A group formation is when different organizations come together to form a group that is all controlled by the same company. If your organization is participating in a group formation, you will have to discuss several important factors.
Factors of Group a Formation
Ownership and managerial control are the first factors you need to consider.
Second, you must find out if your group formation violates any Stark Laws or anti-kickback laws. Stark Laws refer to a set of laws that prohibit physicians to self-refer themselves. Anti-kickback laws make it illegal for providers to accept bribes or other forms of monetary value in return for generating Medicare, Medicaid, or other federal health care program business.
Zetter HealthCare can advise you on what different entities mean to you, not just from a structural standpoint, but also from a documentation standpoint. For example, certain states require that the group pay a yearly fee and re-register the business every year. Other states do not require a yearly fee, and only require you to register your business once, depending on the type of structure or entity you are operating.
Choosing an Entity Type
If you form a corporation there are certain rules that you will have to follow, including taking board minutes on an annual basis. An LLC does not require taking board minutes. Corporations also require owners to buy and sell stock. LLCs do not. For these reasons, it is much easier to bring on new board members to an LLC.
When choosing what type of entity your group will be it is essential to consider how you will be taxed. An LLC can be taxed as an LLC, or as an S Corporation or C Corporation. This means that the IRS will view your business as a corporation, but you will be registered with the state as an LLC. This means that your business would not have to take minutes and sell stock, but could still be taxed as a corporation.
As an S Corporation, the business would be considered an LLC and you are able to receive a Schedule K-1. Your Schedule K-1 will document profits coming from your LLC and get sent straight to your 1040 Form. You will get taxed but the corporation will not, so you will not be taxed twice. Many CPAs make the mistake of taxing business owners twice. Zetter HealthCare can ensure that does not happen.
Zetter HealthCare can help communicate all information about group formations and how to structure yours. For more information, contact Zetter HealthCare or give us a call at (717) 691-6768.
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