Sales & Dissolution Articles | Fremont, Hayward, San Leandro, Milpitas

Business legal services in Silicon Valley

Medical Practice Buy-Ins: How to Bring an Associate Physician in as a Partner

Medical practice buy-ins are notoriously complex. If you are preparing to bring in an associate physician as a partner in your practice, it is imperative that you ensure that everything is done properly. An associate physician can make a great partner. The right approach will protect your business interests. In this article, our Fremont business attorney for employers provides an overview of medical practice buy-ins and how to bring in an associate physician as a partner in a group medical practice in California.

Know the California Ownership Rules Before Offering Equity

There are specific rules and regulations for the ownership of medical practices in California. A medical practice buy-in in the Bay Area must account for our state’s strict rules on professional medical corporations and the corporate practice of medicine. A general business investor cannot simply buy into a medical practice and share control over clinical operations.

California Corporations Code § 13401.5 limits who may own shares, serve as officers, serve as directors, or work as professional employees in certain professional corporations. For a professional medical corporation, licensed physicians must remain in control. A practice that brings in an associate physician should confirm licensure, ownership eligibility, voting rights, and transfer restrictions before discussing price.

You Need Value the Medical Practice With More than Near-Term Revenue

Price matters for any business purchase. Whether it makes sense for you to allow an associate physician to become a partner depends on the prices. The buy-in price should reflect the actual economics of the California medical practice. A key point to remember is that the near-term revenue alone rarely tells the full story. With that in mind, you should be prepared to review collections, payer mix, physician compensation, accounts receivable, equipment, lease obligations, staff costs, malpractice history, goodwill, and expected future profitability.

Medical Practices Should Use a Written Buy-In Agreement

A handshake deal is not enough for a physician buy-in. The agreement should state the purchase price, payment schedule, interest rate if financed, consequences of default, tax treatment, and whether payments come from personal funds, reduced compensation, or future distributions. California medical practices should also coordinate the buy-in agreement with the shareholder agreement, bylaws, employment agreement, and any lender or landlord consent requirements.

Medical Practice Governance Must Be Clearly Specified Before the Relationship Changes

A strong associate physician does not automatically become a good business partner. Before closing the buy-in, the practice should define governance rights with precision. The documents should address voting thresholds, management authority, hiring decisions, compensation formulas, call coverage, admission of future partners, debt approval, expansion plans, and major capital purchases. Clinical authority and business authority should also be separated where appropriate. In California, medical judgment must remain with licensed physicians. Still, not every physician-owner needs equal authority over every business decision.

You Need a Comprehensive Plan for Exit, Disability, Death, and Termination

Finally, a buy-in by an associate doctor for a group medical practice in California should always include a buy-sell structure. The associate may leave, lose a license, become disabled, retire, die, or be terminated for cause. The practice needs a clear repurchase right for each scenario. The agreement should state how shares are valued, when payment must be made, whether discounts apply, and whether restrictive covenants or patient-transition duties apply.

Contact Our Bay Area Business Lawyer for Medical Practices Today

Lynnette Ariathurai is a California business attorney with extensive experience working with medical practices. If you have any questions about how to bring in an associate physician to a medical practice as a partner, we can help. Please do not hesitate to contact us today for a completely confidential case review. Our firm provides business law services to medical practices throughout the Bay Area.

business planning, growing a medical practice, healthcare agency buy-ins

Hiring a New Physician: Employment Agreements, Bonuses, etc. in California

Are you a partner in a medical practice? You may be considering hiring a new physician to join the practice. It can be a complicated process in California. There are a number of different considerations that business owners need to consider and address, including employment agreement, compensation terms, and ownership structure. Here, our California business lawyer for employers highlights the key things to know about hiring a new physician to join a group medical practice in the Bay Area.

You Should Start With a Physician-Specific Employment Agreement

California is an at-will employment law state. Medical practices are not required to use employment contracts to hire employees. With that being said, a comprehensive, professionally-drafted employment agreement is always recommended when hiring a new physician for your group medical practice. The contract should be tailored to physicians. A generic employee offer letter usually leaves too much unresolved. The agreement should identify the physician’s title, clinical duties, schedule, call expectations, supervision structure, administrative obligations, patient documentation standards, and compliance responsibilities. It should also address licensure, board certification, DEA registration, medical staff privileges, malpractice coverage, and participation in Medicare, Medi-Cal, and private payer networks.

Beware of non-compete agreements: California sharply limits restrictive covenants. Business and Professions Code § 16600 generally voids contracts that restrain a person from engaging in a lawful profession, trade, or business. In other words, non-compete should generally be avoided.

