Guide to Medical Practice Formation

The choice between PLLC and PC determines your governance structure, tax treatment, and operational flexibility. Many physicians default to PLLC due to familiarity with LLC structures, but PCs offer advantages for certain practice types, particularly groups with complex employee benefits or practices in states where PLLC is unavailable for medical practice.

States Requiring PC for Medical Practice (partial list): California, Nevada (historically), and certain other jurisdictions. Always verify current state law.

PLLC Default Taxation: PLLCs are “disregarded entities” (solo) or partnerships (multi-member) by default. All net income passes through to physician-owners and is subject to both income tax and self-employment tax (15.3% on income up to $160,200 in 2023, then 2.9% Medicare tax above that threshold). This creates a significant tax burden.

S-Corporation Election for PLLC: PLLCs can elect S-corporation tax treatment to reduce self-employment tax. Under S-corp taxation, physician-owners take a “reasonable salary” subject to FICA tax, and remaining profits pass through as distributions not subject to SE tax. For a physician earning $400,000 net, an S-corp election might save $15,000-$25,000 annually in payroll taxes.

PC Default Taxation: PCs are C-corporations by default, subject to double taxation (corporate income tax on entity profits, then shareholder income tax on dividends). This is almost never advantageous for medical practices. Nearly all medical PCs elect S-corporation status immediately upon formation.

PC with S-Corp Election: Functionally identical to PLLC with S-corp election. Physician-shareholders receive W-2 salary (subject to FICA) and S-corp distributions (not subject to SE tax). Same tax planning considerations apply.

The Tax Cuts and Jobs Act created a 20% deduction for qualified business income (QBI) from pass-through entities. However, “specified service trades or businesses” (SSTBs)—including medical practices—face income limitations:

• Full QBI Deduction: Available if taxable income is below $182,100 (single) / $364,200 (married filing jointly) for 2023
• Phase-Out Range: Deduction phases out between $182,100-$232,100 (single) / $364,200-$464,200 (married)
• No Deduction Above Threshold: Medical practice income above phase-out threshold receives no QBI deduction

Most successful physicians exceed these thresholds, making QBI planning complex. Strategies include spousal income shifting, W-2 salary optimization, and multi-entity structures (clinical PLLC + administrative entity).

PLLC Governance: Operating agreement defines management structure (member-managed vs manager-managed), voting rights, profit distribution formulas, capital contributions, and exit provisions. PLLCs offer maximum flexibility but require carefully drafted operating agreements to avoid disputes. For multi-physician groups, address:

• Decision-making authority (unanimous, majority, or managing member)
• Allocation of profits and losses (equal, pro rata based on ownership, or performance-based with eat-what-you-kill formula)
• Capital call provisions if practice needs additional funding
• Buy-sell provisions upon death, disability, retirement, or voluntary departure
• Non-compete and non-solicitation restrictions
• Dispute resolution (mediation, arbitration, or Texas showdown buyout)

PC Governance: Corporate bylaws and shareholder agreements define governance. PCs require formal annual meetings, board resolutions, and corporate minutes. While more burdensome administratively, this formality provides clearer governance framework and may be preferable for larger groups or hospital-affiliated practices. PC governance includes:

• Board of directors (often all physician-shareholders in small practices)
• Officers (president, secretary, treasurer—may be same person)
• Annual shareholder meetings with documented minutes
• Shareholder agreements defining stock transfer restrictions, buyout formulas, and exit terms
• Corporate resolutions for major decisions (hiring physicians, opening locations, securing financing)

Choose PLLC if:

• Your state allows PLLCs for medical practice
• You’re a solo practitioner or small group (2-3 physicians) prioritizing flexibility
• You want minimal ongoing formalities (no annual meetings/minutes)
• You’re comfortable with S-corp election for tax optimization
• You don’t plan extensive employee benefits beyond retirement plans

Choose PC if:

• Your state requires PC for medical practice (e.g., California)
• You’re a larger group (4+ physicians) benefiting from corporate structure
• You want formal governance framework with board and shareholder meetings
• You plan robust employee benefits (health insurance, disability, life insurance)
• You’re affiliated with hospital system that prefers corporate structure
• You anticipate eventual practice sale or private equity transaction

The Management Services Organization (MSO) structure separates clinical and administrative functions into separate legal entities. The physician-owned professional entity (PLLC or PC) provides all patient care and clinical services, while the MSO (typically an LLC owned by non-physicians, private equity, or the physicians themselves) provides administrative support: billing, collections, HR, IT, marketing, facilities management, and business operations.

