By Connor B. Breza

Forming or investing in an entity or practice to provide professional services that require a license from the New Jersey Division of Consumer Affairs (the “DCA”), necessitates many considerations that unlicensed business entities typically do not face when they set out to structure their businesses. Such professional services licensed and regulated by the DCA include services related to Medicine, Dentistry, Physical Therapy, and Psychology, among many others.  Each DCA licensed service is governed by its own “Board.” Each Board establishes and facilitates the regulatory requirements applicable to each licensed service and controls matters involving the licensure and practice of each practitioner under the applicable Board’s purview.  Likewise, New Jersey caselaw and certain State statutes place additional restrictions on professional practice structures and coalesce to form New Jersey’s “Corporate Practice of Medicine” prohibition, which governs the unlicensed practice of medicine and certain other healthcare professions.   

The various regulatory schemes applicable to each licensed service often create pitfalls to those seeking to form and use such entities. This is especially common in areas involving the provision of professional medical or healthcare related services.  Beyond issues typical of business structuring, such as whether to use an LLC or a corporation, or what tax treatment is preferable for the business, it is often the case that ownership of a professional practice itself is limited to those licensed to provide those services, or, in some cases, co-ownership with “closely allied health care professionals.”  This is the case for several licensed services, including the practice of Medicine, Dentistry, and Psychology. Even the ability to share fees and split profits between practitioners and owners can be significantly limited depending on the applicable regulations, which must be carefully considered. 

Whether you are a licensee seeking to form, own, and/or operate a professional practice (i.e., a physician opening a medical practice), or a non-licensee wondering if you are able to do the same in a particular licensed field (i.e., owning a med spa or a physical therapy practice) or otherwise entering into a management and administrative relationship with a friendly practice or licensee to engage their practice through a management company, it is important to move forward in a regulatory compliant manner from the outset.  New Jersey has harsh penalties for non-compliance with these regulatory schemes, which may include civil and/or criminal penalties, potential loss of license or professional sanctions, invalidation of contracts, or even false claims allegations. 

The laws, regulations, and oversight of each Board under the DCA varies significantly across licensed services.  Given the complexity of these regulatory schemes, it is essential that licensees and non-licensees alike obtain reliable and experienced legal counsel prior to commencing the formation and operation of any professional practice regulated by the DCA to safeguard from compliance issues.  Given the harsh penalties for non-compliance, taking the time to consider the appropriate business structure for these practices from the outset is a worthwhile and important initial investment to prevent major difficulties and potential liability down the line.

If you are planning to form or invest in a professional medical or healthcare related practice regulated by the DCA and are seeking counsel for proceeding in a regulatory compliant manner, contact Connor B. Breza, Esq. at CBB@spsk.com or 973-798-4957 for more information.

DISCLAIMER: This Alert is designed to keep you aware of recent developments in the law. It is not intended to be legal advice, which can only be given after the attorney understands the facts of a particular matter and the goals of the client.