Medical Practices Should Carefully Define Compensation, Bonuses, and Productivity

Physician compensation should be clear before employment begins. Along with other things, the employment agreement should state base salary, bonus eligibility, productivity targets, collection thresholds, quality metrics, and payment timing. If the practice uses a productivity bonus tied to collections, relative value units (RVUs), profit sharing, or new patient volume, the formula must be precise.

Know the law: California Labor Code § 2751 requires written commission agreements when an employee’s pay involves commissions.

Ownership Expectations Should Be Addressed Upfront

Many associate physicians join a group practice with an expectation that partnership may follow. The employment agreement should avoid vague promises. If ownership may be offered later, the agreement should describe the process without guaranteeing admission as a partner. The practice can require minimum tenure, productivity levels, cultural fit, licensure compliance, board approval, capital contribution, or a separate buy-in agreement.

Medical Practices Can Benefit With a Plan for Termination, Transition, and Risk Management

The agreement should explain how the relationship can end. Termination provisions should address without-cause notice, for-cause termination, loss of license, exclusion from federal health care programs, loss of malpractice coverage, substance impairment issues, patient safety concerns, and failure to maintain hospital privileges or payer credentials. As a general matter, the contract should also state things like how compensation, accrued bonuses, benefits, records, equipment, and patient handoff duties are handled at separation. Malpractice coverage deserves special attention. If the practice uses claims-made coverage, the agreement should specify who pays for tail coverage after termination.

We Provide Business Law Services to Medical Practices in California

Lynnette Ariathurai is a California business lawyer who works directly with employers, including professional practices. If you have any questions about hiring a new physician for a medical practice, please do not hesitate to contact us today. With an office in Fremont, we work with medical practices throughout the Bay Area.

business planning, healthcare agencies, hiring a doctor, medical practice hiring

Succession Planning for California Medical Practices

The owners of California medical practices should have a comprehensive, well-considered succession plan in place. If something happens to any owner of the medical practice without a plan in place, it can create some very serious challenges. Navigating the transition is a lot easier with a proper business succession plan. Here, our California business law attorney for business owners provides a guide to succession planning for Bay Area medical practices.

Background: What is Business Succession Planning?

The United States Small Business Administration (SBA) explains that business succession planning is the process of preparing for the transfer of ownership and management of a business when an owner retires, becomes incapacitated, or passes away. Along with other things, a comprehensive business succession plan for a medical practice identifies future leadership, establishes a transition timeline, and addresses key legal, regulatory, and financial issues tied to the change in control.

Physician Ownership Restrictions in CA are Key to Medical Practice Succession Planning

Succession planning for a California medical practice must always begin with the state’s corporate practice of medicine doctrine. California law restricts ownership of professional medical corporations to licensed physicians and certain other licensed healthcare professionals. These rules appear in the Moscone-Knox Professional Corporation Act. A transition plan must ensure that ownership always remains compliant with these requirements. If a physician owner dies, becomes disabled, or retires, the practice must transfer the ownership interest to a qualified licensed professional. That needs to be addressed within your business succession plan.

Buy-Sell Agreements for Medical Practice Ownership

A comprehensive succession plan for a medical practice will often include a buy-sell agreement governing ownership transfers. It is this type of agreement that establishes the legal mechanism for transferring shares when a triggering event occurs. The most common “triggers” are death, disability, retirement, voluntary departure, or the loss of a professional license of an owner.

A buy-sell agreement must be properly drafted. It should clearly define the valuation methodology used to determine the purchase price of the departing physician’s ownership interest. It should also identify the funding mechanism used to complete the purchase. Many medical practices rely on disability insurance or life insurance policies to fund ownership buyouts.

Full Compliance With California’s Corporate Structure Rules is a Must

Most physician groups in California operate as professional medical corporations (PCs). Succession planning must address the governance and ownership rules that apply to these entities. Only individuals licensed to practice medicine may hold shares in a medical corporation, though limited exceptions exist for certain allied professionals. When a physician shareholder leaves the practice, the corporation must ensure that the shares transfer to a properly licensed successor. A California business lawyer for medical practices can help.

Contact Our Bay Area Business Lawyer for Medical Practices Today

Lynnette Ariathurai is a California business law attorney who has extensive experience working with medical practices. If you have any questions or concerns about succession planning strategies for a medical practice in California, please do not hesitate to contact us today for a fully confidential consultation. With an office in Fremont, we work with medical practices throughout the entire San Francisco Bay area.

business planning, business succession plan, healthcare agency succession plan

Succession Planning for California Medical Practices

Background: What is Business Succession Planning?

