facebook

What is a Professional Limited Liability Company?

By: Marcus Leonard

 

What is a PLLC?

Many people are familiar with limited liability companies (“LLC”) including liability protection and other benefits provided by this type of business structure. Slightly different, a professional limited liability company (“PLLC”) is an LLC formed specifically by those who are licensed to provide professional services.

The term “professional service” means any type of personal service to the public which requires someone to obtain a license or other legal authorization to perform such service. Many medical professionals are authorized to form PLLC’s, including chiropractic physicians, dentists, osteopathic physicians, physicians and surgeons, doctors of medicine, doctors of dentistry, and podiatric physicians.

It is important to note that in Florida, a PLLC is only authorized to engage in providing the professional services for which it was organized. Additionally, all members must be licensed to provide the specific professional services offered by the PLLC and remain subject to the rules and regulations of the relevant state professional licensing authorities. For example, a group who wants to form a PLLC for a dental practice is authorized to engage only in dental services and all members must be licensed dentists. Accordingly, while practicing, the dentist will remain subject to the rules and regulations provided by the Florida Board of Dentistry.

 

PLLC’s Protections

A PLLC, like a standard LLC, offers some personal liability protections but does not shield members from all types of liability. The structure of a PLLC will provide members with protection from creditors attempting to collect unpaid debts owed by the PLLC, liability for the malpractice of other PLLC members, and from malpractice suits and other torts connected with the PLLC. Unfortunately, a PLLC will not protect members from liability if they have personally guaranteed a business loan, engaged in professional malpractice, or were negligent or intentionally committed a tort.

 

How Do You Form a PLLC in Florida?

Compared to other business structures, forming a PLLC is often more straightforward which is a major benefit for those who want to begin practicing as soon as possible. As mentioned above, it is important that all professional members of the company have the necessary state licenses and certifications. Members must then contact the relevant state licensing board to find out what approval is required for their profession. Those who wish to form a PLLC must draft and file articles of organization with the Florida Division of Corporations. This will include a statement of specific purpose, such as the practice of dentistry, medicine, or another professional service.

 

Different from a Professional Corporation

A PLLC is not to be confused with a professional corporation (“PC”).  A PLLC, like other LLCs, is comprised of members. On the other hand, a PC is comprised of shareholders. This distinction is important because PLLC ownership consists of membership interests in the business, while PC ownership is based on shares of stock.

In Florida, authorized licensed professionals can form both PLLCs and PCs. Although a PC has its appeal and provides liability protection, it requires more paperwork and, in some cases, does not benefit from the tax advantages of a PLLC.

 

Conclusion

It is highly recommended to speak with someone who specializes in healthcare when deciding on the best legal entity for your practice. The team at Jones Health Law is eager to assist authorized licensed professionals seeking instruction or guidance with the formation of a Florida PLLC or other business structure.

*****************************************************

It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice, it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services, please contact me using the contact information listed above.

All information and references made to laws, rules, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.

The Truth About the Corporate Practice of Medicine, Optometry, and Dentistry in Florida

Many states place restrictions on how medical doctors, optometrists, and dentists may organize themselves and conduct business within the state. Some states place significant restrictions on these healthcare providers while others are more lenient. Several states have enacted laws that prohibit certain healthcare providers from being employed by or controlled by any corporation or business, which is not entirely owned by other physicians. This is referred to as the prohibition of the “corporate practice of medicine.” Florida is unique in many ways, including its approach to regulating how these healthcare providers can organize themselves. Florida does not place the same corporate prohibitions on medical doctors as it does with dentists and optometrists.

Under Florida law, licensed healthcare professionals may organize themselves as professional service corporations (“P.A.”) or as professional limited liability companies (“PLC”). However, if a provider organizes her business as a P.A. or PLC she is only allowed to have other members who are in the same profession in her association. They may act as shareholders, officers, or directors of the corporation. For example, a P.A. may only be comprised of M.D.’s and is prohibited from allowing other healthcare providers such as, D.O.’s, dentists or optometrists from becoming shareholders of that P.A.

In Florida, Healthcare providers may also choose to organize themselves as a regular business corporation, with the “Inc.” designation, or as a Florida limited liability company.