MSOs enable business models that would otherwise violate state medical practice acts or federal fraud laws:

• Private Equity Investment: Non-physicians cannot own medical practices in most states (corporate practice of medicine doctrine). MSO structure allows PE firms to own the business operations while physicians retain 100% ownership of the clinical entity.
• Practice Sales/Rollups: When physician groups sell to aggregators or hospital systems, MSO structure allows the buyer to acquire the business assets (patient lists, contracts, real estate, equipment) while physicians continue operating the clinical practice.
• Multi-Specialty Practices: When different licensed professionals (physicians, dentists, optometrists) collaborate, MSO provides shared administrative infrastructure without violating licensing restrictions.
• Hospital Joint Ventures: Hospitals can own the MSO and provide services to independent physician practices without employing physicians directly.
• Cost Efficiency: Large MSOs achieve economies of scale in billing, compliance, and operations that individual practices cannot.

A compliant MSO arrangement requires three key legal documents:

The management fee paid by the professional entity to the MSO is the primary Stark Law risk. Three common approaches:

1. Percentage of Collections (Most Common but Highest Risk):

MSO receives 20-40% of gross collections. Simple to administer but creates Stark risk if percentage is above fair market value or if MSO owns designated health services (DHS) that receive physician referrals. To comply:

• Fee percentage must reflect fair market value for services provided (independent valuation required)
• Fee cannot be based on the volume or value of referrals to DHS owned by MSO
• If MSO owns labs, imaging, or other DHS, fee structure must be restructured

2. Flat Fee Structure (Lower Risk):

MSO receives fixed monthly or annual fee regardless of practice revenue. Reduces Stark risk but less attractive to MSO investors who want upside tied to practice growth. Flat fees must still be set at fair market value.

3. Cost-Plus Model (Lowest Risk):

MSO receives reimbursement for actual costs incurred plus fixed percentage markup (e.g., costs + 10%). Most defensible under Stark Law but burdensome to administer (requires detailed cost tracking). Preferred by conservative compliance advisors.

Private equity investment in medical practices has exploded since 2015, particularly in dermatology, ophthalmology, gastroenterology, orthopedics, and emergency medicine. PE-backed MSO transactions follow this structure:

Transaction Structure:

• PE firm acquires or forms MSO entity (typically LLC)
• MSO purchases practice’s business assets: real estate, equipment, patient lists, payor contracts, non-clinical staff
• Physicians form new professional entity (PLLC/PC) and transfer medical licenses, clinical operations
• MSO and professional entity enter Management Services Agreement
• Physicians typically receive equity stake in MSO (20-40% of MSO ownership) and continue managing clinical operations

Physician Considerations in PE Deals:

• Clinical Autonomy: Ensure MSA preserves physician control over patient care, staffing, and treatment decisions
• Management Fee: Negotiate sustainable management fee that leaves adequate compensation for physicians
• Termination Rights: Preserve right to terminate MSA without cause (typically with 90-180 day notice)
• Non-Compete: PE deals typically include restrictive covenants—negotiate reasonable scope and duration
• Equity Rollover: Understand waterfall provisions and whether MSO equity provides meaningful upside
• Second Bite: If PE firm plans to sell MSO in 5-7 years, evaluate potential exit valuation

Hospitals use MSOs to provide services to independent physicians without direct employment. Common in:

• Call Coverage: Hospital MSO employs emergency room physicians and contracts with hospital
• Anesthesia Services: Hospital MSO employs anesthesiologists and provides services to surgical center
• Hospitalist Programs: MSO employs hospitalists and contracts with hospital for inpatient coverage
• Concierge Services: MSO provides administrative support to employed physicians or independent practices

Hospital MSO arrangements face intense Stark scrutiny. Compensation paid by hospital to MSO is a financial relationship that can trigger Stark violations if not properly structured under a safe harbor exception (personal services arrangement, employment, fair market value compensation).

The federal Stark Law (42 U.S.C. § 1395nn) and Anti-Kickback Statute (42 U.S.C. § 1320a-7b) are strict liability criminal statutes prohibiting certain financial relationships between physicians and healthcare entities. Violations result in exclusion from Medicare/Medicaid, civil monetary penalties up to $100,000 per violation, treble damages, and potential criminal prosecution. Entity formation is the foundation of compliance—improper structures create automatic violations.

Basic Prohibition: A physician may not refer Medicare/Medicaid patients for “designated health services” (DHS) to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies. The entity may not bill for services arising from prohibited referrals.

