Alabama Practice Structure Guide: Board Rulings on Lay Employment, the Control Line and the 2026 Peptide Warning
Alabama's position comes from Board and licensure commission rulings and not from a statute. They allow employment by lay corporations only if the physician keeps independent judgment, and the Board has warned owners and investors about control.
Key Highlights
- Alabama medical professional corporations file certified articles and a shareholder list with the Board within 30 days, and the Board and the Medical Licensure Commission can ask the Attorney General to seek dissolution.
- Board and Commission rulings from 1992 and 1995, reaffirmed in a 2022 retail IV ruling, allow employment by lay entities if the physician exercises independent judgment and is not controlled by a non-physician.
- The fee-splitting statute bars dividing fees for bringing or referring a patient, and a 1988 informal Board opinion found a fixed percentage not a violation if reasonably related to the cost of facilities and services.
- Chapter 540-X-11 treats lasers and energy devices as the practice of medicine and sets delegation levels, and the Board issued a September 2025 notice that RNs may not inject cosmetic botulinum toxin.
Entity and Ownership
Board Rule 540-X-9-.01 governs physician professional corporations, and it still cites the older numbering of the Alabama Professional Corporation Act, while a parallel Dental Board rule cites the current Title 10A numbering, so confirm the section numbers against the official Code before relying on any citation. Shares go only to qualified persons. A 1994 Board General Counsel letter says out-of-state physicians from a qualified state can hold shares without an Alabama license if they do not practice in Alabama, and a foreign medical corporation's shareholders who render services in Alabama must be Alabama-licensed. A 1998 letter says a chiropractor may not own shares in a medical corporation but may be an employee.
The rule requires filing certified articles, any certificate of authority and a shareholder list with the Board within 30 days. Late filing does not invalidate the entity but can be grounds for involuntary dissolution. The name follows the statute, and if it uses a physician's name it must include M.D. or D.O. Professional associations appear in the rule only as entities that predate 1984.
The Corporate Practice Position
Alabama's rule is administrative. A Board declaratory ruling of October 1992 held that a business corporation's employment of licensed physicians is not unlicensed practice, saying physicians are free to contract with professional corporations, nonprofit corporations, business corporations, partnerships and other entities provided they exercise independent judgment and are not controlled by a non-physician. A Medical Licensure Commission ruling the same month held employment by a business corporation is neither fee splitting nor aiding and abetting. A 1995 Commission ruling involving a business corporation with lay employee shareholders and physician pay based principally on income production found no unlicensed practice, required a no-employer-control clause, and warned that a physician who lets unlicensed corporate superiors make medical decisions may be disciplined.
A 2022 Board ruling on retail IV businesses reaffirmed the position, warned that owners and investors may implicate the prohibition on unlicensed persons maintaining an office to practice medicine, quoted that neither the business nor the owner may exercise control over how physicians provide services, and treated standing-order models as the physician aiding and abetting. These rulings are fact-limited, and the 2022 text says it can lapse if statutes change. We found no Alabama appellate decision on the doctrine.
The Management Agreement and Fees
The Commission's discipline statute makes it a ground to divide fees with any person for bringing or referring a patient. A 1988 informal Board General Counsel opinion, which is non-binding and predates the rulings above, found a fixed percentage paid to a contracting physician not a violation, assuming the retained percentage was reasonably related to the cost of furnishing facilities and services and compensation was not directly related to referrals. The opinion noted no appellate court had interpreted the statute and expressly declined to address federal fraud and abuse law. A Board rule says financial incentives or contractual ties must not adversely affect medical judgment, and another sets seven-year record retention with patient access and notification on a physician's departure or a practice sale. Non-compete law is the 2016 Restrictive Covenants Act, and secondary sources say courts treat physicians as exempt professionals, which we could not verify. We found no transaction notice law.
Med Spa and Aesthetic Rules
Alabama has no med spa statute or facility license, and the Board's September 2025 agenda lists med spa regulations as an item with no adopted rule that we found. Chapter 540-X-11 says lasers, pulsed light and any energy or chemical modality affecting tissue below the stratum corneum are the practice of medicine. Non-ablative treatments may be delegated to trained delegates under written protocols with on-site or locally remote supervision depending on the delegate and risk, annual protocol and competency review and Board registration of physicians using lasers. A September 2025 Board notice says cosmetic botulinum toxin is the practice of medicine, may be administered by nurse practitioners and physician assistants under a Board-approved protocol, and may not be further delegated to RNs, following a Board of Nursing declaratory ruling that the Medical Board says binds only the requester. Only a physician or a PA, CRNP or nurse midwife working with one may diagnose and recommend IV therapy.
Recent Developments
A 2024 declaratory ruling says physicians may not compound or dispense with non-prescription-quality ingredients and must buy from permitted sources, and drawing take-home doses from bulk vials is regulated as compounding. A May 2026 Board warning against prescribing, recommending or supplying non-FDA-approved research-grade peptides, even with a consent form, was reported by a state news outlet, and we did not retrieve the Board's notice itself. New office-based procedure rules require accreditation for many procedures from January 1, 2027, and we could not tell whether they reach med spa procedures. We found no 2025 or 2026 Alabama bill on corporate practice, med spas, private equity or non-competes.
How We Structure It
As a rule we set up a professional corporation owned by the licensed physician, with no exceptions for what looks like a more flexible state. Patients pay the physician-owned practice. The practice pays the management company a fixed monthly fee under a written management services agreement. The management company pays MedGrid a fixed monthly retainer for consulting. The MSO never practices medicine, and the physician makes every clinical decision. In Alabama the agreement carries a no-employer-control clause, the supervising physician is never paid for referrals, and wellness products come only from permitted sources.
Disclaimer
This article is general educational information, not legal advice. Entity and corporate practice rules change, and parts of this summary rest on secondary sources, so have health care counsel in the state confirm the structure before you form or sign anything.
MedGrid MSO provides management services to independently owned practices; it does not practise medicine and does not direct clinical decisions. Requirements vary by state and by service, and change over time — nothing on this page is legal or medical advice. Talk to us or your own counsel before making a structural decision for your clinic.