Corporate vision: Deciding what works for you

The right practice structure is in the eye of the beholder. Here's how to figure out which one is best for your practice.

By Katherine Vogt, AMNews staff. Feb. 27, 2006.

Christina McAlpin, MD, isn't shy about seeking advice. When the ear, nose and throat surgeon decided to open a solo practice in Los Angeles last year, she read books, talked to other physicians and asked relatives for help in choosing which legal structure she should use to form her practice. Then -- just to be sure -- she got input from two attorneys, an accountant and a financial planner.

The consensus was that a professional service corporation was the right fit for Dr. McAlpin's situation, partly because it would accommodate expansion but also because it would provide her with liability protection.

"The things you keep hearing are all these horror stories about doctors who aren't separate from their practices. Even though I haven't had any malpractice lawsuits, I'm still terrified about it," she said. "My priority was protecting both my practice and me."

Scores of physicians have wrestled with the same dilemma. For many, trying to distinguish between practice structures with acronyms and abbreviations such as LLP, LLC, S corp and C corp is enough to make them cross-eyed. But there is no room for blurry vision when it comes to this choice. That's because using the right structure can determine the financial viability of a practice.

Each structure might have different tax advantages, provide varying levels of liability protection or require more or less administrative work to maintain. Some might work better for smaller practices, while others are suited to big groups. Some are cut out for practices that intend to expand, and others are designed for the physician who plans to remain independent. Some are restricted in certain states.