Designated Health Services (DHS):

• Clinical laboratory services
• Physical therapy, occupational therapy, speech-language pathology
• Radiology and imaging services (MRI, CT, ultrasound, x-ray)
• Radiation therapy
• Durable medical equipment (DME) and supplies
• Parenteral and enteral nutrients, equipment, and supplies
• Prosthetics, orthotics, and prosthetic devices
• Home health services
• Outpatient prescription drugs
• Inpatient and outpatient hospital services

Financial Relationships Triggering Stark:

• Ownership/Investment Interest: Any equity, debt, or security interest in DHS entity (e.g., owning shares in imaging center, laboratory, DME company)
• Compensation Arrangements: Any payment or other transfer of value between physician and DHS entity (employment, independent contractor agreements, medical directorships, call coverage, research grants)

Stark Law includes numerous exceptions. Entity structure must fit within an exception to avoid violations:

The Anti-Kickback Statute is broader than Stark Law. AKS prohibits offering, paying, soliciting, or receiving anything of value to induce or reward patient referrals or generation of business involving federal healthcare programs (Medicare, Medicaid, TRICARE, VA).

Key Differences from Stark:

• Intent Requirement: AKS requires “knowing and willful” conduct (unlike Stark’s strict liability). However, “one purpose” test applies—if one purpose of the arrangement is to induce referrals, AKS is violated even if other legitimate purposes exist.
• Broader Scope: AKS applies to all healthcare services, not just DHS. Applies to all items/services reimbursable by federal programs.
• Safe Harbors: AKS includes regulatory “safe harbors”—arrangements fitting within safe harbor are protected from prosecution. Unlike Stark exceptions, safe harbors are optional (failing to meet safe harbor doesn’t automatically violate AKS, but increases enforcement risk).
• Criminal Penalties: AKS violations are felonies punishable by up to 5 years imprisonment and $25,000 fines per violation. Civil penalties include $50,000 per violation plus treble damages.

Employment Safe Harbor: Payments to bona fide employees for services provided to employer are protected. Physician employees of PLLC/PC are protected if:
• Employee provides services covered by employment agreement
• Compensation is consistent with fair market value
• Compensation is not based on volume or value of referrals (except for productivity bonuses if based on personally performed services)

Personal Services Safe Harbor: Independent contractor arrangements are protected if:
• Agreement is in writing for at least one year
• Covers all services to be provided
• Specifies schedule of services or exact time commitment
• Compensation is set in advance, consistent with fair market value, not based on volume/value of referrals
• Services are commercially reasonable

Investment Interests Safe Harbor: Ownership interests in large entities (publicly traded companies or entities with $50M+ assets and broad investor base) may be protected. Small physician-owned practices do not qualify.

• Fair Market Value Documentation: All compensation arrangements require independent FMV analysis. Obtain written valuation from qualified healthcare appraiser before executing agreements.
• Written Agreements: All financial relationships must be documented in writing with specific term, scope, and compensation. Handshake deals and informal arrangements automatically violate Stark and AKS.
• Avoid Referral-Based Compensation: Never structure compensation based on number of patients referred, tests ordered, or admissions generated. Productivity bonuses must be tied to personally performed services.
• Commercial Reasonableness: Services must have legitimate business purpose unrelated to referral generation. “Consulting” or “advisory” roles that involve minimal work are suspect.
• Annual Compliance Review: Stark and AKS compliance is ongoing. Review all financial relationships annually, particularly when arrangements are renewed or compensation changes.
• Legal Counsel: Stark and AKS are complex, fact-specific statutes. Engage healthcare attorney experienced in fraud and abuse compliance for entity formation and ongoing advice.

Every state regulates the practice of medicine through medical practice acts enforced by state medical boards. These statutes define who can practice medicine, corporate practice restrictions, professional entity requirements, and disciplinary authority. Violations can result in license suspension/revocation, civil penalties, and criminal prosecution under state law (separate from federal Stark/AKS enforcement).

Most states prohibit corporations or non-physicians from practicing medicine or employing physicians to provide medical services. This “corporate practice of medicine” (CPM) doctrine requires medical practices to be owned by licensed physicians. Key implications:

• Ownership Restrictions: Only licensed physicians can own equity interests in PLLC/PC providing medical services. Non-physician investors (private equity, business partners, family members) cannot own professional entity.
• Control Requirements: Physicians must maintain control over all medical decisions. Non-physicians cannot direct patient care, hiring/firing of physicians, treatment protocols, or clinical operations.
• Separate Entities Required: Non-physician ownership of administrative/business functions must be separated into MSO or management company (see MSO section).
• Professional Entity Requirement: Standard LLCs are prohibited for medical practice. Must use PLLC (if state allows) or PC formation.