Florida professional corporations are governed by the laws contained in Florida Statutes §§ 607, 620 and 621. Additionally, certain healthcare providers are regulated by one or more of the following statutes, Florida Statutes §§ 456 – 468, depending on the type of healthcare services that they provide and the licenses that they hold. Healthcare providers must ensure that they strictly comply with all applicable Florida Statutes and the Florida Administrative Code. Therefore, it is extremely important to hire a knowledgeable attorney that specializes in health law to ensure that your practice is complying with the applicable laws.

 

Corporate Practice of Medicine

As of April 2018, Florida does not have any laws that expressly prohibits the corporate practice of medicine. In other words, a physician (M.D. or D.O) may be employed by or contracted by non-physician owned corporations for the provision of healthcare services.

Throughout the years, several Declaratory Statements have been issued the Florida Department of Health indicating that there is no prohibition on the practice of medicine by physicians as corporate employees. In re Crow, Crow was a Florida licensed physician who sold his practice to a corporation and was then hired as an employee by that corporation and was provided a flat-fee salary for the provision of his services. Dr. Crow informed each patient of his relationship with the corporation but maintained exclusive control over the medical diagnosis and treatment of patients, and the corporation had no authority to exercise control over Dr. Crow’s professional judgment or the manner in which he rendered medical care to patients. The Board found that this arrangement was permissible so long as the fees generated for the corporation by professional services were actually provided by Dr. Crow and those under his direct supervision.

 

Corporate Practice of Optometry

Unlike the corporate practice of medicine, Florida expressly prohibits the corporate practice of optometry. Florida Statute §463.014 states that no corporation, lay person, organization or individual other than a licensed practitioner can engage in the practice of optometry by engaging the services, through paying a salary, commission, or other means of inducement to any Florida licensed optometrist.

The law does allow for a licensed practitioner, such as an optometrist, to associate with a multidisciplinary group of licensed healthcare professionals, the primary purpose of which is the diagnosis and treatment of the human body. Optometrists may also employ, or form partnerships or professional associations with Florida licensed practitioners or healthcare professionals, the primary purpose of which is the diagnosis and treatment of the human body.

 

Corporate Practice of Dentistry

The corporate practice of dentistry is prohibited under Florida law. Florida Statute §466.0285 states that no person other than a Florida licensed dentist or any entity other than a professional corporation or limited liability company composed of dentists may:

  1. Employ a dentist or dental hygienist in the operation of a dental office.

 

  1. Control the use of any dental equipment or material while such equipment or material is being used for the provision of dental services, whether those services are provided by a dentist, a dental hygienist, or dental assistant.

 

  1. Direct, control, or interfere with a dentist’s clinical judgment.

 

  1. Have a relationship with a dentist which would allow the non-dentist or entity to exercise control over:

 

  • The selection of a course of treatment for a patient, the procedures or materials to be used as part of such course of treatment, and the manner in which such course of treatment is carried out by the dentist;
  • The patient records of a dentist;
  • Policies and decisions relating to pricing, credit, refunds, warranties, and advertising; and
  • Decisions relating to office personnel and hours of practice.

 

Any lease agreement, rental agreement, or other arrangement between a non-dentist and a dentist whereby the non-dentist provides the dentist with dental equipment or dental materials must provide that the dentist maintains complete care, custody, and control of the equipment or practice.

 

Conclusion

Dentists must examine the administrative rules implemented by the Florida Board of Dentistry because these rules provide guidance in addition to the statutory law. The Florida Board of Optometry also has its own set of rules that could impact an optometrist’s relationship with others and how it conducts its business.

Whether you are considering creating a corporation for your healthcare practice to take advantage of tax benefits or to limit your exposure to certain types of liability you must determine whether the proposed structure for your corporation is compliant with applicable healthcare laws. For example, Florida law prohibits “fee-splitting” by healthcare professionals. Failure to do so could result in fines, penalties, closure of your office, or imprisonment.

 

 

Which Business Structure is Best for my Medical Practice?

Which Business Structure is Best for my Medical Practice?

Over the years many providers have come to my office expressing an interest in owning a medical practice, healthcare facility, or healthcare business. During these meetings, it is important to obtain pertinent background information about the healthcare entity followed by a discussion about some of the regulatory and licensing issues that may arise. Equally important is determining how the healthcare entity should be structured for asset protection and tax purposes. A corporate healthcare attorney like myself can determine whether it is best for you to create a corporation, LLC, or an LLP. Admittedly, some of the more complex tax issues should be discussed with an attorney that specializes in tax law. Here is an overview of some of the basic differences between the different business entities.

