Business Entities for Texas Physicians
There are several ways to structure a medical practice in Texas, each of which has its own uses. The type of entity you choose for your practice will depend on the amount of liability you expect to face, the options you have for managing the entity, and what tax obligations you will likely have. Here, we’ll review four types of business entities that Texas doctors can choose from.
Professional Associations (PA)
A professional association is an organization designed expressly to provide professional services, including medicine, osteopathy, podiatry, dentistry, and other forms of medical care. PAs are owned by professionals who are licensed in the services the association provides.
A PA does not provide limited liability protection to its members for their own errors, debts, obligations, etc. However, individual members do have limited liability against issues that arise from the actions of other members, such as malpractice claims, debts, etc.
Professional Corporations (PC)
A professional corporation, or PC, is a distinction set under Texas law to a corporation that provides professional services that would require a license. PCs are typically utilized for licensed providers other than physicians. General business corporations are not permitted under state law to provide licensed medical services, and as such, the PC distinction is necessary for medical practices to incorporate within the state.
PCs enjoy limited liability, meaning the corporation, not individual members, are held liable in the event of a lawsuit or claim. In addition, they can also reduce their tax obligations by providing certain benefits to their employees, such as insurance.
Professional Limited Liability Companies (PLLC)
A PLLC is a limited liability company that provides professional services. It operates just as any other LLC would, i.e. it passes tax obligations on to its shareholders, limits liability to individual members due to business operations, etc. The main distinction is that it must be owned and governed by professional individuals or organizations.
In a partnership, the entity itself is not taxed, and it does not bear tax liability for business operations. As such, those obligations are passed on to the partners. An exception to this is a limited liability partnership (LLP), in which partners are not liable for the errors or debts of others in the partnership.
Jointly Owned Entities
In recent years, legislation has been enacted that allows physicians and non-physician health care providers to form jointly owned entities. These include entities jointly owned by physicians and podiatrists, chiropractors, mental health licensed providers and physician assistants. Each of these arrangements have special requirements that are specified in the Texas Business Organizations Code.
When structuring your medical practice, it is vital to have solid legal guidance to assist you. Our Dallas health law practice with board-certified healthcare law attorneys can provide counsel as you determine which type of organization will best suit your needs, and then prepare and file the legal documents required to form your business entity.