Starting a Healthcare Practice in Texas: Legal Considerations for Physicians, Nurse Practitioners & Clinical Founders

Starting your own healthcare practice can be an exciting step in your professional career. It also means becoming a business owner in a highly regulated industry.

Before opening your doors, healthcare professionals should consider how their practice will be structured, who may own or manage the entity, what agreements may be needed, how regulatory requirements affect operations, and how those decisions fit together.

Texas law also places particular requirements on professional entities. Depending on the professional services being provided, an ordinary business entity may not always be the appropriate structure. The Texas Secretary of State specifically advises that businesses performing professional services may be required to organize as professional entities.

For physicians and other clinical founders, the goal should therefore be more than simply filing formation documents. It should be creating a legal foundation that supports the way the practice will actually operate.

What Legal Issues Should You Consider Before Starting a Healthcare Practice in Texas?

Although every practice is different, several legal considerations commonly arise during the planning and formation process.



These include:

• Business entity selection and formation
• Ownership and governance
• Professional licensing considerations
• Healthcare regulatory compliance
• Operating or company agreements
• Physician, provider, or nursing services agreements
• Independent contractor agreements
• Business Associate Agreements (BAAs)
• HIPAA-related consents and waivers
• Other contracts supporting the practice's operations

Addressing these issues together can help avoid creating a business structure that does not align with the practice's professional, operational, or regulatory needs.

1. Choosing the Appropriate Business Structure

One of the first decisions when establishing a healthcare practice is determining the appropriate legal entity.

Business owners frequently hear terms such as LLC, PLLC, professional association, and professional corporation, but healthcare professionals should not assume that every structure is available or appropriate for their profession.

Under the Texas Business Organizations Code, a professional limited liability company is an LLC formed to provide a professional service, and “professional service” includes services requiring a Texas license, including medicine and other licensed professions.

Texas also imposes profession-specific rules. For example, the Secretary of State explains that an entity formed to provide medical services may use a professional association or professional limited liability company rather than a professional corporation.

Why does entity selection matter?

The entity you establish can affect matters such as:

• Ownership
• Governance
• Management
• Liability considerations
• Internal decision-making
• Future changes in ownership
• Business relationships
• Long-term growth planning

For that reason, formation should be viewed as part of a broader legal strategy rather than simply an administrative filing.

Related Legal Service: Business Formation & Structuring →

2. Understanding Ownership and Governance

Determining who owns the practice and who has authority to make decisions is another important part of establishing the business.

This becomes particularly important when there are multiple founders, investors, healthcare professionals, or other parties involved.

Texas professional entities can be subject to restrictions regarding ownership and management depending on the profession and entity involved. For example, Texas law and Secretary of State guidance impose specific requirements on professional entities and certain combinations of licensed professionals.

The practice's governing documents should therefore reflect more than percentages of ownership.



Depending on the circumstances, they may need to address issues such as decision-making authority, responsibilities among owners, changes in ownership, governance, and what happens when the business or professional relationships change.

3. Building Healthcare Compliance Into the Practice

Compliance should not be something a healthcare practice considers only after it begins seeing patients.

A new practice may need to evaluate how healthcare regulations affect its business model, documentation, relationships, information practices, and day-to-day operations.

For practices subject to HIPAA, for example, relationships with outside individuals or organizations that create, receive, maintain, or transmit protected health information may trigger Business Associate Agreement requirements. HHS explains that covered entities generally need appropriate written assurances from business associates concerning the safeguarding and permitted use of PHI.

Depending on the practice, compliance planning may involve:

HIPAA and privacy considerations

How patient information will be handled and which outside relationships involve protected health information.

Business Associate Agreements

Whether vendors or other parties qualify as business associates and whether appropriate agreements are in place.

Consents and waivers

Whether the practice's documents appropriately reflect its operations and applicable healthcare requirements.

Operational compliance

How the practice's business arrangements and processes interact with healthcare regulatory requirements.

The specific requirements depend on the practice, profession, services provided, and business relationships involved.

Related Legal Service: Healthcare Compliance & Regulations →

4. Identifying the Contracts Your Healthcare Practice May Need

A healthcare practice operates through relationships—with owners, providers, contractors, vendors, service companies, and other organizations.

