctor from owning or being even a part-owner of a medical practice.
Which entity you choose for your practice affects taxation, credentialing, general business liability (employment claims) and malpractice liability. Certain formation structures better protect against liability than others. Entities such as sole proprietorships and partnerships carry extended personal liability exposure in most circumstance as they do not legally distinguish between the owners and the entity itself. While an owner is held accountable for the acts of their partners, doctor employees and staff, choosing a PC or PLLC may offer additional corporate layers of protection in certain circumstances. Now, I will not answer the question for you as to which entity structure you should choose, because depending on your circumstances, you may lean towards one or another structure. A PC is a little cheaper to form, as a PLLC has a publishing requirement; however, legally a PLLC has more flexibility and a less rigid regulatory structure. Also the tax structure varies.
Because the entity structure you choose will have significant tax ramifications, the first person to speak with before incorporating (before calling your attorney who will handle the structuring) is your healthcare accountant. I stress that you speak with a healthcare accountant because you want to make sure the professionals you are working with specialize in healthcare so that they have a frame of reference with regards to applicable laws, rules and regulations that may apply to your practice arrangements, as well as experience with similarly situated clients. If you need a referral to a healthcare accountant, let me know.
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