Starting a medical practice is one of the most significant decisions a physician can make. It’s not just a professional milestone—it’s the beginning of building something that reflects your values, expertise, and long-term vision for patient care. But before seeing your first patient or hiring your first staff member, there’s a critical legal decision that often gets overlooked: choosing the right business structure. In New Jersey, physicians generally have two main options when forming a practice—setting up a professional corporation (PC) or a professional limited liability company (PLLC). While this choice might seem technical, it can have long-lasting implications for your liability protection, tax strategy, compliance obligations, and operational flexibility.

As attorneys who work closely with healthcare professionals across the state, we’ve guided many clients through this early but essential phase. One of the first things we emphasize is that healthcare providers in New Jersey are subject to specific rules under the state’s Professional Service Corporation Act. Unlike in other industries, not just anyone can form a regular LLC or corporation to offer medical services. Physicians must form either a PC or a PLLC, and each comes with its own set of requirements and limitations that need to be carefully considered from both a legal and business perspective.

Both entity types provide a layer of protection for personal assets by separating them from the liabilities of the business. However, they are not interchangeable. A professional corporation, for example, must be owned entirely by licensed professionals engaged in the same field—meaning physicians can’t co-own the PC with someone who isn’t also licensed to practice medicine. The same goes for a PLLC. This restriction can limit who you partner with, but it also helps ensure that ownership and control stay within the hands of qualified providers. Additionally, the PC structure is often favored by solo practitioners or small group practices because it tends to be more straightforward to manage in terms of corporate formalities and board governance.

On the other hand, a PLLC may offer greater flexibility in terms of management structure and profit distribution. Many multi-member practices appreciate the operational ease of the PLLC model, especially when they want to customize internal roles or revenue-sharing arrangements. That said, certain insurance carriers, credentialing entities, or banking institutions may have preferences or requirements based on your entity type—making it critical to align your legal structure with your broader operational goals.

Tax treatment is another area where strategic planning can make a difference. PCs are typically treated as C corporations by default, which could mean exposure to double taxation unless they elect S corporation status. PLLCs, meanwhile, are generally taxed as pass-through entities by default, allowing income to flow directly to the members. But even here, there’s nuance. Depending on your earnings, payroll setup, and long-term goals, an S corporation election might make sense for either structure. This is exactly the type of decision we help clients evaluate, coordinating with their CPAs and financial advisors to ensure the legal framework supports the financial strategy.

We also make sure our clients understand the compliance obligations that come with operating a medical practice in New Jersey. From maintaining licensure and ensuring corporate documents are up to date, to navigating the Corporate Practice of Medicine doctrine and employment law issues, there are multiple layers of regulation that must be monitored on an ongoing basis. Having the right entity in place is just the beginning—the real work comes in operating that entity with care, precision, and legal support.

If you’re thinking about launching a practice—or if you’ve already done so and want to make sure your structure is still serving you well—we’re here to help.