October 1st, 2021
Are You Taking As Good Care Of Your Practice As You Are Of Your Patients?
Author: Andrew L. Schwartz
Successful practices take time to build. They require years of hard work and significant investment. However, medical professionals, as business owners, often are unaware of the need for ongoing business maintenance requirements, and appropriate business agreements and contractual arrangements to address specific business concerns and protect the viability of their practices.
Some items to consider if you are starting or growing your practice:
- Selecting and forming the appropriate business entity for your practice. One of the most important considerations at the outset is what is the appropriate entity structure for me. In certain jurisdictions, professional practices are limited to the type of entity that they can form. Limited Liability Companies (LLCs) and Professional Limited Liability Companies (PLLCs) allow for flexibility in ownership and management while also providing the same limitation of liability as stockholders of a corporation. Generally, no member of a limited liability company is personally liable for the obligations of the LLC or PLLC solely by reason of being a member of the LLC or PLLC. However, an LLC or PLLC employee who renders a professional service is liable for his or her negligent or wrongful act or omission.
- Purchasing or leasing office space. There are several factors to weigh given financial considerations, investment opportunities, practice growth potential, and time horizons. Every purchase agreement or lease has provisions that need to be carefully negotiated, including, but not limited to, rent abatement, tenant improvement allowances, options for additional terms, financial and study period contingencies and landlord’s obligations for build-outs, maintenance and repair.
- Hiring additional medical providers. When you are ready to hire additional providers and staff, there are certain provisions that should be considered and included in an employment agreement, including, but not limited to: compensation and how such compensation is determined; termination rights, the duties and responsibilities; and restrictive covenants, which may include provisions related to confidentiality, non-solicitation of patients and employees and a non-compete clause.
- Adding a “partner.” If you decide to bring on a “partner” (additional owner or member), it is imperative that a Corporation Shareholder/Buy-Sell or Limited Liability Company Operating/Partnership Agreement be written and implemented. This agreement should not only address the buy-in methods, but also set forth the governance and management of the business, restrictions on transferability of ownership interests, employment, compensation of management, exit strategies, dispute resolution and other issues commonly addressed in shareholder/partnership/operating agreements.
- Hiring employees and staff. As a business owner you must be aware of all federal, state and county employment laws and tax laws as they relate to employees. In order to help reduce the incidences of employment-related claims it is essential that your practice have an employee handbook, which includes certain policies and procedures and employment contracts, including non-solicitation and confidentiality agreements, which comply with these laws.
Successful practice management involves having the necessary and appropriate legal documents to protect and sustain the viability of the practice. They provide a blueprint for handling and avoiding disputes among business owners, as well as legal issues that may arise with employees and patients. Getting these set up front, will save you time and expenses in the future.