In California, structuring the ownership of a medical practice is a nuanced decision, particularly when it comes to Medical Service Organizations (MSOs) and Professional Corporations (PCs). California law allows Registered Nurses (RNs) to own up to 49% of a Professional Corporation, while a licensed physician must own at least 51%. However, when it comes to ownership and management of the MSO, an RN can legally be the 100% owner. This leads many practitioners and business owners to ask: what’s the best way to structure this ownership?
Should an RN Own 100% of the MSO and Have 0% Ownership in the PC?
In many cases, having the RN own 100% of the MSO and 0% of the PC is legally cleaner and operationally simpler. Here’s why:
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Flexibility in Changing Medical Directors
When an RN owns part of the PC, complications can arise when the Medical Director (who must own at least 51%) needs to be replaced. Dissolving or restructuring a 51/49 PC when there’s an ownership change can be both legally and logistically burdensome. By having the RN own 0% of the PC, the process of switching Medical Directors becomes more straightforward, avoiding the need for dissolving or reconfiguring the PC.
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Clear Separation of Roles
Separating the ownership of the MSO and PC clearly delineates the roles between the medical and business sides of the practice. The RN, as the owner of the MSO, focuses on managing the non-clinical aspects of the business, while the Medical Director takes responsibility for the clinical side. This division aligns with legal requirements and reduces potential liability concerns.
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Bank Account Set-Up and Cooperation
A common challenge with this structure arises when a Medical Director may refuse to cooperate in opening the PC’s bank account alongside the RN. While many Medical Directors prefer the flexibility of a 51/49 ownership split to maintain greater control over financial decisions, this issue can often be resolved through clear communication and legal agreements outlining roles and responsibilities. It is crucial to choose a Medical Director who understands and agrees to the structure from the start.
In Conclusion
Structuring a medical practice in California where an RN owns the MSO and has 0% ownership in the PC often provides greater flexibility and simplicity, particularly when it comes to changing Medical Directors. However, each situation is unique, and the willingness of the Medical Director to cooperate on financial matters plays a crucial role in making this structure viable. Ultimately, the best ownership structure depends on the specific dynamics and agreements between the RN and the Medical Director involved.
Do you have questions about how to structure your MSO or PC ownership? Reach out to us for strategic legal guidance tailored to your specific situation!