New Requirement Involving Professional Practice Entities

By Alan Sonnenklar, Esq. & Stacey Lipitz Marder, Esq.
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As of October 1, 2019, the New York State Education Department is requiring that professional practice entities (PCs or PLLCs) submit an affidavit when forming a new entity, filing to do business in New York, or changing the name of the entity. If the affidavit is not filed, the request will be rejected.

Among other things, the affidavit requires that an owner of the professional practice entity, or shareholder or member authorized to make such disclosure, attest on behalf of the entity as to whether it has “any relationship, ownership interest, affiliation or association with any other business and/or professional practice entity.” Furthermore, the professional practice entity must now attest whether it has chosen a name for the purpose of suggesting a relationship, ownership interest, affiliation or association with another business and/or professional practice entity.

If such a relationship does exist, the name of the affiliated/associated entity and the nature of the relationship must be disclosed, and a certification must be made that the relationship is fully compliant with all applicable rules and regulations as per the New York Education Law and Business Corporation Law.

There is currently no guidance or instructions from the New York State Education Department with respect to how to complete the affidavit or determine which relationships need to be disclosed. New York State has also not provided any guidance with respect to penalties that may be associated with filing false affidavits, of course any false statement in a affidavit could be deemed perjury. We are currently awaiting further guidance from New York State.

Although it is unclear how this information will be used, providers need to be cognizant that New York State will now have access to this information, which can potentially be used to analyze whether the professional practice entity has relationships which may run afoul of applicable rules and regulations, including, for instance, those governing kickbacks, fee splitting and the corporate practice of medicine, as well as state requirements regarding practice management arrangements.

In view of this new New York State requirement, providers will need to conduct an analysis of potential risks, including potentially problematic business relationships, prior to forming a new professional entity or changing the name of an existing professional entity.

Should you have any questions or concerns regarding this new procedural requirement, please contact us at 516-627-7000.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.