New York Practice Structure Guide: The Professional Corporation, Fee-Splitting Law and the Attorney General's 2026 NaphCare Order

Entity and Ownership

New York physicians practice through a professional corporation under Article 15 of the Business Corporation Law. Shares may be issued only to individuals authorized to practice the profession and practicing in the corporation or about to within 30 days, issuances and voting agreements in violation are void, and directors and officers must be licensed in New York and be shareholders or practice in the corporation. The State Education Department requires each proposed shareholder, director and officer to be licensed and currently registered, and there is no limited non-physician ownership exception for medicine. The Department first issues a Certificate of Authority, with a $90 domestic filing fee and an eight-to-ten-week wait, then the corporation files with the Department of State, then registers the certified certificate with the Department within 30 days, and files a triennial statement of shareholders, directors and officers. The name must describe the profession accurately and end with Professional Corporation or P.C., and the Department of State has said a professional entity cannot include the word spa in its name. A search result mentioned a medical corporation under Public Health Law Article 44, which we treat as unreliable because that article concerns HMOs.

The Corporate Practice Position

New York's position comes from the licensing statutes. The Education Law makes unauthorized practice, including aiding or abetting, a violation, with aiding three or more unlicensed persons a class E felony, and lists misconduct including aiding unlicensed persons, undue influence and sales promotion, referral payments, fee sharing and false advertising. A professional corporation may render services only through authorized individuals, and reports, diagnoses and prescriptions must be signed by the practitioner in responsible charge. In no-fault insurance cases, State Farm v. Mallela (2005) allows insurers to withhold payment from fraudulently incorporated providers, and Andrew Carothers, M.D., P.C. v. Progressive (N.Y. 2019) held no finding of fraud is needed if the practice is improperly controlled by non-physicians. The Appellate Division in that case approved thirteen non-exhaustive control factors, including arm's-length dealing, bank-account control, hiring and firing, shared space, corporate formalities and the professional shareholder's role. We did not confirm the reporter citation for Carothers.

In March 2026 the Attorney General signed an assurance with NaphCare, with $875,000 and a five-year contracting bar, after finding an Alabama company controlled a New York practice and practiced medicine unlicensed. A 2015 assurance with Aspen Dental, $450,000, involved percentage payments of 45 to 50% of gross profits and undue control.

The Management Agreement and Fees

Education Law section 6530(19) and the Board of Regents rule bar sharing professional fees with anyone other than a partner, employee, associate, subcontractor, consultant or trainee, and the prohibition also covers payments for space, facilities, equipment or personnel services that are a percentage of, or dependent on, the licensee's income. A percentage-of-revenue management fee is therefore high risk. In Advanced Dental of Ardsley v. Brown (2d Dep't 2024), an asset purchase agreement paying a percentage of practice revenue was a voluntary prospective arrangement for splitting fees and unenforceable. That is a dental case under the same Education Law framework. Use a fixed, fair-market fee for defined services.

We found no current statutory ban on non-competes. A bill that passed the Senate in June 2026 would cover health professionals regardless of income and was in the Assembly Labor Committee.

Transaction Notice and Pending Bills

Public Health Law Article 45-A requires health care entities, including MSOs and physician practices, to give the Department of Health notice at least 30 days before closing a material transaction, with formation of an MSO counting and a de minimis exemption below $25 million of added in-state gross revenue. A proposal to expand it was not enacted in the FY2027 budget for the second year, according to a law-firm alert we saw only in summary. Senate Bill 8442 would require physicians to hold a majority of each voting class, board seats and officer roles other than secretary and treasurer, restrict transfer of control over operations, and add anti-retaliation protection. It was in committee, and it would loosen the rule to allow minority non-physician ownership.

Med Spa Rules

New York has no single med spa license. In January 2026 the Department of State reported inspecting 223 businesses and citing 87, including for possible unlawful practice of medicine, and listed services requiring a professional license such as injections of any drug including Botox and fillers, lasers other than laser hair removal, IV therapy, microneedling, peels, hormone therapy, GLP-1 drugs and vitamin infusions. Its statement that a business offering these services must be licensed as a medical facility is ambiguous, and we could not reconcile it with the professional corporation model, so ask counsel what it means in practice. Registered and practical nurses need formal IV training, and medical assistants cannot start IVs, according to one law-firm source. We found no authoritative New York rule on compounded semaglutide.

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 New York the management fee is a fixed amount for defined services, nothing that pays for space, equipment or personnel moves with the practice's income, and the practice keeps its own bank account, hiring and treatment decisions.

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.