Minnesota Practice Structure Guide: The Professional Firms Act, a 2026 Corporate Practice Change and the Bill to Watch

Entity and Ownership

The Professional Firms Act lets a corporation, an LLC or a limited liability partnership elect to be a professional firm in its organizational document, and a professional corporation, a professional association or a firm with a similar designation can qualify. Ownership interests may be held only by licensed professionals in at least one of the firm's service categories and a few narrow qualified holders such as professional trusts and ESOPs, and violating transfers are void. Governance authority must rest with licensed professionals, and administrative and operational matters may be delegated but decisions requiring professional judgment cannot be delegated to a non-licensee. The firm must furnish services only through licensed professionals and may not adopt policies that would give a board grounds to discipline a professional. Names must end with an entity-type designator such as P.C. or Chartered. We could not confirm from the sections we read which office receives the filing or whether any board registration applies.

The Corporate Practice Position

Minnesota applies the doctrine through case law. Granger v. Adson (1933) and the Supreme Court's decision in Isles Wellness v. Progress Northern (2005) hold that the doctrine exists in Minnesota with limited exceptions, enforced strictly for chiropractic and recognizing the Professional Firms Act as a route only if all owners are licensed. A dissent argued the doctrine is weakly rooted, and the court said changing it was for the Legislature. A federal court in 2014 found non-physician-owned MRI technologists did not violate the doctrine, which we treat with caution.

In May 2026 Minnesota enacted a change to the medical practice act adding that it is unlawful for any person who is not a natural person to practice medicine, with parallel changes for optometry and psychology. The session law we read does not state a separate effective date, and a legislative summary indicates most of the act takes effect August 1, 2026, which we treat as likely but unconfirmed. We read it as codifying the rule that an entity cannot practice medicine, and we found no Board guidance on how it interacts with professional firms.

The Management Agreement and Fees

The discipline statute covers paying or receiving a commission or remuneration primarily for referring patients or prescribing drugs, dividing fees with another physician or a professional corporation unless in proportion to services and responsibility with disclosure, undisclosed financial interest referrals, and dispensing drugs for profit without disclosing the profit interest. That last item matters for a clinic that dispenses peptides, GLP-1s or hormones. The fee-division language names another physician or a professional corporation and not a lay management company, and we found no authority squarely addressing a percentage MSO fee.

Minnesota voids covenants not to compete, with exceptions only for sale of a business and dissolution of an entity. The definition of employee includes independent contractors, and there is no health care carve-out. It applies to agreements entered on or after July 1, 2023.

Transaction Notice

Minnesota's health care transaction law covers group practices and captive professional entities, but its notice requirement applies only at $80 million or more in average annual revenue, and its competition-lessening prohibition has no revenue threshold. A small clinic's management arrangement is usually below the notice threshold.

The Bill to Watch

The Minnesota Health Care Accountability Act would have created a new section barring anyone but a licensee from owning a medical practice, requiring meaningful ownership, barring owners from managing both a practice and an MSO, barring relinquishing control over hiring, revenue disbursement, staffing, coding, pricing and payer contracts, voiding certain non-disparagement agreements, barring compensation to management entities based on the practice's income or volume of care and capping MSO compensation at fair market value. It failed in 2025 and was laid over in a House committee in March 2026. We read a summary of the supplemental budget act and found none of these provisions, so we treat it as not enacted, and confirm before relying on that. Expect it to return in 2027. A flat, fair-market, invoiced fee and physician control of those functions already match its direction.

Med Spa and Aesthetic Rules

Minnesota has no med spa license or mandated medical director. Practicing medicine includes prescribing, diagnosing and performing procedures including those using a laser, and a violation is a gross misdemeanor. Who may operate cosmetic lasers depends on delegation under the practice act and nursing rules, and sources conflict on whether nurses may fire them, so we do not state an answer.

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 Minnesota the physician holds every function the failed bill listed, and the MSO invoices a flat fee.

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.