Andrew Schwartz publishes article in Montgomery County Medical Society’s August newsletter
Andrew L. Schwartz
Montgomery County Medical Society newsletter
Cared-for Practice, Cared-for Patients: You Can’t Have One without the Other
By: Andrew L. Schwartz, Esq.
Successful medical practices become so over time, often as a result of years of hard work and significant investment. Yet doctors, as business owners, may find they are missing appropriate business agreements and contractual arrangements, which address specific business concerns and protect the viability of their practices.
Every physician should keep in mind important business considerations when looking for office space, establishing and running a medical practice, hiring associate physicians or promoting a physician to shareholder, membership or partnership status. These considerations include:
Choosing the most appropriate type of business entity. In certain jurisdictions, professional practices are limited in terms of the type of entity that they can form. Limited Liability Companies (LLCs) and Professional Limited Liability Companies (PLLCs) provide flexibility in ownership and management while also granting the same limitation of liability as with stockholders in a corporation. Generally, no member of a LLC is personally liable for the obligations of the LLC or PLLC solely by reason of being a member. However, an LLC or PLLC member who renders a professional service is liable for his or her negligent or wrongful act or omission.
Buying or leasing office space. Doctors must take into consideration their finances, possible investment opportunities, practice growth potential, and long-term planning. As business owners, physicians should be sure they carefully negotiate purchase or lease provisions that include, but are not limited to, rent abatement, tenant improvement allowances, options for additional terms, financial and study period contingencies and landlord’s obligations for build-outs. By consulting an attorney during this process, your lease could transform from a liability into an asset.
Hiring an associate physician. As your medical practice grows, you may consider bringing on another doctor. As part of that process, you will want to consider business provisions that should be included in an employment agreement with an associate physician, including, but not limited to, compensation and how such compensation is determined; the duties and responsibilities of the doctor; and restrictive covenants, which may include provisions related to confidentiality, non-solicitation of patients, referral sources and employees and a non-compete clause.
Adding a “partner.” In the event that you decide to bring in a “partner” (additional owner or member), it is imperative that a Corporation Shareholder/Buy-Sell or Limited Liability Company Operating/Partnership Agreement be drafted and implemented. This agreement should cover the buy-in methods, as well as the governance and management of the practice, restrictions on transferability of ownership interests, employment, management compensation, transition planning, dispute resolution and other issues commonly addressed in shareholder/partnership/operating agreements.
Hiring employees and staff. A successful medical practice has its employees as a foundation. As a business owner you must be aware of all federal, state and county employment laws and tax laws as they relate to employees. One method for reducing employment-related claims is to create and implement an employee handbook and employment contracts, including non-solicitation and confidentiality agreements, which comply with these laws.
To successfully manage a medical practice, physicians must have the necessary and appropriate legal documents to protect and sustain the practice’s viability. These documents provide a blueprint for handling and avoiding disputes among business owners, as well as legal issues that may arise with employees and patients.
Andrew L. Schwartz is an attorney with Stein Sperling Bennett De Jong Driscoll PC, a Rockville, Maryland-based law firm with offices throughout the Washington, D.C., metropolitan area. Andrew handles matters related to corporate and business law, including commercial transactions and real estate matters. He also provides general corporate counseling and advice, entity structuring and formation; and services related to ownership, management and control; sale and transfer, and contracting. He gives speeches to groups of business owners on a variety of topics, such as business disputes, choice of business entity, including the use of limited liability companies, and practical and legal aspects of business succession planning.
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