Most healthcare professionals I talk to are confused about business structures. This makes sense since they are clinicians who are not trained in running their own business. Their accountant tells them one thing. Their lawyer says something else. Their colleague who opened a practice last year has a completely different opinion. This is one thing to really watch out for. There is a lot of bad information that gets passed around from colleague to colleague.
Which One Actually Fits Your Practice?
Ask yourself this: What are your goals? Do you want to own your practice by yourself or bring in other members?
If you’re a dentist, nurse, physician, or certain other type of professional, you probably need a PLLC. You should discuss this with your accountant before you create your business structure. Medical billing companies and wellness centers that don’t provide medical services usually can go with an LLC.
Med spas can get complicated depending upon the state you are in. In Colorado, a med spa can only be owned by a physician or physician/physician combo (as long as the physician has a majority interest). This is because med spas offer medical services and operate under the Corporate Practice of Medicine.
You can own a “spa” that offers the same services as a med spa that is not under the Medical Practice Act. With these spas, an advanced practice nurse practitioner provides the oversight. The APN does not need to own the spa.
Getting this wrong costs money later. A lot of money. And your license could be disciplined by the Colorado Medical Board or Nursing Board, or the Office of Barber and Cosmetology.
Colorado’s Rules About Who Can Own What
Colorado Revised Statutes § 12-240-138 governs professional service corporations and limited liability companies for medical practice, requiring that ownership be limited to licensed professionals.
What does this mean for you?
- PLLC owners have to be licensed in your field or related healthcare areas
- LLC can be owned by anyone. Owners do not need to have a professional license.
- Clinical decisions in PLLCs stay with licensed professionals
So your dental school buddy can buy into your practice if it’s a PLLC. Your neighbor who made money in real estate cannot. These rules exist whether you like them or not.
How They’re Different
| What Matters | LLC | PLLC |
| Protecting Your Stuff | Intended to have Business problems not touch your house | Malpractice issues get separated between owners |
| Who Can Invest | Anyone with money | Licensed professionals only |
| Taxes | Pass-through, lots of options | Pass-through, fewer choices |
| How DORA Sees You | Just another business | Professional operation |
| Cost to Start | $50 to the state | $50 plus professional requirements |
The protection works differently too. LLCs keep business creditors away from your personal assets. PLLCs do that plus separate malpractice risks between owners.
DORA may treat these entities differently. They view PLLC formation as evidence you understand professional responsibilities. LLCs don’t necessarily get this same consideration.
When DORA Gets Involved
DORA complaints go beyond normal business problems. They look at how professionally you run your practice, your compliance history, and whether you follow regulations.
Your business structure matters during these reviews. Having a PLLC shows DORA you take professional standards seriously. It’s not a guarantee, but it helps your case.
Colorado’s Department of Regulatory Agencies says “Professional entities must maintain the highest standards of practice management and regulatory compliance.”
LLCs protect your assets but don’t carry professional weight during licensing issues. The structure you pick can influence how these situations play out.
Med Spa Owners Need to Know This
Colorado keeps changing medical spa rules. But for now the ownership rules are more clear than what is being said out there.
Which treatments require medical licenses? This question determines everything.
Here’s how oversight typically works:
- A physician must provide oversight over the services offered at a med spa.
- An advanced practice nurse practitioner can over services offered a spa (similar services to a med spa but different business structure).
- Basic cosmetic services might work under esthetician licenses
- Wellness treatments often don’t need medical licenses
Professional liability insurance differs between these structures. PLLCs can often get coverage that regular LLCs cannot access. This difference can cost you thousands in premiums. It is always recommended that you check with your insurance carrier to make sure your services are covered.
The Tax Side
Both get pass-through taxation. The business doesn’t pay corporate taxes. Everything flows to your personal return instead.
One owner? Either structure gets treated like sole proprietorship for taxes. Multiple owners? It becomes partnership taxation unless you choose corporate treatment.
You’ll pay self-employment tax as an active owner either way.
Your professional income might qualify for Section 199A deductions. Equipment purchases work the same in both structures.
Don’t let taxes be the only thing that drives your decision. Focus on licensing requirements and liability protection instead. The tax differences are small compared to everything else.
Common Questions
Can nurses form PLLCs in Colorado?
Registered nurses can form PLLCs for nursing practices. Nurse practitioners often choose PLLCs for independent practices.
What if I pick wrong?
You will need to make an amendment with the Colorado Secretary of State and inform the IRS.
What does formation cost?
Colorado charges $50 for filing either type. You’ll also pay for registered agent services and meeting professional requirements.
Should I get professional help?
Healthcare businesses have licensing compliance issues beyond normal business formation. Getting help prevents expensive mistakes.
Can I add non-licensed partners later?
PLLCs permanently restrict ownership to licensed professionals. LLCs let you add different types of owners anytime.
Your entity choice affects who can invest, how you grow, and how regulators view your practice. Colorado’s healthcare rules are specific and mistakes cost money.
Want to make sure you choose correctly? Schedule a consultation to review your licensing requirements and business plans. Getting this right from the start protects your practice and your future.
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