Those relationships often require carefully structured agreements.

Depending on the practice, these may include:

• Physician and provider agreements
• Nursing services agreements
• Independent contractor agreements
• Master Service Agreements (MSAs)
• Business Associate Agreements (BAAs)
• Operating agreements
• Company agreements
• Non-Disclosure Agreements (NDAs)

The appropriate agreement depends on the relationship and the role each party will have.

Contracts should not be viewed simply as documents to sign. They establish responsibilities, expectations, obligations, and risk between the parties.

Having agreements reviewed or drafted in the context of the practice's broader business and healthcare operations can help ensure that contracts support rather than conflict with the legal structure of the practice.

Related Legal Service: Corporate Contracting & Transactional Law →

5. Don't Treat Formation, Compliance, and Contracts as Separate Decisions

One of the most important considerations for a clinical founder is that these legal issues often overlap.

Your entity structure affects ownership.

Ownership affects governance.

Governance affects decision-making.

Your relationships with providers, contractors, vendors, and other organizations create contractual obligations.

Some of those relationships may also create healthcare compliance or privacy considerations.

This is why establishing a healthcare practice should involve looking at the whole legal structure of the business, rather than addressing each document independently.



A well-planned legal foundation should support both the professional requirements of the practice and the owner's long-term business objectives.

6. When Should You Speak With a Healthcare Business Attorney?

Ideally, legal planning begins before the practice is formed or major agreements are signed.

Consider seeking legal guidance when you are:

• Preparing to open a new healthcare practice
• Deciding between potential entity structures
• Bringing another owner or provider into the practice
• Drafting governing documents
• Reviewing physician, provider, nursing, or contractor agreements
• Establishing relationships with vendors that may handle protected health information
• Restructuring an existing practice
• Preparing for significant growth or a change in ownership



Addressing legal questions earlier can make it easier to structure the business intentionally rather than trying to correct disconnected decisions later.

Key Takeaways

Starting a healthcare practice in Texas involves more than registering a business name and filing formation documents.

Healthcare professionals should consider business structure, ownership, governance, regulatory compliance, contracts, privacy obligations, and long-term business objectives as interconnected parts of the practice's legal foundation.

Taking a coordinated approach at the beginning can help create a structure designed not only to open the practice, but also to support its operations and future growth.



Sources & References

Texas Secretary of State — Formation of Texas Entities FAQs

Texas Business Organizations Code

U.S. Department of Health & Human Services — Business Associate Guidance

FAQs

Frequently Asked Questions

About Starting a Healthcare Practice in Texas

Do I need an LLC or PLLC to start a healthcare practice in Texas?

Not every healthcare professional or practice will use the same entity type. Texas places specific requirements on professional entities, and the appropriate structure can depend on the profession, ownership, and services being provided. The Texas Secretary of State notes that those performing professional services may be required to use a professional entity when organizing as a corporation or LLC.

Can a healthcare professional form a PLLC in Texas?

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Can a healthcare professional form a PLLC in Texas?

Texas law recognizes professional limited liability companies for the provision of professional services, but the permissible entity structure and ownership requirements depend on the profession involved.

What contracts might a new healthcare practice need?

The answer depends on how the practice operates. Agreements may include operating or company agreements, physician and provider agreements, nursing services agreements, independent contractor agreements, MSAs, BAAs, NDAs, and other agreements relevant to the practice's business relationships.

When does a healthcare practice need a Business Associate Agreement?

Generally, a BAA may be required when a HIPAA-covered entity engages a business associate to perform functions or services involving protected health information. HHS also requires BAAs in applicable business-associate/subcontractor relationships.

Should I speak with an attorney before forming my healthcare practice?

Getting advice before formation can help a clinical founder evaluate entity structure, ownership, governance, contracts, and healthcare regulatory considerations together rather than addressing each issue separately after the business has already been established.

Still have a question?

Starting or Growing a Healthcare Practice in Texas?

Brewster Law Firm provides strategic legal guidance to healthcare professionals and clinical founders navigating the legal considerations involved in starting, structuring, operating, and growing healthcare practices in Texas.

From business formation and structuring to healthcare compliance and contract drafting and review, Brewster Law Firm helps clients understand their options and build stronger legal foundations for their practices.