Practice Formation Glossary

Choose a legal and tax structure

A sole proprietorship is an unincorporated business owned by one individual. A partnership carries on a business with two or more owners under applicable law. A limited liability company is a state-created entity with governance and tax treatment that depend on elections and facts.

A C corporation is a corporation taxed under the general corporate income-tax rules. An S corporation election is a federal tax election for an eligible entity. The election creates no state entity or professional authority.

IRS's business-structures page gives federal tax orientation. A qualified lawyer and tax adviser should evaluate liability, ownership, payroll, benefits, investment, succession, and state tax treatment.

Create and govern the entity

Articles of organization are a state filing commonly used to form an LLC. An operating agreement defines member rights, management, economics, voting, transfer, and other internal rules under applicable law.

A registered agent receives legal or state communications for the entity. A certificate of good standing is state evidence that an entity meets defined filing or status conditions at a point in time. Good standing does not prove licensure, tax compliance, solvency, insurance, payer enrollment, or service authority.

The SBA business-registration guide provides general orientation. Use the actual secretary of state, tax, labor, professional, facility, and local sources for each jurisdiction. USAGov maintains a state-government directory.

Separate professional entity choices

A professional corporation and professional limited liability company are entity forms available or required for specified licensed professions in some jurisdictions. Permitted owners, directors, officers, managers, names, services, and shares vary.

The corporate practice of medicine doctrine is a state-specific body of law and policy restricting or structuring control over professional medical practice in some jurisdictions. Its application to behavior analysis, psychology, medicine, and related professions requires local analysis.

A management services organization provides defined administrative services to a professional practice under a management arrangement. An MSO structure cannot cure prohibited ownership, fee splitting, referral payments, clinical control, or misleading representations. Counsel should review reserved clinical powers, fees, staffing, records, bank access, branding, payer contracts, and termination.

Complete identifiers and operating authority

An Employer Identification Number is a federal tax identifier issued by the IRS. The IRS EIN page explains application and change resources. An EIN does not establish licensure, provider enrollment, or payment.

A business license is a government permission or registration whose scope depends on the jurisdiction. Record every entity, professional, tax, employment, facility, fire, zoning, childcare, school, telehealth, home-based, and local approval separately.

Foreign qualification registers an entity to do business outside its formation jurisdiction when required. That registration creates no healthcare or professional authority. Determine the trigger, registered agent, filing, tax, annual report, and withdrawal process in each state.

Check current ownership reporting

Beneficial ownership information reporting refers to reporting under the Corporate Transparency Act and related rules. FinCEN's current BOI page states that U.S.-created entities and their beneficial owners are exempt, while certain foreign-formed entities registered to do business in the United States remain within the revised framework.

This status has changed over time. Check FinCEN immediately before relying on an exemption or deadline, and separately analyze bank, payer, licensure, Medicaid, tax, state transparency, and contract disclosures.

Build a formation matrix

For each jurisdiction, record the entity, owners, managers, professional roles, formation document, tax election, EIN, registered agent, good standing, foreign qualification, licenses, facility permissions, insurance, employment accounts, payer applications, bank authority, and renewal dates.

Ownership alone creates no clinical authority. A qualified clinician makes clinical decisions within scope. Administrative owners allocate resources, approve policy, and hold leaders accountable without overriding reserved professional judgment.

Write reserved-authority rules into governance and operating documents. Identify who controls clinical standards, client acceptance, assessment, treatment, supervision, records, billing, hiring, compensation, bank accounts, vendor contracts, marketing, and compliance. Test the arrangement against fee-splitting, referral, kickback, professional independence, privacy, tax, and payer-contract rules in each state. Titles alone cannot repair an agreement that gives an unqualified party practical control over professional decisions.

Create a change calendar after formation. Ownership, address, name, manager, professional leader, bank account, site, service, tax election, workforce, and payer participation changes can trigger different notices. Record the authority, deadline, form, approval, operational effect, and evidence for each recipient. A filing accepted by one agency does not update another agency, board, payer, bank, insurer, or contract automatically.

A release-gate example

A fictional startup tracks 24 formation and operating gates across two entities and one site. Twenty-one have written authority, effective dates, owners, and renewal triggers, or 21/24, 87.5%. Six are required before hiring or service; all six pass verification.

The three open gates remain visible. The practice can complete planning and lawful pre-opening work while the affected representation, hire, training, payer claim, or service stays on hold according to its gate.

Start or grow your ABA practice with Finni. Confirm current formation, ownership, compliance, payer, workforce, finance, and implementation capabilities during diligence.