Due Diligence Required: Before forming entity, verify current state medical practice act requirements. State laws change, and enforcement priorities shift. Consult local healthcare attorney familiar with state medical board enforcement.

Entity formation must coordinate with professional licensing requirements:

• Active License Requirement: All physician-owners must hold current, unrestricted medical license in formation state
• License Verification: State may require physician license numbers in formation documents
• Entity Registration: Some states require separate registration with medical board for professional entities
• Name Restrictions: Entity name must comply with state requirements (e.g., “Medical Professional Corporation,” “Physician Practice PLLC”)
• Foreign Qualification: If practicing in multiple states, entity must foreign-qualify in each state and physicians must hold multi-state licenses
• Supervising Physician Rules: For physicians employing nurse practitioners or physician assistants, verify supervision requirements are documented in operating agreements

Medical practice formation requires coordination among legal, regulatory, tax, and operational considerations. The process typically takes 3-8 weeks depending on state processing times and complexity of structure.

• Step 1: Verify physician licensing status and good standing with state medical board
• Step 2: Review non-compete agreements and restrictive covenants from prior employment
• Step 3: Determine entity type based on state law (PLLC vs PC) and operational needs
• Step 4: Assess Stark Law and Anti-Kickback compliance needs (existing hospital relationships, referral arrangements, ancillary services)
• Step 5: Decide ownership structure (solo vs multi-physician, equity percentages, voting rights)
• Step 6: Evaluate MSO need (private equity investment, non-physician ownership)
• Step 7: Plan tax election (C-corp, S-corp, or partnership taxation)
• Step 8: Engage healthcare attorney and CPA experienced with medical practices

• Step 9: Name availability search with state (verify “professional” naming requirements)
• Step 10: Draft and file Articles of Organization (PLLC) or Articles of Incorporation (PC) with state
• Step 11: Draft Operating Agreement (PLLC) or Bylaws + Shareholder Agreement (PC) including:
  • • Ownership percentages and capital contributions
  • • Management structure and decision-making authority
  • • Profit distribution formulas (must comply with Stark group practice exception)
  • • Buy-sell provisions (death, disability, retirement, termination)
  • • Non-compete and non-solicitation terms
  • • Dispute resolution procedures
• Step 12: If using MSO structure, draft Management Services Agreement with Stark-compliant fee structure
• Step 13: Register entity with state medical board (if required)
• Step 14: Obtain Employer Identification Number (EIN) from IRS

• Step 15: File Form 2553 (S-Corporation Election) with IRS if electing S-corp taxation (must be filed within 75 days of formation or by March 15 for calendar year election)
• Step 16: Register for state tax accounts (income tax, sales tax if applicable, employment taxes)
• Step 17: Obtain state business licenses and local permits
• Step 18: Apply for DEA registration (if prescribing controlled substances)
• Step 19: Register with state Medicaid program and obtain Medicaid provider number
• Step 20: Apply for Medicare provider number (PECOS enrollment)
• Step 21: Credential with private insurance payors (requires entity formation documents, malpractice insurance, license verification)
• Step 22: Establish HIPAA compliance program (privacy policies, business associate agreements, training)
• Step 23: Implement fraud and abuse compliance program (Stark, Anti-Kickback, False Claims Act policies)

• Step 24: Open business bank account (requires Articles, EIN, ownership verification)
• Step 25: Obtain professional liability (malpractice) insurance
  • • Determine occurrence vs claims-made coverage
  • • Verify coverage limits meet state requirements and hospital credentialing standards
  • • If switching from prior coverage, ensure proper tail coverage for claims-made policies
• Step 26: Obtain business insurance (general liability, property, cyber liability, employment practices liability)
• Step 27: Establish payroll system (if employing staff or taking W-2 salary under S-corp)
• Step 28: Implement accounting system (accrual-basis required for medical practices with gross receipts over $25M)
• Step 29: Set up billing and coding infrastructure (clearinghouse, billing software, certified coders if outsourcing)
• Step 30: Execute employment agreements with employed physicians (must comply with Stark and AKS)
• Step 31: Execute independent contractor agreements with locum tenens or part-time physicians
• Step 32: If providing ancillary services (lab, imaging, therapy), ensure CLIA certification and equipment calibration
• Step 33: Apply for hospital privileges (requires entity formation documents, malpractice insurance, peer references)

