Reference no: EM133084921

Choosing an Organizational Form

Sole proprietorships, partnerships, and corporations are the three most common categories of business entities in the United States. Many health care providers organize as corporations, but many private medical practices operate as sole proprietorships or partnerships. Each organizational structure has benefits, drawbacks, structures, setup processes, and taxation implications that health care entities must consider when deciding how to structure their business.

For each scenario, consider how you would proceed as a manager of this company. Be sure to include the following details to justify your thinking:

Do you agree with the organizational form chosen in each of these scenarios? Why or why not?

Which type of organizational form would you have chosen, and why?

If you were consulted for advice in each scenario, what questions would you ask to help these individuals make the best decision?

Here are the three scenarios for your consideration:

Sonya is considering starting a practice in which she will be the sole orthodontist. She owns a home, and her top priority is making sure that she cannot lose her home because of a lawsuit. Her brother told her not to incorporate because it would be very expensive and would lead to more regulatory scrutiny. She chooses to operate as a sole proprietorship.

Bradley and Li Jing have been friends since the beginning of college. Bradley has a master's degree in Nutrition Science, and Li Jing has a master's degree in Exercise Therapy. They decide they should combine their skills and open their own wellness center. Upon graduation, they use a verbal agreement to enter into a limited partnership. Bradley's girlfriend expresses that she opposes this idea because she wants to move back to her home state. Bradley tells her not to worry because it will be easy for him to sell his share of the organization if they chose to move in the future.

May, Paulo, Jordan, and David have been operating their mental health center as a general partnership for almost eight years. Paulo, a psychiatrist, has discovered a revolutionary new kind of therapy that he believes will be extremely popular and effective. He wants to take on investors to help fund the expansion of the center and implement the new therapy program. The four discuss forming a corporation, but Jordan is concerned that it will increase their tax liabilities substantially. She convinces the group they should remain as a partnership.