South Dakota Practice Structure Guide: The Medical Corporation Act, a Statutory Safe Harbor and a Three-Year Limit

Entity and Ownership

South Dakota's medical corporation chapter lets persons licensed under the Medical Practice Act form a corporation to own, operate and maintain an establishment for the study, diagnosis and treatment of human ailments, with treatment or advice by employees allowed only if they are licensed. All officers, directors and shareholders must be licensed at all times, no unlicensed person may have any part in ownership or control, and proxies to non-licensees are barred. A sole shareholder, director and officer is allowed. A 1982 Attorney General opinion concludes a physician assistant cannot get a certificate. The name must end with chartered, limited, professional association or P.C., and P.A. is grandfathered only for corporations using it in 1974. A certificate of registration from the Board of Medical and Osteopathic Examiners is required before operating, the Board investigates that incorporators, officers, directors and shareholders are licensed with no pending discipline, it renews annually and the Board can suspend or revoke it. Corporate policies cannot give the Board grounds for discipline, and the Board has access to business and patient records.

The Corporate Practice Position and the Safe Harbor

SDCL 36-4-8.1 says that except as provided in the medical corporation chapter, it is the public policy of the state that a corporation may not practice medicine or osteopathy. It then provides that a corporation is not practicing medicine, and does not violate the unlicensed practice statute, by employing a physician if the agreement or relationship does not supplant, diminish or regulate the physician's independent judgment, does not result in profit to the corporation from the practice of medicine itself, such as by charging a greater fee for the physician's services than the physician would reasonably charge as an independent practitioner, though the corporation may make additional charges reasonably associated with the services rendered such as facility, equipment or administrative charges, and does not last more than three years, after which it may be renewed by both parties annually. The source line shows the statute is unchanged since 1993. Unlicensed practice is a class 1 misdemeanor.

Bartron v. Codington County (S.D. 1942) is the older case. We know its holding only from secondary sources, which say a profit corporation supplying equipment and licensed physicians violated public policy even though the physicians' work was not interfered with. We could not read it. We found no Attorney General opinion or Board statement interpreting section 36-4-8.1 and no enforcement against an MSO structure. Applying the safe harbor to a practice and MSO fee is our inference: a fee priced to the MSO's services is consistent with the statute, and a fee that shares the physician's professional fees is not. Whether the three-year limit governs MSO service agreements is unverified.

The Management Agreement and Fees

The discipline statute makes unprofessional conduct splitting fees or giving to any person furnishing a patient any portion of the fees received from the patient or paying or giving consideration of any kind for furnishing a patient, and bars cappers or steerers. We found no rule on percentage fees. The control rules in the safe harbor and the medical corporation chapter both apply. The Board can inspect premises, drug records and inventories, and misleading medical advertising is unprofessional conduct.

A statute makes provisions restricting a healthcare practitioner, defined to include physicians, from practicing after employment ends or after a partnership or other professional relationship dissolves voidable for contracts on or after July 1, 2023, with exceptions for a sale of a practice or interest and for patient non-solicitation within general limits. A 2026 amendment added a clause for community services providers and did not change the practitioner rule. We found no transaction notice law.

Med Spa and Practitioner Rules

We found no South Dakota med spa statute, facility license or medical director rule, and a 2023 news report says the state does not inspect or license IV hydration clinics, which we saw only in snippets. A physician assistant with at least 6,000 practice hours and national certification may practice without a collaborative agreement under a 2025 law, and otherwise needs a collaborative agreement. A nonresident physician treating a South Dakota patient electronically under a contract with a South Dakota provider or facility is practicing medicine in the state and needs a license. The Board of Nursing's elective IV guidelines were reported in a snippet and we could not retrieve them.

How We Structure It

As a rule we set up a medical 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 South Dakota the MSO charges only for facilities, equipment and administration, the practice holds its Board certificate and agreements with employed physicians stay within the three-year-then-annual structure.

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.