After formation, medical practices face ongoing compliance obligations:

• Annual Reports: File annual report with state (due date varies by state, typically anniversary of formation)
• License Renewals: Renew medical licenses, DEA registration, and state business licenses
• Tax Returns: File federal and state tax returns (Form 1120S for S-corp, 1065 for partnership, 1120 for C-corp)
• Payor Re-credentialing: Re-credential with Medicare, Medicaid, and private payors (typically every 3 years)
• Compliance Training: Annual HIPAA, fraud and abuse, and sexual harassment training for all staff
• Operating Agreement Amendments: Update agreements when ownership changes, physicians join/leave, or compensation formulas change
• Fair Market Value Reviews: Re-evaluate FMV of all compensation arrangements annually (Stark requirement)
• Corporate Formalities: For PCs, hold annual shareholder meetings and document major decisions in corporate minutes

Medical practice tax planning intersects entity structure, compensation arrangements, retirement planning, and healthcare compliance. Physicians face unique tax considerations including self-employment tax, passive loss limitations, net investment income tax, and restrictions on qualified business income deductions. Optimal tax structure can save six figures annually for successful practices.

The largest tax consideration for most physicians is self-employment tax vs FICA tax on compensation:

The Tax Cuts and Jobs Act created a 20% deduction for qualified business income from pass-through entities. However, medical practices are “specified service trades or businesses” (SSTBs) subject to income limitations:

2023 Thresholds:

• Full QBI Deduction: Available if taxable income is below $182,100 (single) or $364,200 (married filing jointly)
• Phase-Out Range: Deduction phases out between $182,100-$232,100 (single) or $364,200-$464,200 (married)
• No Deduction: Medical practice income above phase-out receives zero QBI deduction

QBI Deduction Calculation (if below threshold):

Deduction equals lesser of:
• 20% of qualified business income, OR
• 20% of taxable income minus net capital gains

QBI Planning Strategies for High-Income Physicians:

• Income Shifting: If spouse has lower income, shift practice ownership to maximize QBI deduction for spouse while physician’s income exceeds threshold
• Retirement Contributions: Pre-tax retirement contributions reduce taxable income, potentially bringing physician below phase-out threshold
• Multi-Entity Structure: Separate administrative functions into non-SSTB entity (property management, billing services) to create non-SSTB income eligible for QBI deduction regardless of income
• W-2 Salary Optimization: For S-corps, balance reasonable compensation requirement against QBI deduction (higher W-2 salary reduces QBI but may be required for reasonable compensation)

Physicians can contribute to retirement plans through their practice entity, achieving significant tax savings:

Solo 401(k) (for solo practitioners with no employees):

• Employee deferral: up to $22,500 ($30,000 if age 50+) for 2023
• Employer profit sharing: up to 25% of W-2 compensation (S-corp) or 20% of net self-employment income (partnership/sole proprietorship)
• Total contribution limit: $66,000 ($73,500 if age 50+) for 2023
• Example: Physician age 52 with $400,000 income can contribute $73,500, saving ~$26,000 in taxes (35% marginal rate)

Defined Benefit Plan (for high-income physicians wanting maximum contributions):

• Actuarially determined contributions to fund specified retirement benefit (e.g., $200,000 annual pension starting at age 65)
• Annual contributions can exceed $200,000 for physicians age 50+ earning $400K+
• Requires annual actuarial certification and IRS filings
• Best for physicians age 45+ with stable income who want aggressive retirement savings
• Can be combined with 401(k) for maximum savings

Cash Balance Plan (hybrid defined benefit):

• Combines features of 401(k) and defined benefit plan
• Employer contributes specified percentage of pay to “account” (e.g., $150,000 annually)
• Contributions can exceed 401(k) limits but less complex than traditional defined benefit
• Popular for group practices where all physicians want aggressive retirement savings

Entity-Level Deductions (reduce practice net income):

• Malpractice insurance premiums
• Health insurance premiums (for employees; self-employed health insurance deduction for owners)
• Continuing medical education (CME) expenses
• Medical licenses and board certifications
• Professional association dues
• Practice management fees
• Medical equipment and supplies
• Office rent and utilities
• Staff salaries and benefits

Personal Deductions (itemized on Schedule A):

• State and local taxes (SALT deduction capped at $10,000)
• Mortgage interest on primary residence
• Charitable contributions
• Medical expenses exceeding 7.5% of AGI (rarely beneficial for high-income physicians)

Strategy: Maximize entity-level deductions to reduce business income subject to SE tax and income tax. Personal itemized deductions provide less tax benefit due to SALT cap and standard deduction ($27,700 married filing jointly for 2023).

