PART 3 OF 3: Structuring Around the Restriction

Where an LLC can fit, and how to choose and form correctly.

The unavailability of the LLC for clinical practice does not mean the LLC has no place in a healthcare provider's plans. Understanding where each form fits, and how they can work together, is what turns a frustrating limitation into a workable structure. This part addresses where an LLC can still be used and how to choose and form the right structure.

Where an LLC can still fit

The restriction applies to the entity that renders licensed professional services. A related business that does not itself practice medicine or dentistry may be able to use an LLC. Examples include a management company, a real estate entity that holds the practice's premises, or a venture offering non-clinical products or services. The clinical practice and the businesses around it can take different forms.

Pairing a professional corporation with an LLC

This is why healthcare structures frequently combine forms. The management services organization model, for instance, pairs a professional corporation on the clinical side with a separate management entity that need not be a professional corporation and is often an LLC. The professional corporation keeps clinical ownership and control where the law requires, while the related entity handles business functions in a more flexible form. Structured properly, the two work together.

Considerations for multiple owners

When more than one provider is involved, the professional corporation with multiple licensed shareholders is the common vehicle, and the internal arrangements carry much of the weight:

• Ownership shares, voting, and control among the owners.
• Buy-sell terms governing departure, retirement, disability, and death.
• Income division and compensation among providers.
• How and when new owners may be admitted.

Choosing and forming correctly

Because the clinical practice must be a professional corporation, the real decisions lie in how to form and operate it, how to handle ownership and tax elections, and whether and how to use a related LLC for non-clinical functions. These choices are best made together and at the outset, since correcting a structure after formation is more difficult and more costly than building it correctly the first time.

The bottom line

For a California medical or dental practice, the professional-corporation-versus-LLC question is less a choice than a starting point: the clinical practice must be a professional corporation, while an LLC may have a role in the business around it. The useful work lies in forming the professional corporation correctly and structuring any related entities to fit the provider's goals. Done well at the start, the structure supports the practice for years.

How West Coast Health Law Can Help

We help California providers choose and form the right combination of structures for a healthcare practice, including professional corporations and any related management or holding entities. If you are forming or reorganizing a practice, we can help you get the structure right from the start.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws change and every practice is different; consult a qualified attorney about your specific circumstances.