Ongoing Business Operations for Licensed Professionals
Licensed professionals—such as doctors, lawyers, accountants, engineers, and others—face unique challenges when forming and operating a business. Unlike standard business entities, professional practices are subject to strict regulations imposed by licensing boards that govern ownership structures, permissible business arrangements, advertising, and ethical compliance. These rules often limit who may hold equity, require special entity types, and impose penalties for missteps that could jeopardize both the business and the individual's professional license. Because of this complexity, engaging an attorney is essential to ensure the chosen business structure complies with both state corporate law and the professional licensing board's requirements, while also addressing critical legal issues such as liability protection, governance, contracts, and succession planning. An attorney can help professionals navigate these overlapping frameworks and avoid costly mistakes that could threaten their livelihood.
Succession Planning for Licensed Professionals
Why have a business succession plan in place?
Even before a business owner sells their business or retires, things happen that can require the business owner to have a structure in place to ensure the business can continue without significant difficulty in the absence of the owner or owners.
When the business owner is a licensed professional (lawyer, physician, therapist, psychologist, CPA, etc.), the licensing body frequently requires compliance with policies, regulations or professional rules. To avoid any potential problems, it's essential that any professional practice owner has a plan which lays out what happens with your practice if you die or become incapacitated. Similar to a personal will, a "professional will" names a trusted colleague as your professional executor or agent and provides the information that person will need to either run or close down your practice.
Generally, this type of planning is called "Succession Planning" but it encompasses three primary areas of the business - what we call the three "O's":
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Operations
- Who will take on the responsibilities of the business owner?
- Who can sign checks, withdraw funds, or access bank accounts?
- Who has access to passwords, keys?
- Who may access personnel files?
- If a professional practice, who will see patients or clients?
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Ownership
- What happens to the ownership interest if the owner dies or is incapacitated?
- The ownership interest is an asset - will the LLC interest or stock go into the business owner's estate?
- Does the estate executor or trustee of a revocable living trust have the requisite professional license?
- Client or Customer Obligations
- Who may access client or customer files? Do privacy laws apply?
- Who is authorized to transfer client files?
- Who will see patients or clients?
- Who can access client trust funds in a legal practice?
- What notice is required to be sent to clients or patients?
Each type of business and professional license requires different structures to ensure your business and your practice can continue, when you can't. We can help you put together a plan for your business and ease your mind.