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Published July 24, 2026 Author: Patrick Formato. Executive Partner and Director of the Healthcare Law Practice at Abrams Fensterman, LLP. 516-328-2300 |
Forming a Medical Practice in New York: PC and PLLC Requirements
Opening a medical practice in New York is not the same as starting any other kind of business. State law dictates who may own the practice, how it must be structured, and what documentation is required before its doors can open. Getting the corporate structure wrong can expose a practice to fraud claims, invalid contracts, licensing concerns, or personal liability.
The attorneys at Abrams Fensterman work with physicians and medical groups to establish corporate structures that satisfy New York’s legal and regulatory requirements from day one.
What Type of Business Entity Should a New York Medical Practice Use?
New York law generally requires medical practices to organize as a Professional Corporation or Professional Limited Liability Company owned by licensed physicians. Non-physicians cannot directly own a medical practice under the state’s corporate practice of medicine doctrine.
In certain circumstances, non-physicians may financially participate through a properly structured Management Services Organization, commonly referred to as an MSO. These arrangements must be carefully designed to preserve physician ownership and control over clinical decisions while complying with New York’s stringent legal requirements.
Professional Corporation
A Professional Corporation, or PC, is the traditional business structure used by medical practices in New York. Its shareholders, directors, and officers must satisfy the state’s professional licensing and ownership requirements.
Professional Limited Liability Company
A Professional Limited Liability Company, or PLLC, may be an alternative for licensed physician groups that prefer an LLC-style governance structure while remaining subject to New York’s professional ownership rules.
Both structures require every owner to hold an active professional license appropriate to the services the entity provides. A general business corporation or standard limited liability company is not a legally permitted substitute for a properly formed medical practice.
Who Can Own a Medical Practice in New York?
Under Article 15 of the New York Business Corporation Law, an individual generally may not serve as a director or officer of a professional service corporation unless that person is licensed to practice the profession for which the corporation is organized and is either a shareholder or actively practicing within the corporation.
For a medical PC, this means that every director, officer, and shareholder must generally be a licensed physician, such as a medical doctor or doctor of osteopathic medicine.
This ownership rule is the foundation of New York’s corporate practice of medicine doctrine, which is intended to keep clinical decisions in the hands of licensed physicians rather than outside investors or management companies. Our health law attorneys evaluate proposed ownership structures against these requirements before formation documents are filed.
What Steps Are Involved in Forming a Medical Practice Corporation?
Formation begins with selecting the appropriate entity and continues through the preparation and filing of the documents that establish how the practice will be owned, managed, and governed.
- Select the entity. Determine whether a Professional Corporation or Professional Limited Liability Company is the appropriate structure.
- Confirm ownership eligibility. Verify that each proposed owner, shareholder, member, director, or officer satisfies the applicable licensing requirements.
- Prepare formation documents. Draft the articles of incorporation, articles of organization, bylaws, operating agreement, and related governance documents.
- Address stock or membership interests. Ensure that shares or ownership interests are issued only to legally qualified licensed professionals.
- Complete required filings. Submit the necessary documents and approvals to the appropriate New York agencies.
Abrams Fensterman assists physicians with selecting the appropriate entity, drafting bylaws and governance documents, and preparing formation filings that comply with New York’s professional ownership requirements.
Should Medical Practice Staff Be Employees or Independent Contractors?
Physicians, nurses, and other practice personnel may, depending on the circumstances, be engaged as employees or independent contractors. The correct classification depends on the working relationship, the degree of control exercised by the practice, liability exposure, tax considerations, and applicable employment laws.
Employee arrangements may provide the practice with greater control over scheduling, policies, and day-to-day responsibilities, while properly structured independent contractor arrangements may offer greater flexibility. Abrams Fensterman advises practices on classification issues and drafts the corresponding employment or independent contractor agreements.
How Does a Professional Corporation Protect a Medical Practice From Liability?
Organizing as a PC or PLLC can provide a corporate shield that separates certain liabilities of the practice from an individual physician’s personal assets, provided the entity is properly formed, governed, and maintained. This protection does not ordinarily shield a physician from liability for the physician’s own professional negligence or misconduct.
What Ongoing Corporate Maintenance Does a Medical Practice Need?
Formation is the starting point, not the finish line. A medical PC or PLLC must maintain its corporate structure as the practice grows, admits additional physicians, changes ownership, or expands its services.
Ongoing corporate maintenance may include:
- Maintaining bylaws, operating agreements, and corporate records
- Documenting shareholder, member, and board decisions
- Updating ownership and governance documents
- Reviewing employment and contractor agreements
- Preserving appropriate separation between the practice and any MSO
- Addressing regulatory requirements when physicians join or leave the practice
Abrams Fensterman continues to work with medical practices after formation to keep their corporate structures compliant, including when a practice is later bought or sold, which involves its own ownership, regulatory, and contractual requirements.
Frequently Asked Questions
What happens if a medical practice does not comply with PC formation rules?
A noncompliant ownership or governance structure may expose the practice to fraud allegations, invalid or unenforceable contracts, reimbursement disputes, licensing consequences, and potential personal liability. For this reason, New York’s professional ownership requirements should be addressed before the practice begins operating.
Do all shareholders of a medical PC need to be licensed physicians?
Generally, yes. Under Article 15 of the New York Business Corporation Law, shareholders, directors, and officers of a medical professional corporation must satisfy the applicable New York licensing requirements.
Can a non-physician invest in a New York medical practice?
A non-physician generally cannot hold direct equity ownership in a New York medical practice. A properly structured MSO arrangement may allow non-physicians to participate in the administrative or business side of the enterprise, provided the physician owners retain control over clinical operations and professional decision-making.
What is the difference between a PC and a PLLC?
A PC is governed as a professional corporation, while a PLLC generally provides an LLC-style governance structure. Both are subject to New York’s professional licensing and ownership restrictions, and the appropriate choice depends on the practice’s ownership, tax, management, and long-term business objectives.
Contact Our Law Firm
For guidance on forming, restructuring, or maintaining a medical practice in New York, please contact Abrams Fensterman to schedule an initial consultation.
The appropriate ownership and corporate structure for a medical practice depends on the physicians involved, the services provided, and the practice’s operational and financial objectives.
