Business Formation Legal & Compliance
Guidance
Guidance
Healthcare ventures can benefit from seasoned legal advice about the type of entity and making corporate formation issues work for the healthcare entrepreneur.
Often, healthcare startups or practitioners (such as MDs) come to us, having received advice from their accountant or corporate attorney, and formed the wrong kind of entity. We have expertise in general corporate law as well as the specialized areas within healthcare law. As such, our advice goes deeper than the usual corporate lawyer’s advice about business structure.
Choice of Entity: Corporation vs. Partnership vs. LLC
Within our corporate and healthcare law expertise, we advise healthcare practices and businesses on the best legal structure to form their enterprise.
We will advise on the choice of business entity, including:
- S Corporation
- C Corporation
- Close Corporation
- Limited Liability Company (LLC)
- Limited Liability Partnership (LLP)
- Professional Corporation (PC) or (depending on the state), Professional Limited Liability Partnership (PLLP) for:
Accountants and CPAs
Acupuncturists
Architects
Chiropractors
Dentists
Medical Doctors
Naturopathic Medical Doctors
Psychologists
Real Estate and Mortgage Brokers
Social Workers
Other Licensed Professionals
Regulatory authorities take these legal rules very seriously. Corporate practice of medicine enforcement, as well as regulatory scrutiny for kickbacks and fee-splitting, can be fierce.
An important concept to remember is that a professional entity must be formed whenever the goal is the delivery of professional healthcare services. For example:
- A physician can deliver medical services individually, or through a Professional Medical Corporation or PLLP (depending on state law).
- A general business corporation cannot deliver medical services. In a “strong” corporate practice of medicine state, the general business corporation or an LLC cannot hire a medical doctor, naturopathic medical doctor, psychologist, or certain other licensed healthcare professionals.
- If the physician is contemplating building up a business side, across sites (for example, through an MSO), then that MSO should be a general corporation or an LLC, but not a professional corporation or professional LLC.
Regulatory authorities take these legal rules very seriously. Corporate practice of medicine enforcement, as well as regulatory scrutiny for kickbacks and fee-splitting, can be fierce.
Formation Agreements and Other Documents
Forming the legal entity requires certain documents, including:
- Articles of Incorporation (Inc.) or Articles of Organization (LLC)
- Bylaws (corporations) or Operating Agreement (LLC)
- Buy-Sell Agreement with exit provisions that protect your rights in the event one partner or shareholder must leave the business entity.
- Employee or Consultant Agreement
- Partnership Agreement
- Proprietary Inventions Agreement
- Stockholder Agreement
- Vendor Contracts
- Other Agreements
We can help with corporate governance dissolution and wind-up, purchase, sale, merger, and conversion of corporations, LLCs, or LLPs.
Professional Corporations
As we have said, our health care lawyers will help advise clients when they need a professional corporation, such as a Professional Medical Corporation or a Professional Psychology Corporation. And, in many states, the corporate practice of medicine doctrine prohibits lay, non-professional entities (such as general corporations and LLCs) from providing professional services, and requires that professionals who wish to operate through a corporate entity do so via a professional corporation.
Professional corporations can have several legal advantages.
For example, in many states, it is advisable to have a medical doctor form a professional medical corporation to help insulate the physician against liability. The professional medical corporation itself can then contract with the medical spa or medical clinic to provide services, and contract internally with the physician and nurse, physician assistant, or other medical staff to provide services to the other entity. This kind of legal structure can potentially help with the corporate practice of medicine doctrine, as it means that licensed medical professionals, rather than unlicensed professionals, are providing medical services to patients. Unlicensed practice can result in significant penalties. For example, in New York, Education Law Section 6512 makes it a felony for an unlicensed person to practice medicine. Section 6513 makes the unauthorized practice of medicine a crime.
In addition, the use of the professional corporation helps mitigate Stark, anti-kickback, and fee-splitting concerns in the medical spa or integrative medicine and wellness clinic. We preview this more in our discussion of the MSO Model.
