Healthcare licensing and your LLC: who may own the practice, and who may only manage it

In California, a corporation has no right to practice medicine. A business that is not owned by physicians cannot employ a doctor to see patients, and California’s Attorney General has held that a lay company arranging and billing for physician services was itself practicing medicine without a license. Every dollar of outside investment in a California medical practice has to go somewhere other than the practice.

Healthcare is where licensing reaches deepest into the business entity. This page covers the corporate practice doctrine and the management company built to live with it, the dental and pharmacy versions of the same question, and the agency licenses that a sale can void. Industry articles sit under this page.

In a corporate-practice state, outside money can own the business around the practice and never the practice itself.

The corporate practice of medicine

The doctrine says a business entity that is not owned by licensed physicians may not practice medicine, employ physicians to practice, or control clinical decisions. It comes from licensing statutes, attorney general opinions and case law, and its strength varies widely by state.

California is the strong-doctrine benchmark. Its Business and Professions Code says corporations and other artificial entities “shall have no professional rights, privileges, or powers” in medicine (§ 2400, as quoted in Cal. Att’y Gen. Op. No. 00-206). Texas keeps the doctrine as policy, with listed exceptions such as certified nonprofit health organizations and certain hospitals; the Texas Legislature’s own bill analysis describes the doctrine as insulating the doctor-patient relationship “from pecuniary pressures.” New York makes it professional misconduct for a physician to share fees with anyone outside the professional firm, and the statute expressly reaches payments “for space, equipment, or staff” that track the physician’s income (N.Y. Educ. Law § 6530(19)).

Florida takes a different route. It generally lets non-physicians own a medical practice, but a site that provides and bills for care must hold a health care clinic license unless it fits an exemption, such as being wholly owned by licensed practitioners (Fla. Stat. § 400.9905). In Florida the ownership question is answered by a facility license rather than a ban.

The management company, and the rules now aimed at it

In a strong-doctrine state, investors own a management services organization, an MSO, instead of the practice. The practice stays a professional corporation or PLLC owned by one or more physicians. The MSO supplies everything non-clinical, the space, staff, billing, technology and marketing, under a long-term management agreement, and takes a fee. A separate agreement usually lets the MSO choose who owns the practice’s shares if the physician-owner leaves. The investors get economic control without legal ownership. That is the market description of the model, and it is the structure state law is now targeting directly.

Oregon went furthest. Its 2025 law, SB 951, bars an MSO that manages an Oregon medical practice, and the MSO’s own shareholders, directors, officers and employees, from owning or controlling that practice or serving as its directors or officers (Or. Laws 2025, ch. 295). That breaks the common arrangement in which an MSO insider is the practice’s nominal owner. New York requires a physician practice or MSO to give the Department of Health 30 days’ notice before a material transaction, such as an acquisition or the formation of an MSO, that adds $25,000,000 or more in New York revenue (N.Y. Pub. Health Law §§ 4550, 4552).

The fee formula is where an MSO meets the fee-splitting statute: in New York, a management fee that tracks the practice’s income sits on the line.

The fee is the quiet risk. New York’s misconduct statute reaches payments for space, equipment or staff tied to the licensee’s income, so an MSO paid a percentage of collections is structured on the edge of it. In Allstate Insurance Co. v. Northfield Medical Center, New Jersey’s Supreme Court let a factfinder treat a management-company structure with a figurehead physician-owner as a sham, and the plaintiff there was an insurer seeking to recover what it had paid the practice. Corporate practice risk is a reimbursement risk as much as a licensing one.

Dentistry and pharmacy

Dentistry follows medicine in many states, sometimes more strictly. North Carolina defines the practice of dentistry to include owning, managing or controlling an enterprise where dental acts are performed (N.C. Gen. Stat. § 90-29(b)(11)). The dental service organization, the dental version of the MSO, exists because statutes like that one make owning the practice itself a licensed act.

Pharmacy is usually open to any owner, and the control point is the permit. A California pharmacy license cannot be transferred; moving 10% or more of the beneficial interest to a new holder requires notice to the Board of Pharmacy within 30 days, and a transfer that leaves the buyer with 50% or more requires a new license application before closing (16 Cal. Code Regs. § 1709). North Dakota is the exception on ownership itself: its pharmacy permits go only to pharmacists or to entities majority-owned and actively managed by pharmacists (N.D. Cent. Code § 43-15-35(5)).

Agency licenses that a sale can void

Home health, home care, hospice and behavioral health agencies usually hold a license issued to the entity, and each state decides what change in ownership ends it. Missouri voids a home health license on any sale or change in ownership, management or corporate status (Mo. Rev. Stat. § 197.420). New York requires approval before a transfer of 10% or more of a home care agency (N.Y. Pub. Health Law § 3611-a). Florida requires 60 days’ written notice before a change of ownership of an agency-licensed provider and keeps the seller liable until the buyer is licensed (Fla. Stat. § 408.807), and treats a majority transfer of a substance abuse provider as a prohibited transfer of the license (§ 397.407(6)).

For agencies that bill Medicare, the federal rules sit on top and do not match the state ones. The full comparison, including the 36-month rule for home health and hospice and Medicaid’s 5% disclosure rule, is on who is allowed to own a licensed business.

A healthcare sale has to clear the state license, Medicare and Medicaid, and each uses its own definition of a change of ownership.

Industry articles

ABA providers: the two large states that now restrict who may own an ABA company, the state that licenses the agency instead of the analyst, and what a sale does to Medicaid enrollment.

Home health agencies and hospices: the 36-month rule, the 2026 enrollment moratoria, and the state that sees no change where Medicare sees a new provider.

Pharmacies: a license that does not transfer, a DEA registration that follows the entity, and a Medicaid program that treats an LLC sale differently from a stock sale.

Dental practices: the dental service organization, the management fee that is misconduct in New York, and the succession deadlines a buy-sell has to meet.

Medical practices: the management company model, Oregon’s limit on the succession clause, California’s void control terms, and the federal limit on the fee.

The structuring side of each healthcare business, apart from licensing, is in the healthcare playbooks.

The bottom line

In strong corporate-practice states, outside investors cannot own a medical practice and invest through a management company instead.

Oregon’s 2025 law bars a management company and its insiders from owning or running the practice they manage, which breaks the common friendly-physician structure there.

A management fee that tracks the practice’s income can be fee splitting, and the enforcement risk often comes from payers, not only boards.

Agency and pharmacy licenses belong to the entity, and each state picks its own ownership change that ends them.

What this page does not cover

The four ownership models across every licensed profession, and the Medicare and Medicaid change-of-ownership rules, are on who is allowed to own a licensed business. Professional LLCs and the rules for law, accounting and design firms are on licensed professions. The structure of a medical practice as a business, apart from licensing, is on the healthcare practice playbooks.

Last verified October 2026.