Physician Ownership Restrictions in CA are Key to Medical Practice Succession Planning

Buy-Sell Agreements for Medical Practice Ownership

Full Compliance With California’s Corporate Structure Rules is a Must

Contact Our Bay Area Business Lawyer for Medical Practices Today

business planning, business succession plan, healthcare agency succession plan

Attorney for Closing a Medical Practice in California

There are more than 75,000 actively licensed physicians in California who work across thousands of different medical practices (California Health Care Foundation). Of course, medical practices do not always last forever. New practices are being formed every month and many existing practices are being sold or even being closed down.

If you are a doctor in the Bay Area who is preparing to close your medical practice, it is imperative that you have a comprehensive understanding of your responsibilities. Within this article, our Fremont business lawyer for medical practices highlights the key things to know about closing down a medical practice in California.

Know Your Responsibilities When Closing Down Your Medical Practice

You Must Provide Adequate Written Notice to All Current Patients

There are strict rules regarding “patient abandonment” in California. Your practice does not want to be in violation as it closes down. The California Medical Board emphasizes that physicians must give sufficient advance notice—usually defined as somewhere between 30 and 60 days—so patients have time to secure alternate care and obtain their records. Written notices should be sent in writing either or both mail and email, and they should include the closure date and instructions for obtaining records.

You Must Maintain, Transfer, and Retain Medical Records

One of your big responsibilities when closing a medical practice in California is ensuring that medical records are properly handled. California requires physicians to keep medical records at least seven years from the last date of service for adults and, for minors, until age 25. You must either retain the charts yourself or designate a licensed custodian and disclose that custodian’s contact information in the patient‑notification letter.

You Must Safely Dispose of or Transfer Controlled Substances and Return DEA Forms

There are also strict rules for managing controlled substances. You should conduct a final inventory of Schedule II‑V drugs, cancel unused DEA 222 order forms by writing “VOID,” and mail them—along with your registration certificate—to the local Drug Enforcement Agency (DEA) office. Destruction of controlled substances must meet the federal “non‑retrievable” standard.

You Must Coordinate Continuing/Emergency Care as Appropriate

As a best practice, all medical practices in California should set up a proper system for coordinating continuing care and emergency care through their closure date. To do right by your patients, it is crucial that you take a proactive approach—especially if your practice has vulnerable patients.

You Must Notify Licensing Boards, Payers, and Credentialing Entities

Another requirement is to file a change‑of‑status form with the Medical Board, relinquish hospital privileges, and update your NPI profile. Medicare, Medi‑Cal, TriCare, and private plans generally require 30‑90 day’s notice to terminate provider agreements and to redirect electronic funds or capitation payments. Failure to cancel contracts in the proper manner can cause big problems.

You Must Properly Wind Down Business Operations

Finally, you need to develop a plan for the orderly wind down of your business operations. What this entails will depend, in part, on the specific nature of your medical practice. With that being said, there are many employment requirements. You should ensure that you give all employees written notice that meets California Labor Code requirements, pay final wages (including unused PTO) on the last day, and issue COBRA or Cal‑COBRA election forms.

Our California Business Lawyer Can Help You Close Down a Medical Practice

Lynnette Ariathurai is a California business attorney with the skills and experience to help physicians wind down their medical practice. If you have any questions about your responsibilities, please do not hesitate to contact us today. With an office in Fremont, we work with medical practices throughout the Bay Area.

close medical practice California, medical office closing, physician practice closure

Legal Services for Medical Practices from Formation through Sale

For physicians, owning and operating their own professional practice can be a great opportunity. At the same time, it is complicated. California physicians face unique challenges throughout the lifecycle of a medical practice. As a small business owner and a California business attorney, Lynnette Ariathurai provides solutions-driven representation to medical practices. Here, our Bay Area business lawyer provides an overview of key things medical practices need to know about business law—from open to close.

Forming a Medical Practice

Starting a medical practice in California requires strict compliance with the state’s professional corporation rules. Physicians must form a Medical Corporation under the Moscone-Knox Professional Corporation Act. A key element of the law is that it only allows licensed professionals to own shares and serve as officers or directors. You will also need to obtain a federal employee identification number (EIN) and provide the registration to the California Medical Board.

Buying a Medical Practice

You may be considering buying a medical practice in California. There are options for structuring the purchase agreement. You could buy the entire medical practice—which means acquiring all assets, liabilities, and operational responsibilities. Alternatively, you could complete an asset purchase. That involves selecting specific assets to acquire—and it can allow you to avoid taking on most of the practice’s liabilities. However, the downside of an asset purchase is that you may lose access to contracts/licenses that could otherwise be transferable through purchasing the whole business.