Nuanced Regulatory Issues When Dealing with Professional and General Corporations
The cross-fertilization between the medical domain and the healthcare venture can create unique legal issues that go beyond the typical corporate lawyer’s expertise. For example, legal challenges can arise when physicians also take an equity stake in an MSO formed by non-physicians. This sets up a conflict of interest, and the legal landscape is ambiguous, at best. Because we have such a diverse range of clients, we are well-positioned to guide clients in making business decisions where healthcare laws and regulations, and industry practice, might point in opposite directions. As another example, legal complications can arise when the MSO is the brand and driving force behind building the medical part of the venture and executing the overall business strategy. Here, as well, issues of corporate practice of medicine and fee-splitting can require specialized knowledge and the ability to assess risk and deploy legal strategies to mitigate risk.
FAQ
Great! Let us know and we’ll do a conflicts check and then send you an engagement letter. Typically we want to know if we are going to represent you as an individual, or your entity (corporation or LLC); we’ll also want to know your website and some basic contact information.
Review our legal services to see some of the areas we like to work in; check our testimonials, client roster, and experience; read some of our blog posts; check out our Linked In community; or just call or email us to explore. Put simply, we represent health and wellness products, technologies, practices and ventures that accelerate health and healing.
We are very comfortable working with clients via phone and email. You can sign, scan and email the engagement letter, and submit the advance by check or online.
The answer depends on the complexity of the project. Each client’s situation is different. We want every client to receive the best possible advice, and so we want to be in a position to devote as much time as is required to do that. Look to our testimonials, client roster, and experience. We work with our clients effectively and efficiently and build long-term relationships based on mutual trust. We bill hourly and do not offer project or flat fees. Lawyering is an art, not a science – we’re intuitive as well as skilled lawyers.
Yes, like most law firms, we require an advance against fees and costs. Our typical advance ranges from $3,500 – $10,000. We offer our expertise and savvy and work hand-in-hand with you toward your goals. Occasionally, we will offer you a one-hour consult as a way to jump-start our work together, and give you an overview of critical issues, with guidance on the critical business cross-roads you’re facing. We do not take equity or deferred compensation.
Our Firm doesn’t quite “quotes” or answer “how much does it cost.” Through long experience, we’ve found that the answer is pretty much meaningless. Some lawyers and law firms give quotes, but if you read the accompanying disclaimer, you’ll see that the disclaimer basically says that you can’t depend on the quote for anything. In our long experience, “how much it costs” depends on a lot of variables, including:
- What the client is asking for
- What the client really needs
- What the client doesn’t know they don’t know
- What we discover as we dive into the legal research and analysis
- How complicated the problem really turns out to be
- How much client will want to do on their own
- Whether we can find some elegantly simple solutions to sub-parts of the puzzle
- What decisions we make together, and separately, as we explore the puzzle and put solutions and strategies together
In many cases, we might think a project is very complex but then as dig in, we can make executive decisions and recommendations that save the client dozens of hours of lawyer time and tens of thousands of dollars. This happens a lot with our clients. In other cases, the client might think the problem is simple but as we start to review it, the puzzle is much larger; sometimes the client throws in extra facts and complications at the last minute, and that will increase the expense and work; sometimes we’ll give the client “homework” so they can DIY a piece, taking it outside the need for lawyer time.
One thing we do is get our clients frequently on the phone. We find that the Legal Strategy Session often cuts through the fog. Where we need to do a chunk of written legal work, we’ll do so and let you know that’s what we think is needed. Where we can be more efficient with a call, we’ll tell you that as well.
Many clients come us after having wasted tens of thousands of dollars with other lawyers. Read our testimonials. We’re here to provide a lot more value than the retainer—our business model and Firm policy is to provide at least 3-5 times the value back to you. That’s our model and we’re sticking to it. We’re not trying to sell you on a “cheap retainer” or promise of discounts. We’re here to solve a big hairy problem and get you where you need to go, as efficiently and productively as we can.
Typically, assessing feasibility involves legal and strategic advice, which we provide in the 45-minute consult, in a way that is appropriate to the time we have together there.
The only way to know is to jump into the process. If you want to know more about us and how we work, browse our testimonials, look at our client rolodex, or review our experience on our website.
Work with us and find out how efficient and engaged we are with your business. We like to work with clients for life. It is a deep and trusting relationship.
Michael’s bio is online here. He has written books on healthcare law and policy, taught healthcarelaw as a faculty member at Harvard Medical School, garnered NIH and other medical research grants, and published over 100 articles in legal and medical journals. Michael speaks all over the world on healthcare topics.
