Can out-of-state docs bankroll your practice?

September 16, 2005

I want to start my own practice, but I can't get a loan from the bank because I have so much debt already. I have several private investors lined up, though--physicians licensed in another state--who would like to be shareholders in the professional corporation I'd set up. Is this legal?

Q: I want to start my own practice, but I can't get a loan from the bank because I have so much debt already. I have several private investors lined up, though-physicians licensed in another state-who would like to be shareholders in the professional corporation I'd set up. Is this legal?

A: Maybe. Although most states require doctor-shareholders to be licensed in the state where the practice is located, there are some exceptions, so consult a healthcare attorney.

You should also check whether "foreign" corporations (i.e., those incorporated in another state) are permitted to register and practice in your state. If so, you might incorporate in the state where your investors are, but practice in your home state.

There are also a variety of esoteric organization structures (like management companies) that may allow the out-of-state doctors to effectively own or control the practice without being the titular owners. But these approaches require careful examination to avoid anti-fee-splitting rules and other legal constraints.