Choosing the Right Legal Entity for Your Healthcare Practice

February 14, 2025
By Prax Health Research
start your own practice

Starting your own healthcare practice is an exciting step as a clinician, and choosing the right legal entity is a crucial first move. The right entity ensures that you have the necessary legal protections, limits personal liability, and sets the foundation for smooth business operations. However, the best choice varies by state.

Why Your Legal Entity Matters

Having a legal entity in place when running a healthcare practice is crucial, even if you're operating on a small scale. Key benefits include:

  • Liability Protection – The right structure helps separate your personal assets from your business liabilities. Without an entity, you could be held personally responsible for debts, lawsuits, or other obligations tied to your practice.
  • Compliance with State Regulations – Many states require certain businesses, especially professional services (like healthcare practices), to operate under a specific legal entity.
  • Taxation – Different legal entities come with different tax treatments. For example:
    • LLCs allow pass-through taxation, meaning business income is taxed only on your personal return.
    • Corporations (C-Corp, S-Corp) offer different tax advantages, such as deductions for business expenses and potentially lower tax rates.

Common Legal Entities for Healthcare Professionals

For clinicians, the most common legal entities include:

  • Professional Corporation (PC): A corporate structure for licensed professionals, offering liability protection.
  • Professional Limited Liability Company (PLLC): Offers liability protection and operational flexibility, with additional protections for licensed professionals.
  • Limited Liability Company (LLC): Offers liability protection and operational flexibility but may not be permissible or advisable for professional services in all states.

State-by-State Overview of Recommended Legal Entities

Since regulations vary widely by state, it's essential to understand the options available based on where you plan to practice.*

  • Alabama — PC or PLLC
  • Alaska — PC
  • Arizona — PC, PLLC, LLC
  • Arkansas — PC, LLP, LLC
  • California — PC
  • Colorado — PLLC or PLLP
  • Connecticut — PC or PLLC
  • D.C. — PC or LLC
  • Delaware — PC
  • Florida — PC or PLLC
  • Georgia — PC
  • Hawaii — PC
  • Idaho — PC or PLLC
  • Illinois — PC or PLLC
  • Indiana — PC or LLC
  • Iowa — PLLC, PC, LLC
  • Kansas — PC or LLC
  • Kentucky — PC, PLLC, LLC
  • Louisiana — PC or LLC
  • Maine — PC or PLLC
  • Maryland — PC or PLLC
  • Massachusetts — PC or PLLC
  • Michigan — PC or PLLC
  • Minnesota — PLLC, PC, LLC
  • Mississippi — PC or PLLC
  • Missouri — PC or LLC
  • Montana — PLLC, PC, LLC
  • Nebraska — PC or LLC
  • Nevada — PLLC, PC, LLC
  • New Hampshire — PC or PLLC
  • New Jersey — PC or LLC
  • New Mexico — PC or LLC
  • New York — PC or PLLC
  • North Carolina — PC or PLLC
  • North Dakota — PLLC, PC, LLC
  • Ohio — PC, LLC
  • Oklahoma — PLLC, PC, LLC
  • Oregon — PC, LLC, LLP
  • Pennsylvania — PC or PLLC
  • Rhode Island — PC or LLC
  • South Carolina — PC or LLC
  • South Dakota — PLLC, PC, LLC
  • Tennessee — PLLC, PC, LLC
  • Texas — PC or PLLC
  • Utah — PC or PLLC
  • Vermont — PC or PLLC
  • Virginia — PC or PLLC
  • Washington — PC or PLLC
  • West Virginia — PC or PLLC
  • Wisconsin — PC or LLC
  • Wyoming — LLC or PC

*Source: McDermott Will Emery Law

If you are planning to practice in multiple states

Please note that if you are interested in practicing in multiple states, it is important to choose the right 'anchor' state for your multi-state entity or your 'mega-entity'. This is more nuanced, and we would recommend discussing live with a member of our team.

Key Takeaways

  • Choosing the right legal entity is a critical step to starting your own healthcare practice
  • State regulations determine which entity types (PC, PLLC, LLC, etc.) are available to licensed clinicians
  • Understanding your state's requirements and choosing appropriately ensures compliance and provides the best legal and financial protections

Disclaimer:
The information and/or resources provided in this post and elsewhere on the Prax Health site is provided for general informational purposes only and to assist you as you evaluate engaging in Prax Health's services. It is not intended as, and Prax Health, Inc. does not provide, medical advice, diagnosis or treatment nor is it intended to be legal or tax advice.

Sources

  1. Prax Health Research
  2. McDermott Will & Emery Law

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