Setting Up a New Physician’s Practice in Florida: Key Accounting Considerations

Florida’s dynamic healthcare industry and favorable business climate make it an attractive destination for physicians looking to establish their own practices. With no state personal income tax, a growing population and a strong healthcare infrastructure, there are few places more attractive than the Sunshine State for physicians looking to set up their own practice. However, success in this environment requires more than just clinical excellence. It demands careful attention to accounting and regulatory compliance from day one.

As a firm with over 60 years of experience serving healthcare clients throughout Florida, James Moore has guided countless physicians through the complex process of establishing their practices. Our deep understanding of both healthcare operations and Florida’s specific regulatory environment positions us to offer valuable insights into the accounting considerations that can make or break a new practice.

So, what are some of the key accounting considerations that should be top of mind when setting up a new physician’s practice in Florida? Read on as we walk you through the following issues:

• Selecting an appropriate business structure
• Fulfilling compliance requirements
• Establishing your financial infrastructure
• Navigating sales and use tax issues
• Understanding real estate and related party transaction issues

The decisions you make during the setup phase have lasting implications on your practice’s financial health, tax obligations, and regulatory compliance. Making informed choices from the outset is far more cost-effective than attempting to correct issues later when changes can be both expensive and disruptive to your practice’s operations.

Selecting an Entity Structure

Selecting the appropriate business structure for your medical practice demands careful consideration of multiple factors, including liability protection, tax implications, and operational flexibility.

In Florida, medical practices often consider structuring as professional corporations (PAs) or professional limited liability companies (PLLCs). These entities may provide liability protection for business debts while still maintaining professional liability for medical care — a distinction that’s important to evaluate when assessing risk management strategies.

These entity structures offer tax benefits too. Physicians can elect for their PA or PLLC to be taxed as a partnership (PLLCs only), S corporation or C corporation. S corporations unlock the ability to reduce self-employment taxes and are particularly advantageous in Florida due to the state’s lack of personal income tax.

For practices considering a C corporation structure, it’s important to note that Florida has a corporate state income tax. So corporate tax returns will be required for them (unlike those structured as S corporations, partnerships or sole proprietorships). While this means additional compliance requirements, it might be a consideration for practices planning to retain significant earnings or raise capital from entities or foreign investors.

Carefully selecting the right entity structure is especially important for practices with multiple providers since this can have a material impact on compensation structures. Your compensation methodology should address both base compensation and productivity models, while also accounting for ancillary service revenues. Having all compensation policies clearly defined in writing helps prevent future disputes and ensures fair treatment of all providers.

Related: What Business Structure Should You Use for Your Physicians Practice?

Fulfilling Compliance Requirements

Establishing a medical practice in Florida involves navigating multiple regulatory layers with precision and attention to detail. The process begins with registering your practice with the Florida Department of Revenue. This agency oversees the various tax obligations your new practice will have, from sales and use taxes to employment taxes.

Before you start hiring staff for your physician’s practice, be aware that the employment landscape in Florida presents its own unique set of requirements. Practices must establish a state re-employment compensation account and understand Florida’s specific workers’ compensation requirements.

Beyond these accounting and HR basics, physician practices must also maintain proper medical licensing through the Florida Board of Medicine, secure DEA registration for prescription capabilities, and be careful to only use HIPAA-compliant programs permissible under Florida law. These requirements form the foundation of a legally compliant practice, but it’s likely your compliance requirements will evolve in line with your business.

Financial Systems and Infrastructure

A robust financial infrastructure is the backbone of any successful medical practice. Your accounting system should be specifically configured for healthcare operations, with a chart of accounts structured for healthcare accounting and integration capabilities with electronic health records (EHR) systems. The system must efficiently handle revenue cycle management and track multiple providers while processing different types of medical insurance payments.

Medical billing infrastructure requires particular attention in the setup phase. A comprehensive billing system should manage insurance credentialing, process claims, handle patient payments and generate reports for provider compensation. The effectiveness of these systems directly impacts your practice’s financial health and operational efficiency.

Sales and Use Tax Considerations

Florida’s sales and use tax regulations present unique challenges for medical practices. While fees for medical services are exempt from sales taxes in Florida, physicians must understand certain nuances when setting up their practice, particularly if they sell ancillary products outside of their core medical services. For example, optical practices must distinguish between prescription eyewear (which is typically exempt from sales tax) and non-prescription sunglasses (which are taxable).

Similarly, a dermatology practice selling skincare products needs separate tracking systems capable of collecting, tracking and remitting sales taxes for any skincare products they might sell. These distinctions affect not only tax compliance but also influence the design of your point-of-sale and inventory management systems.

There’s also the question of use taxes, which apply when a physician’s practice buys taxable items from out-of-state. While medical supplies are largely exempt, items such as office equipment are not, making it crucial to maintain proper documentation for claiming exemptions.

Real Estate and Related Party Transactions

Real estate decisions carry significant implications for medical practices in Florida. While it can be beneficial for physicians to own their practice’s real estate through a separate entity, these transactions must be structured appropriately to ensure compliance with tax laws. Take note, for instance, that commercial rents are subject to sales tax.

These real estate arrangements demand careful consideration of tax implications, including depreciation allocation, cost segregation opportunities and related party transaction reporting. Property tax considerations also play a crucial role in the overall financial picture. While well-structured real estate arrangements can provide significant advantages, poor documentation or improper handling of these related party transactions can create substantial risks for physicians.

Build Your Physician’s Practice With the Support of James Moore

Setting up a new physician’s practice in Florida requires careful attention to numerous accounting and tax considerations. While it may seem overwhelming initially, establishing proper systems and processes from the start is far more efficient than correcting issues later. Your investment in setting up your practice the right way will pay dividends through reduced risk, better financial management, and fewer regulatory concerns.

James Moore brings extensive experience in healthcare accounting and a deep understanding of Florida’s specific requirements for medical practices. Our team has helped numerous physicians successfully establish and maintain compliant, efficient practices throughout the state.

Whether you’re in the planning stages or ready to launch your practice, our healthcare specialists can provide the guidance needed to build a strong financial foundation for your medical practice in Florida. Contact us today to learn more about how we can help your business succeed.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.