Practice Alerts

Laws, rules and regulations, not Alerts, specify the requirements for practice and violating them constitutes professional misconduct. Not adhering to this Alert may be interpreted as professional misconduct only if the conduct also violates pertinent law, rules and regulations, some citations of which are listed at the end of this Alert.

Alert 19: Professional Business Entities

In addition to practicing as a sole proprietor or in a professional partnership, licensed professionals may practice in a professional service corporation (PC), a professional service limited liability company (PLLC) or a registered limited liability partnership (LLP). Licensed professionals may not set up a general business corporation (GBC) to provide professional services.

Except where specifically authorized by law, a GBC may not:

  • provide professional services to the public
  • exercise any judgment over the delivery of professional services
  • have employees who offer professional services to the public
  • hold itself out as offering professional services
  • share profits or split fees with licensed professionals

A GBC may employ licensed professionals to provide in-house services to its own employees. For example, General Motors may employ a physical therapist (PT) or an occupational therapist to provide services to the employees of General Motors. However, General Motors may not set up a business to provide these services to the public.

A GBC may be a management services corporation or an employment agency. For example, a GBC may:

  • refer PTs to work as employees of a health care facility
  • find jobs for licensed professionals
  • find licensed professionals for potential employers
  • manage the services of licensed professionals, including providing services to the professional for a fee, e.g., scheduling or billing.

A professional corporation may not serve as a management services corporation. A PC may only provide services in its field. For example, a hypothetical PC named "John Doe Physical Therapy, PC" may only provide physical therapy services. It cannot offer occupational therapy services, speech-language services, or any other professional services. Also, because it is only allowed to provide professional services, it can only manage the services that it provides; that is, it cannot provide management services to other PTs .

A professional service limited liability company may provide professional services in more than one profession,1 provided that the company includes at least one member licensed in each of the professions in which the company will offer services. For example, a hypothetical PLLC has seven members: an acupuncturist, an audiologist, a nurse, an occupational therapist, a PT, a psychologist and a speech-language pathologist. This LLC may provide services in all of these professions. It may not, however, provide respiratory therapy or optometry services, because none of its members are licensed in those two professions. It may not employ or contract with a teacher of the speech and hearing handicapped to provide speech therapy services (because this would constitute the illegal practice of the profession of speech-language pathology). It may not employ or contract with a special education teacher to provide special education services (because it may only provide the professional services it was constituted to provide). Additionally, a special education teacher may not be a member in a PLLC, because all its members must all be professionals licensed in the professions in which the company is authorized to provide services.

While physicians may provide services that are within the scope of physical therapy, they are not authorized to use the professional title "physical therapist." Physicians may also not own a physical therapy PC, PLLC or LLP. A physician may only own a professional business entity formed to practice medicine. There is no legal arrangement in which a physician and a PT can join as co-owners of a business enterprise to provide professional services; however, a physician may employ a PT.

In many instances, Education Law specifically requires a referral for physical therapy services. However, if a consulting arrangement between a physical therapy PC and a medical PC provides for such referrals, then that agreement could result in charges of unprofessional conduct and of improper fee splitting. The referral requirement of the physical therapy statute is based upon the assumption that the referring practitioner is an independent professional exercising independent professional judgment and devoid of any financial interest in the performance of the physical therapy services.

An agreement under which the physician or PT, or their PCs, would receive or give money as a result of referrals to the PT, would violate Education Law section 6509-a and Regents' Rule section 29.1(b)(3)(fee splitting). Furthermore, if the financial interest of the physician and the existence of the referral arrangement were not disclosed to any patients/clients who were referred, the referral may also constitute a violation of the provisions of section 29.1(b)(2) of the Regents’ Rules (exercising undue influence).

1Note that this does not apply in the professions of medicine, dentistry, licensed clinical social work, creative arts therapy, marriage and family therapy, mental health counseling, psychoanalysis, veterinary medicine, professional engineering, architecture, land surveying and landscape architecture, although professionals in the latter four professions may practice together.

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Citations of Pertinent Law, Rules or Regulations:
Education Law, Section 6509-a – definition of professional misconduct
Business Corporations Law Article 15 – professional service corporations Regents Rules, Part 29.1(b)(3) – improper referrals
Regents Rules, Part 29(b)(4) – fee-splitting
Last Updated: August 11, 2016