Texas Business Entities for Doctors
Doctors may have the answers when it comes to diagnoses, but some may need help in other aspects — like deciding which business entity is best for their practice. This article builds off the Primer on Texas Business Entities, which provides a brief introduction to the most common types of business entities in Texas. While the same principles generally apply to business entities for doctors, doctors practice under certain entities in Texas. Deciding which business entity is best for your practice can be a pain, but Johnsen Law can help assist with selecting the form of entity and preparing the governing documents. Contact Johnsen Law for more assistance and to learn more.
Professional Association (PA)
Professional associations are formed to provide professional services rendered by a doctor of medicine, doctor of osteopathy, doctor of podiatry, dentist, chiropractor, optometrist, therapeutic optometrist, veterinarian, or licensed mental health professional. As a result, a professional association is an appropriate business entity for a doctor. Professional associations are taxed like corporations, whereby C corporations are subject to double taxation and S corporations (no more than 100 members) pass through income directly to the members. Professional associations limit personal liability for claims other than a doctor’s own malpractice. The owners, officers, and governing persons of professional associations may only be professional individuals.
Professional Limited Liability Company (PLLC)
Professional limited liability companies are simply limited liability companies formed to provide professional services. They are taxed as limited liability companies, whereby they generally pass through income directly to the members but can elect to be taxed as a corporation instead. Unlike professional associations which cannot pass through income when there are more than 100 members, professional limited liability companies can pass through income even when there are more than 100 members. However, there is more flexibility in how professional limited liability companies are structured and managed than there is with professional associations. As with professional associations, professional limited liability companies limit personal liability for claims other than a doctor’s own malpractice. While professional limited liability companies may be owned or governed by either a professional individual or a professional organization, the officers may only be professional individuals.
Limited Liability Partnership (LLP)
Unlike professional associations and professional limited liability companies which can both have only one member, limited liability partnerships must have at least two partners. Thus, a solo practitioner cannot form a limited liability partnership. Limited liability partnerships limit personal liability for claims other than a doctor’s own malpractice, and income is taxed directly to the partners. The partnership must pay $200 per partner per year to the Secretary of State. The partners can be either doctors or entities owned by doctors.
If you are a doctor or know a doctor looking to start a new business, be sure to contact Johnsen Law for all things legal.