Structuring a Medical Practice (Compensation for Physicians)

When you set up a medical practice, one of the biggest questions about structure is how the physicians will be compensated. Notably, the fee-splitting laws for physicians in California are strictly enforced. Our state prohibits physicians from engaging in fee-splitting arrangements with non-licensed individuals or entities, particularly when compensation is tied to patient referrals. A violation of the law can result in severe penalties, including fines and even potential suspension or revocation of the professional corporation’s registration. Medical practices must ensure that compensation structures are based on legitimate services rendered, not on the volume of referrals.

Selling a Medical Practice

Selling a medical practice in California is complicated. When doing so, it is crucial that you ensure transparency by accurately disclosing the practice’s financial status to potential buyers, informing active patients about the sale in advance, and properly transferring patient records, which requires explicit consent to comply with HIPAA regulations. A California business lawyer can help you draft a comprehensive sale agreement and notify the California Medical Board of changes in ownership.

Closing a Medical Practice

Preparing to wind down your medical practice? Shutting down a medical practice involves more than simply ending operations—it is a highly regulated process and physicians have clear legal duties. To start, you must give patients adequate written notice, provide them access to their medical records, and ensure continuity of care during the transition. California law also requires retaining patient records for a set period—usually at least seven years. Physicians must also be prepared to notify all relevant agencies and properly dispose of any controlled substances.

Contact Our California Business Lawyer for Medical Practices to Today

Lynnette Ariathurai is a California business attorney with extensive experience working with medical practices. We advise physicians on the full range of business matters related to their medical practice—from open to close. Contact us today for your fully confidential, no obligation initial consultation. With an office in Fremont, we serve clients throughout the Bay Area.

medical practice closing, medical practice regulations, new medical practice, sell medical practice, start medical practice

Selling a Medical Practice (How Sellers can Minimize their Liability)

Do you own and operate a medical practice in California? If you are considering selling your professional practice, it is imperative that you know how to effectively navigate the transaction. Minimizing your liability risk—both before and after the sale of the medical practice—is crucial. In this article, our Fremont lawyer for selling a medical practice provides an overview of strategies sellers can use to minimize their risk of liability with selling a medical practice in California.

How to Minimize Your Liability Risk When Selling a Medical Practice in California

1. Clearly and Accurately Disclose the Financials of the Medical Practice

It is crucial that sellers clearly and accurately disclose the financial position of the medical practice to prospective buyers. If material misrepresentations are made regarding key financial matters, a seller could potentially face liability. Financial transparency is important.

2. Send Timely Notice of the Sale to Active Patients

Active patients should be informed about the sale well in advance to ensure continuity of care. As the seller, you should provide clear communication about how the transition will affect their treatment and how they can access their medical records. Failure to notify patients in a timely manner could result in a liability risk.

3. Obtain Patient Consent Before Transferring Any Records

TheHealth Insurance Portability and Accountability Act (HIPAA) protects the sensitive medical records of patients. You cannot lawfully transfer medical records to another party—even a buyer of your medical practice—without patient consent. Get clear, explicit consent from patients.

4. Disclose Any Known Legal or Regulatory Issues

Sellers need to be prepared to disclose known issues. Indeed, full disclosure of any ongoing or past legal or regulatory issues is crucial to protect yourself against future claims. Buyers have a right to know about malpractice lawsuits, compliance violations, or outstanding investigations.

5. Use a Comprehensive, Professionally Reviewed Purchase Agreement

A detailed and legally sound purchase agreement protects both parties and minimizes misunderstandings. You should ensure the agreement outlines the terms of the sale, responsibilities for liabilities, and any contingencies. The contract should be drafted by a lawyer who has the experience needed to represent the seller of a medical practice in California.

6. Notify the California Medical Board of the Change in Ownership

The California Medical Board must be notified of the sale to comply with state regulations. As the seller, you should be sure to submit all necessary documentation to avoid penalties or delays in the ownership transfer.

7. Review Medical Malpractice Insurance to Confirm Adequate Coverage

Finally, sellers should review their medical malpractice insurance policy to confirm that it provides adequate coverage through and after the sale. You may want to consider purchasing tail coverage to protect against claims arising from events that occurred before the transfer of ownership.

Get Help From a California Business Lawyer for Selling a Medical Practice

Lynnette Ariathurai is a California business lawyer with the skills, knowledge, and experience to help business owners minimize liability in the sale of a medical practice. Contact us today for a completely confidential, no obligation consultation. We represent clients throughout the region, including in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, San Jose, and Santa Clara.

medical practice sale, minimize liability risk, professional practice sale, selling California medical practice

Business Dissolution To Come For Flash Memory Technology Moguls

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporationposted in Sales & Dissolutions on Tuesday, January 23, 2018.

