A couple weeks ago I posted some general observations about asset protection planning for physicians. While a doctor should be taking steps to protect his or her own personal assets, physicians in a private medical practice should be taking additional steps to protect the private practice itself. Here are some items worth thinking about:
1. Consider using multiple entities to reduce liability and possibly gain some tax benefits.
· Use one entity for the medical practice itself.
· Use a separate entity to hold real estate and then lease the real estate to the practice group.
· Use another entity to hold and lease medical equipment to the practice group.
· Depending on the size of the practice, a management holding company might be advisable in connection with the various entities.
· Patents and any other intellectual property should also never be owned directly by the medical practice.
· Separate entities should generally be limited liability companies because they generally provide the best asset protection and they provide flow-through tax treatment.
Formation of additional entities can obviously involve start up costs, as well as some additional costs for on-going operations. The size of a medical practice (both in terms of the number of physicians and in terms of revenue) will influence how many separate entities may be appropriate.
2. Consider different alternatives with respect to your accounts receivable.
· Some private medical practices (and other health care organizations) use a separate billing company.
· It is sometimes advisable to pledge accounts receivable in connection with a bank loan, since a judgment creditor will be in a second (and less appealing) position to the bank.
3. Make sure that an agreement is in place among members of the medical group covering what happens if a physician dies, becomes disabled, retires, or otherwise leaves the practice. Despite all the concerns about malpractice liability, more physician groups experience problems in this area than with a malpractice claim that exceeds insurance limits.
All of the foregoing are of course just general observations. Each situation must be analyzed on its own. But in any event, a medical practice should periodically review its structure and operations from an asset protection standpoint.