The Final Steps in Closing a Medical Practice in Pennsylvania

Filing the final tax returns is not enough when officially closing a medical practice. Your attorney must also file documents with the Department of State.
Physician Employment Agreement Reviewed

I have previously discussed eight things to consider when selling your medical practice, and warned of the dangers of relying on the “hospital fairies” to maintain your income as an employed physician in the face of increasing costs and declining reimbursement.  I have also had a good rant on the joys of hospital negotiations.  But however you may have reached your decision, this post will discuss the nitty gritty of actually closing your practice after accepting employment at a hospital.

I’m assuming that you sold to a hospital, rather than simply stopping practice.  Accordingly, I will assume that you won’t need to notify patients to avoid charges of abandonment – you’re seeing those patients in your new role as employed physician. I am also assuming that you will not have to notify the Board of Medicine or Board of Osteopathic Medicine that you are no longer supervising one or more physician assistants under  supervising physician agreements in Pennsylvania.

Financial Aspects

closing businessOf course, the most important thing you will have to accomplish is to pay all the bills of the practice incurred before the sale, and collect the income from services rendered before the sale.  I generally counsel physicians to allow at least six months after the sale to collect what you can (and potentially deal with insurance companies’ claims for reimbursement, etc.).  If your practice was on a calendar year, it may make sense to close it at the end of the current year.

Before the end of the year, close out all your accounts, so the practice’s final tax return will show zero assets.  It usually makes sense to pay your healthcare attorney and accountant in advance as a fixed fee for everything that needs to be done in closing a medical practice.  For example, the CPA will need to file the final tax return, generally several months after the corporation has been closed.  You will want to make sure that is accomplished at a flat fee, paid out of the practice’s account before closing the account.  Your attorney will also have to do things after closure (discussed below), so make a deal to pay the attorney a flat fee out of the practice’s assets as well.

There is More to Closing a Medical Practice than Filing Final Tax Returns

I have frequently been informed by my clients that their CPA is telling them that filing the final tax return closes the corporation, and nothing else needs to be done.  That isn’t correct.  Filing the final tax return informs the Pennsylvania Department of Revenue (“Revenue”) and the IRS that the corporation is closed, but the Pennsylvania Department of State (“State”) has exclusive jurisdiction over opening and closing corporations in Pennsylvania.

In order for State to approve the dissolution of a corporation, you must file Articles of Dissolution with State.  State has to ensure that all employee and income taxes have been paid before it allows the corporation to dissolve.  To ensure that these taxes have been paid, State requires a Tax Clearance Certificate (“Certificate”) from both Revenue and the Pennsylvania Department of Labor and Industry (“L & I”).

The Final Step

There is a form that must be filed with both Revenue and L & I to get them each to issue a Certificate.  The good news in this regard is that it is the same form, so you just need an original and a copy to file with the two agencies.  L & I usually produces the Certificate in a few weeks – Revenue sometimes takes as long as a year to cough up its Certificate.

Once your attorney has both Certificates in hand, Articles of Dissolution can be filed with State, and your corporation will be officially closed.  Your long career as a business owner will finally be over, and you can devote yourself exclusively to the practice of medicine (assuming your employer isn’t beating you up too badly on administrative duties).

Share on Facebook
Share on Twitter
Share on Linkedin
Dennis Hursh

Dennis Hursh

Dennis Hursh has been providing healthcare legal services in Pennsylvania since 1982. Since 1992, he has been a physician's lawyer serving as Managing Partner of Physician Agreements Health Law, the first law firm in the country to focus exclusively on physician employment agreements. Dennis has devoted his life to serving physicians and medical practices. He is the author of the definitive book on physician contracts "The Final Hurdle - a Physician's Guide to Negotiating a Fair Employment Agreement, and a frequent lecturer on physician employment agreements.

Leave a Comment

Your email address will not be published. Required fields are marked *

Physician Prosperity Program

How It Works

After purchasing the physician contract review, you will receive an email asking you to transmit the agreement and any concerns you have to me. Many physicians do this by email, but I will be available by phone, too. In three business days from the time you purchase the Physician Prosperity Program® and transmit the draft physician employment agreement along with any concerns you have about the agreement and the information I will need to perform the MGMA analysis, you will receive a detailed physician contract review letter from me.

After you receive my physician contract review letter, you will have the opportunity to discuss it with me, to make sure all of your concerns were met, and to correct any factual inaccuracies, or to point out things that were verbally promised but didn’t make it into the physician employment agreement. These discussions, and revisions of the letter following these discussions, are included in the initial fixed fee.

Once you are completely comfortable with the physician contract review letter, you transmit the letter to your potential employer.