North Dakota Practice Structure Guide: The Professional Organizations Act, a 1990 Attorney General Letter and Narrow Employment Exceptions
North Dakota's professional organizations statute gives physician practices no lay minority ownership, and a 1990 Attorney General letter says only professional corporations may employ physicians.
Key Highlights
- A North Dakota professional corporation's shareholders must be individuals licensed in North Dakota, and the statute's lay minority ownership option does not extend to physicians.
- A 1990 Attorney General letter says state policy prohibits a corporation other than a professional corporation from employing physicians, and a 2023 law lets nonprofits and charitable trusts employ physicians under a written contract preserving independent judgment.
- Section 43-17-31(1)(r) disciplines paying or receiving compensation for services not personally rendered or for referrals, but preserves lawful distributions of professional corporations.
- An exam consisting only of a static online questionnaire or an audio conversation does not meet the standard of care.
Entity and Ownership
The Professional Organizations Act, chapter 10-31, allows a professional corporation, professional LLC or LLP. A professional corporation's shareholders may be individuals licensed in North Dakota to render the same service, non-licensed employees through a retirement plan trust, and minority owners only where a statute expressly authorizes it, which the Act does for two other professional chapters and not for physicians. Shares issued or transferred to anyone not licensed are void, and each transfer needs a regulating-board certificate. An individual cannot be an owner or executive of more than one professional organization rendering the same service. The name must include chartered, limited, professional corporation, P.C., professional association or P.A. Articles go to the Secretary of State with a Board of Medicine certificate that the directors and voting shareholders are licensed, and an annual report certifies the same and goes to the Board. The entity may do no business other than the professional service and ancillary services and may render services only through licensed executives, employees and agents, with clerks, nurses, technicians and assistants not customarily considered to be rendering licensed services excluded. We could not verify whether a physician assistant or nurse practitioner can co-own.
The Corporate Practice Position
North Dakota's rule rests on the statute, an Attorney General advisory letter and the structure of the chapter. Practicing medicine without complying with the practice act is a class B misdemeanor, and the definition of the practice of medicine applies to any person, including one maintaining an office for treatment. The only express employment exception is a statute under which a licensed hospital, nonprofit entity or charitable trust may employ physicians under a written contract preserving independent judgment, and the employer is not engaged in the practice of medicine. A 2023 law added nonprofits and charitable trusts. An October 1990 Attorney General letter says North Dakota public policy prohibits a corporation, other than a professional corporation, from employing physicians, reasoning from a 1970 case and the practice act's wording. It is advisory only and predates the 2023 amendment. The Board of Medicine says it cannot issue advisory or legal opinions. We found no North Dakota court decision, Attorney General opinion or enforcement action on MSOs, and a vendor claim that the state has no exceptions is wrong.
The Management Agreement and Fees
The discipline statute covers paying or receiving any fee, commission, rebate or other compensation for medical services not actually or personally rendered or for patient referrals, with a statement that it does not affect lawful distributions of professional partnerships, corporations, LLCs or associations. We found no rule on percentage-of-revenue fees. Grounds also cover aiding or abetting practice by an unlicensed person, providing records on request, deceptive advertising and practice under a false or assumed name, and whether a properly filed trade name counts matters for MSO-branded clinics and is unverified. A physician assistant must practice at a licensed facility, a physician-owned facility or practice or a board-approved site, so a physician assistant placed in a non-physician-owned site is a risk. North Dakota voids restraints on a lawful profession, with exceptions for sale of goodwill and owner dissociation or sale of an interest, so a non-compete in an employee-physician agreement is void. We found no transaction notice law.
Telehealth and Aesthetic Rules
We found no North Dakota med spa statute, medical director rule or facility license. A bona fide relationship and examination are required before diagnosing or treating by telemedicine, an exam consisting only of a static online questionnaire or an audio conversation does not meet the standard of care, opioids are barred by telemedicine except for medication-assisted treatment and prescription monitoring participation is required for controlled substances. A questionnaire-only model therefore fails the state's standard. The Board of Nursing's December 2024 guidance on retail IV therapy settings names medical spas and IV clinics and requires a prescriber's initial documented history and physical and a client-specific plan before IV therapy, and it states it does not have the force of law.
How We Structure It
As a rule we set up a professional corporation (P.C. or P.A. in the name) 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 North Dakota the practice is owned entirely by licensed physicians, and the management company never employs physicians.
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.