Physicians practicing in multiple states face complex tax filing requirements:

• Resident State Return: File return in state of residence reporting worldwide income
• Non-Resident State Returns: File returns in states where practice operates or services are performed
• Apportionment: Allocate income among states based on where services were performed (telemedicine creates complexity)
• Credit for Taxes Paid: Resident state provides credit for taxes paid to other states (prevents double taxation)
• S-Corp vs Partnership: S-corporations may face more favorable treatment in certain states (some states don’t recognize partnership pass-through taxation)

I provide specialized legal services for physicians and medical professionals forming practices. Unlike general business attorneys or online formation services, I have extensive experience with healthcare fraud and abuse compliance, state medical practice acts, professional entity requirements, and physician-specific tax planning.

• Healthcare Compliance Expertise: Generic business attorneys don’t understand Stark Law, Anti-Kickback, or state medical practice acts. I specialize in healthcare fraud and abuse compliance.
• Physician-Specific Tax Planning: Optimize S-corp elections, QBI deductions, and retirement plan structures for medical practices.
• Professional Licensing Integration: Coordinate entity formation with medical board requirements, DEA registration, and hospital credentialing.
• Stark-Compliant Documents: Operating agreements, employment contracts, and MSO arrangements structured to avoid federal fraud violations.
• Real-World Experience: 14+ years advising physicians on practice formation, compliance, and transactions (not just document preparation).
• Ongoing Support: Available for questions after formation as practice grows, adds physicians, or faces compliance issues.

Legally, no—you can file formation documents yourself or use online services. Practically, yes—medical practices face unique compliance requirements (Stark Law, Anti-Kickback, state medical practice acts) that generic services don’t address. Improperly structured medical practices face license suspension, Medicare exclusion, and criminal penalties. The $1,500-$4,500 investment in attorney-led formation prevents six-figure compliance violations.

No. State medical practice acts prohibit standard LLCs for medical practice. You must use a professional limited liability company (PLLC) or professional corporation (PC) owned by licensed physicians. Using a standard LLC violates state law and can result in license suspension and enforcement by the medical board.

For most physicians earning $200K+, yes. S-corp election reduces self-employment tax by allowing you to take reasonable salary (subject to FICA) and remaining income as distributions (not subject to SE tax). Tax savings typically range from $10,000-$30,000 annually. However, you must pay “reasonable compensation” as W-2 salary (IRS scrutinizes unreasonably low salaries). Work with CPA to determine optimal salary/distribution split.

PLLC (Professional Limited Liability Company) offers LLC flexibility with professional requirements. PC (Professional Corporation) is traditional corporate structure. Key differences: PLLCs have simpler governance (no annual meetings/minutes required), while PCs have formal corporate structure. PLLCs are taxed as partnerships by default (subject to SE tax unless electing S-corp); PCs are taxed as C-corporations by default (nearly always elect S-corp). Some states don’t allow PLLCs for medical practice (e.g., California requires PC). If your state allows both, choose based on preference for flexibility (PLLC) vs formal structure (PC).

Yes. State medical practice acts prohibit non-physicians from owning medical practices (corporate practice of medicine doctrine). To allow PE investment, you must create two entities: (1) MSO (owned by PE) providing administrative services, and (2) professional entity (PLLC/PC) owned 100% by physicians providing clinical services. MSO charges management fee for services. This structure maintains physician ownership of clinical operations while allowing PE ownership of business side.

State processing times vary (1-4 weeks for standard processing, expedited filing available in most states for additional fees). Attorney document preparation takes 1-2 weeks. Total timeline: 2-6 weeks from engagement to fully-formed practice. Ongoing licensing (DEA, Medicare, insurance credentialing) takes additional 4-12 weeks and can proceed concurrently with entity formation.

Medical practices face ongoing requirements: (1) Annual state filings (reports, tax returns), (2) License renewals (medical license, DEA, business licenses), (3) Payor credentialing (Medicare, Medicaid, private insurance—typically every 3 years), (4) Compliance training (HIPAA, fraud and abuse—annually), (5) Fair market value reviews for compensation arrangements (Stark requirement), (6) Corporate formalities for PCs (annual meetings, minutes). Budget 10-20 hours annually for compliance or engage healthcare compliance consultant.