NAND technology is a type of memory or storage system that does not require power to retain data as opposed to random access memory, wherein all data is lost upon computer shutdown. For years, Micron and Intel companies have performed as joint forces in development and promotion of non-volatile flash memory technology. It may come as a shock for many California readers to learn the two entities have announced their planned business dissolution.

The long-term partnership that is currently heading for business dissolutioncarries numerous implications for the world of technology. As it stands, most smart phones, tablets, personal computers and other devices heavily rely on NAND technology for data storage needs. Micron and Intel say they will finish working on 3D NAND technology slated for release in 2019.

Once the project is complete, the two businesses will part ways. In joint ventures of this nature, each entity typically provides specific strengths and specialized efforts to the centrally focused project. This means when two forces separate, each will likely have to compensate for the loss of the other.

Not many business owners would dissolve a successful, long-standing partnership without careful consideration. Profitability may be at risk. It is also conceivable that there may be additional expenses incurred in trying to fill in the gaps created by the absence of a former business alliance. This is why experienced business owners in California and beyond usually consult with experienced business and commercial law attorneys before taking any definitive action to separate from a long-term partner.

business dissolution

Always Good to Think Ahead When Selling a Business in California

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Sales & Dissolutions on Friday, October 21, 2016.

One can imagine the tremendous feeling of satisfaction that accompanies building a successful California business from the ground up. For many business owners, there comes a time when it appears that selling a business is the next logical step to take. However, as such endeavors may present various types of challenges, it is typically best to think ahead before diving in.

An important topic to ponder when considering selling a business is that of potential taxes on the income. There is no set tax rate for money earned through a business sale; various factors determine how much the government gets. In addition to personal income, state of residence and purchase price allocation all play into how much tax will be owed.

Patience may indeed be a virtue when it comes to deciding whether to place a business up for sale. If a business has not been up and running for an extended period of time, some say it is best to wait before selling. Potential buyers are reportedly often more attracted to businesses that have long-standing success and well-established histories.

Anyone thinking about selling a particular business in California may also want to consider what the future might hold with regard to the personal and professional journey. For many, spending every waking moment of their recent pasts working to create and maintain successful businesses leaves them suddenly at a loss when it comes to deciding what to do next in life. Crafting a solid plan is advisable. In fact, a business and commercial law attorney is often able to assist company owners throughout the process of a sale, as well as in creating new business plans.

Source: alleywatch.com, “What to Know Before Selling Your Business“, Mark Daoust, Oct. 10, 2016

If your business is contemplating or already involved in the purchase, sale or merger of another business, please contact the Law Office of Lynnette Ariathurai. We provide professional business legal services for clients in Fremont, Hayward, Union City, Castro Valley, Milpitas, or Newark, CA,

business planning, Sales & Dissolutions, sell a business in california

Legal Challenges Not Uncommon When Selling a Business

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Sales & Dissolutions on Thursday, April 7, 2016.

There are any number of reasons why a California business owner may decide to relinquish ownership by selling a company. Often, legal challenges arise during the process of selling a business that may be best addressed through sound and experienced legal counsel. Sellers and buyers often have very different perspectives regarding potential deals, and sellers often want to make certain that the appropriate valuations are assigned to their businesses before allowing ownership to change hands.

There are various factors to consider when attempting to value a business. The most obvious is to add up all company assets to calculate a selling price. Both net and future potential incomes may also be considered when determining how much a business is worth. The bottom line is that business owners want to protect their interests when determining fair selling prices for their companies.

A business owner often obtains a professional valuation before negotiating a sale. As the process unfolds, at some point, a contract must be drafted requiring signatures of both the seller and buyer in order to finalize a sale. It is crucial to clarify all legal terms, obligations and fine print details in a sales contract to avoid possible disputes from arising.

Anyone selling a business in California who wants to discuss the matter with a business and commercial law attorney can do so by contacting a law office in the area to request a consultation. There are many ways in which an experienced attorney can be of service to a business owner during sale negotiations and contract resolutions. Whether assistance is needed to properly value a business, clarify state law or negotiate a contract dispute, a first logical step to take to resolve such issues would be to seek guidance from a local attorney.

Source: bizbuysell.com, “How To Value A Business“, Richard Parker, Accessed on April 6, 2016

business valuation, Contract Disputes, Sales & Dissolutions, selling a business in california