Nonphysician Partnerships

November 1, 2007

I plan to open a clinic in which I can get a physician assistant (PA) involved as part owner of the company. I don’t want to just pay a salary. I would like the venture to be fair for both of us.

Question: I plan to open a clinic in which I can get a physician assistant (PA) involved as part owner of the company. I don’t want to just pay a salary. I would like the venture to be fair for both of us.

Answer: I suggest you start working through this issue by meeting with an accountant who knows the rules relevant to physicians in your state.

One reason most physicians don’t partner with nonphysicians is that then they can’t incorporate as a professional company (PC), which has big tax implications. PCs tend to be defined as physician-owned organizations.

If you do decide to proceed with a PA partner, you’ll also want some legal help to work out a very detailed partnership agreement. It needs to be crystal clear regarding how you will divide profits and what will happen if one partner decides to leave. Would that person have to buy out? How would the value of the practice be calculated? What would happen if you added another partner?

Work out these details now so there isn’t any confusion down the line.

Also ask yourself why you’re against paying a salary. It’s hardly unfair to compensate someone well for work performed, and for a higher-than-average fee you can look for someone who can help with managerial-level tasks. Why dilute your equity? Keep in mind, too, that you may not find a PA with enough cash to invest in your practice. If your buy-in cost is low, that’s fine; just make sure you don’t cut yourself short for no reason.