Professional Entity Series

by | Jul 27, 2020

Professional Entities

After passing your medical board exam and completing your residency, you are ready to practice medicine on your own.  You know you should form some sort of entity to contain your practice, but you wonder which one.

What is a Professional Entity?  What is the difference between a Professional Association, a Professional Corporation, and a Professional Limited Liability Company?  What laws apply to each, and what should I know in order to form one?

In this blog series, we will discuss what professional entities are and which one may be the best fit for you.

 

What is a Professional Entity?

Under Texas law, a professional entity is a professional association, professional corporation, or a professional limited liability company.

—See Definitions—Tex. Bus. Org. Code §301.003(4)

A professional individual is an individual who is licensed to provide the same professional service as is rendered by that professional entity.

—See Definitions—Tex. Bus. Org. Code §301.003(5)

A professional service is any type of service that requires, as a condition precedent to the rendering of the service, the obtaining of a license in Texas.  This includes the personal services rendered by architects, attorneys, certified public accountants, dentists, physicians, public accountants, or veterinarians.

—See Definitions—Tex. Bus. Org. Code §301.003(8)

 

What is a Professional Association?

A Professional Association is an association (as distinguished from either a partnership or a corporation) that is formed for the purpose of providing the professional service rendered by a doctor of medicine, doctor of osteopathy, doctor of podiatry, dentist, chiropractor, optometrist, therapeutic optometrist, veterinarian, or licensed mental health professional that is governed as a professional entity.

—See Definitions—Tex. Bus. Org. Code §301.003(2)

A licensed mental health professional is a person, other than a physician, who is licensed by the state to engage in the practice of psychology or psychiatric nursing or to provide professional therapy or counseling services.

—See Definitions—Tex. Bus. Org. Code §301.003(1)

 

What is a Professional Limited Liability Company?

A professional limited liability company (“PLLC”) is an LLC formed for the purpose of providing a professional service and governed as a professional entity.

—See Definitions—Tex. Bus. Org. Code §301.003(6)

 

What is a Professional Corporation?

A professional corporation is a corporation that is formed for the purpose of providing a professional service, other than the practice of medicine by physicians, surgeons, or other doctors of medicine and is governed as a professional entity.

—See Definitions—Tex. Bus. Org. Code §301.003(3)

Physicians, surgeons, or other medical doctors practicing medicine in Texas are prohibited from rendering medical services as a corporation by law.

—See Definitions—Tex. Bus. Org. Code §301.003(3)

 

Who Can Join a Professional Entity?

A person may be an owner of a professional entity only if she is an authorized person.  An authorized person is a professional individual or a professional organization.

—See Certain Requirements to be Owner, Governing Person, or Officer—Tex. Bus. Org. Code §301.007(a)

—See Authorized Person—Tex. Bus. Org. Code §301.004

A professional organization is a person that renders the same professional service as the professional corporation or PLLC only through owners, members, managerial officials, employees, or agents, each of whom is a professional individual or professional organization.

 —See Authorized Person—Tex. Bus. Org. Code §301.007

 

Why Create a Professional Entity?

A professional entity is jointly and severally liable for an error, omission, negligent or incompetent act, or malfeasance committed by an owner, managerial official, employee, or agent of the entity while providing a professional service for the entity or during the course of her employment.

—See Liability—Tex. Bus. Org. Code §301.010(a)

Stay tuned over the following weeks to look at each of these professional entities in more depth.

 

 –Authored by Carrie A. Harris, Esq.,

 Matthew Harris Law, PLLC – Business Law Division

1001 Main Street, Suite 200, Lubbock, Texas, 79401-3309

Tel: (806) 702-4852 | Fax: (800) 985-9479

[email protected]