Sole Proprietorship

An individual who does not create an entity.

  • No taxes are imposed on the entity. Instead, the individual owner reports the income and pays the income taxes.

Professional Corporation (a/k/a “P.A.”):

A corporation in which one or more shareholders must be licensed professionals (or entities that themselves are wholly-owned by licensed professionals). The P.A. can be taxed either as an S Corporation or as a C Corporation.

 

Corporation:

A corporation whose owner is not limited solely to licensed professionals. The corporation can be taxed either as an S Corporation or as a C Corporation.

  • C Corporation: Unless it elects otherwise, a corporation must report its own income and pay its own income taxes, under Subchapter C of the Internal Revenue Code.
    • A C Corporation is also subject to Florida’s state corporate income tax at a rate of 5.5%. Any distributions of its earnings to its shareholders requires the shareholders to recognize dividend income, resulting in a second layer or taxation.
    • Many professional C Corporations attempt to avoid distributing dividends by paying all income as compensation (because although it is still taxable to the recipient employee/shareholder, the C corporation gets a deduction for such compensation, resulting in one-layer of taxation).
    • If a C corporation pays excessive compensation, the IRS may try to treat some of the compensation as a dividend distribution and deny the deduction to the corporation with respect to such imputed dividend.

LLLP

A limited liability limited partnership comprised of at least one general partner and at least one limited partner, which is created by filing a Certificate of Limited Partnership and indicated LLLP status in such certificate. The status provides a general liability shield for all of the general partners.

S Corporation

No tax generally imposed on a corporation that elects to be treated as an “S Corporation” under Subchapter S of the Code. Rather, the tax consequences flow-through to the shareholder(s).

  • Each shareholder reports his or her pro rata share of the tax consequences based on his or her ownership in the S corporation and pays the income tax at his or her effective personal income tax rate.
  • Any distribution to the shareholder(s) is not treated as a dividend, but rather first is a return of basis and then excess is capital gain: provided, however, if the S corporation was formerly a C corporation within the past 10 years and had earnings and profits, then a portion of the distributions of the S corporation could be subject to tax as a dividend (Rather than a return of basis).
  • Shareholder distributions:
    • must be made in the ratio or ownership;
    • can be abused to “save” payroll taxes applicable to compensation; and
    • lack the asset protection potential of compensation payable to the head of a family under Florida law.
    • A P.A. generally should elect to be taxed as an S corporation, preferably from inception.
    • If a corporation has already been taxed as a C corporation, then conversion to S Corporation status must be carefully considered to ensure that the “built-in gains” tax on unrealized receivables can be handled through proper accrual and payment of accounts payable and compensation.

Professional Limited Liability Company (a/k/a “P.L.”)

A limited liability company in which one or more members must be licensed professionals (or entities that themselves are wholly-owned by licensed professionals). The P.L. can be taxed either as a disregarded entity (if there is only one member), as a partnership (if there is more than one member), or an S Corporation (whether it has one or more members.)

LLC

A limited liability company whose ownership is not limited solely to licensed professionals. The LLC can be taxed either as a disregarded entity, a partnership or an S corporation.

General Partnership

An entity that is comprised of two or more general partners. No written document is necessary to create a general partnership.

LLP

A limited liability partnership is comprised of two or more general partners, which registers with the state by filing a Statement of Qualification. The registration provides a general liability shield for all of the partners.

Limited Partnership

An entity comprised of at least one general partner and at least one limited partner, which is created upon the filing of a Certificate of Limited Partnership with the state.

There are many factors to consider when deciding how to structure your medical practice or healthcare entity. You should obtain an in-depth analysis of the various business structures so that you can choose the best one suited for your needs. While it is not impossible to change from one business entity type to another, it is always best to choose the best structure from the very beginning. A capable attorney at Jones Health Law, P.A. would be happy to guide you through this process.

***This blog post does not constitute legal advice and is only intended for educational purposes. You should consult a licensed attorney in the State of Florida that specializes in healthcare law.***

Join Us for a LIVE Masterclass


IV Hydration Masterclass: Legal Requirements of Starting an IV Hydration Business

This will close in 35 seconds