PART 3 OF 4: Multi-Owner and Management Structures

Group practices, partnerships, and bringing in outside capital.

Structuring a practice becomes more complex when more than one provider shares ownership, or when outside capital or management is involved. California's rules shape not only who can own a practice but how multiple owners and outside partners can be arranged. This article examines the structures used for group practices and for combining professional ownership with outside resources.

Group and multi-owner practices

When several providers own a practice together, the professional corporation with multiple licensed shareholders is the common vehicle, though partnerships of licensed professionals are also used. The central structural work in a group practice lies less in the entity type than in the internal arrangements — ownership shares, governance, income division, and the terms for admitting and removing owners.

The governing documents that matter

For multi-owner practices, the internal documents do the real work:

• Shareholder or partnership agreements defining ownership, voting, and control.

• Buy-sell provisions governing departure, retirement, disability, and death.

• Compensation and income-division arrangements among owners.

• Employment or independent contractor agreements for providers.

The management services organization model

Because unlicensed investors and management companies cannot own a professional practice, combining professional ownership with outside capital or management is typically accomplished through a management services organization, as we've mentioned in previous blogs. In this model, a professional entity owns the practice and retains clinical control, while a separate management entity, which may have outside ownership, provides non-clinical services under a management agreement. This is the principal structure for aligning outside resources with a compliant professional practice.

Keeping the structure compliant

A management structure only works if it genuinely preserves the professional entity's control over clinical matters and pays the management entity a fair-market-value fee for real services. Arrangements that use the management structure to give outside parties control over clinical decisions, or that route professional profits to the management entity in disguise, risk being treated as unlawful. The structure's integrity lies in its details.

Matching the structure to the goal

Whether a practice is a two-physician group or a platform backed by outside capital, the structure should follow the practice's actual goals for ownership, control, growth, and eventual transition. There is no single correct multi-owner structure; there is the one that fits the providers' objectives while satisfying the legal constraints.

How West Coast Health Law Can Help

We structure group practices and management arrangements for California providers — drafting the ownership, governance, and management documents that make multi-owner and investor-aligned practices work within the law.

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.