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How to run a healthcare business: medical practice versus healthcare entity
Healthcare activities can take different forms, and choosing the right one has significant legal and financial implications. In this article we discuss two main ways to provide healthcare: a medical practice and a healthcare entity. Learn how they differ and what benefits and obligations each option involves.
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Medical practice: individual and group
The first option is a medical practice, which may take two main forms:
Sole proprietorship (individual medical practice): a doctor runs the practice independently as its sole owner and provider of medical services.
Group medical practice: doctors form a group and operate together. The group can be a civil, general or professional partnership.
Healthcare entities: many possibilities, one principle
A healthcare entity is a more elaborate structure that can be run by different kinds of entrepreneurs and organisations. In short, anyone who meets the relevant conditions can run one, including:
Entrepreneurs within the meaning of the Entrepreneurs' Law, covering various legal forms, including civil and commercial partnerships and companies (for example, a limited liability company).
Independent public healthcare institutions.
Budgetary units, research institutes, foundations and associations.
Churches and religious organisations.
Differences between a medical practice and a healthcare entity:
Practising a medical profession: only doctors may run a medical practice, whereas running a healthcare entity does not require medical qualifications, subject to certain exceptions such as a professional partnership.
Legal form: healthcare entities may adopt a variety of legal forms, including a limited liability company, allowing more flexibility.
Liability: a limited liability company limits its members' liability, whereas a civil partnership entails unlimited liability.
Taxation: healthcare entities are subject to corporate income tax, but a preferential form known as “Estonian CIT” allows tax to be deferred until profits are paid to members.
Requirements for establishing a healthcare entity
If you are considering running a healthcare entity, you must meet certain key requirements:
Premises and technical conditions: the premises must meet specified technical and sanitary standards, set out in legal provisions.
Medical equipment: you must have appropriate equipment complying with regulations on medical devices.
Medical personnel: only people with medical qualifications, such as doctors, can provide healthcare services in the entity. Staff can be engaged under employment contracts or civil-law contracts.
Liability insurance: you must take out civil liability insurance covering damage caused by healthcare services.
Registration: after meeting the requirements, you must register with the appropriate Register of Entities Performing Healthcare Activities, for which the provincial governor is the registration authority.
Healthcare entity versus limited liability company
A healthcare entity can operate as a sole proprietorship, civil partnership, partnership or capital company, including a limited liability company.
The main advantage of operating as a limited liability company is its legal personality. This means the company itself is the holder of rights and obligations under contracts and a party to court or administrative proceedings. Naturally, these advantages come with formalities, especially registration and reporting obligations, but in practice these activities do not cause problems.
Operating as a civil partnership has the disadvantage of considerable business and financial risk; it is recommended for sectors operating on a small scale.
In other words, the advantages of a limited liability company compensate for its additional obligations.
If you found this article interesting, explore our tax advisory services and read how we can help you:
Summary
Choosing between a medical practice and a healthcare entity depends on factors such as qualifications and legal and financial preferences. Each option has benefits and obligations, so consider the possibilities carefully before starting healthcare activities. Whatever you choose, meeting the applicable conditions and requirements is essential to operating lawfully and effectively in healthcare.
If you are interested in legal assistance for businesses, contact us.
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