There was an interesting conversation on the Oregon Trust/Estate attorney Listserv, which started with this question:
For a new physician starting a solo medical clinic, is there any preference for the PC over the LLC? Are there better ways to structure the entity? What if there were multiple physicians? Any difference in your advice?
Here are a few responses, unattributed:
Response No. 1: … these may not be the issues you are concerned with but a few differences. A PC may make a subchapter S election but it is not automatic. If you are a PC and a member who takes any profit you must draw at least some of your income through payroll. and there must be a reasonable basis to the amount drawn vis a vie [sic] work and/or dividend draws or the IRS can reclassify your income.
[I]f those issues do not matter to your client then have them describe the type of corporate structure they want. do they intend to move members in and out when hiring and firing, do they intend to ever have any offshoot businesses ie clinics with specialization or a legally separate billing department. if so look to see if they can have one entity own the others and any restrictions on doing so.
[T]here are some record keeping issues as well but often I recommend a corporate structure based on what the client is willing to do themselves vs what they want to hire someone to do where their formalities are concerned. the benefit of llcs is you do not need to be as formal as a traditional corporation. but for some clients they are better off treating their structure more formally to later prove clearly the alter ego and avoid suits against their personal assets.
I know there are some out there in Oregon that say you simply cannot pierce the corporate veil …. However, I have done it in several cases and personally I think it is a risk that should be discussed upfront during formation.
Response No. 2: Usually I form a PC and make an “S” election for tax purposes. This way, you limit self employment tax exposure, etc. You also get the corporate liability shield as well. Typically, doctors make enough money in a year where it is worthwhile to make an “S” election. Continue reading