Hi there, welcome to Module 6.
Long gone are the days of the solo practitioner,
the simple country doctor,
so too are the physician practices and partnerships.
Healthcare today is delivered
by corporations and non-profits.
This module discusses interesting issues
around the structure and management
of healthcare organizations
and how that impacts healthcare providers today.
As you'll see in the readings and materials,
a corporation is a legal entity
that is separate from its owners.
We call them shareholders.
It's created by filing legal documents
with the appropriate government agency, usually a state,
and it's governed by a board of directors
that is elected by shareholders.
The purpose of a corporation is to conduct business
and earn profits for shareholders,
not for staff and leadership.
Unlike a sole proprietor or a partnership,
the liability of shareholders is limited
to their investment in that corporation,
which means they're not personally responsible
for the corporation's debts or liabilities,
even if they're sued.
Corporations are able to raise large amounts of money
called capital through the sale of stocks and bonds,
and they can also enter into contracts,
sue and be sued, own property.
Additionally, corporations can have certain
legal rights and protections.
You'll read about that quite a bit this week,
including that ability to enter into agreements,
protect intellectual property,
and defend themselves against lawsuits.
Unlike a corporation, a partnership
is a business structure in which two
or more people called partners collaborate
to own and operate a business.
Each partner contributes money, property,
expertise into the partnership in exchange
for a share of those profits and losses.
Partnerships can either be general partnerships
or limited partnerships.
In a general partnership,
all partners are basically equally responsible
for all the debts and obligations of the partnership,
and they share management
and decision-making responsibilities.
If you have a limited partnership, there's two types.
There's those general partners who have management
and decision-making responsibilities
and unlimited liability,
and then limited partners
who basically contribute just capital.
They don't have management responsibilities
and have very limited role in terms
of their liability for the debts.
Partnerships are often used by professionals
like doctors, lawyers, so they can join forces,
open a business, provide service to clients.
They're also often used by small businesses
like restaurants or retail stores.
It's a way to pool resources, share the workload,
increase your expertise and profits.
One of the advantages of a partnership
is they allow for pooling of skills, expertise,
and so that means the business will have greater success
than maybe an individual can do on their own.
However, partnerships come with certain risks.
Personal liability being one of those
for the partnership's debts, potential for disputes,
and that liability.
So we've been talking about getting sued.
Where does that money come from?
It's important to remember that partners in a partnership
should have a well-drafted partnership agreement
that outlines their rights,
their responsibilities, their obligations,
especially when it comes to something like being sued.
One of the key differences between the partnership model
and that corporation model is the way they're taxed.
In a partnership, profit and losses of the business
are passed through to the partners
who report them on their tax returns.
In a corporation, the corporation
is the one who pays the taxes on the profits,
and the shareholders are taxed on any dividends
that they're paid, that they receive.
Another important difference is the liability of owners.
In a partnership, the partners
can be personally liable for the debts
and obligations of the partnership,
which means that their personal assets
could be at risk if the partner is sued
or can't pay its debts.
In a corporation, the shareholder's liability
is really limited to what they invested in that business.
You can see how this could be a big deal.
If you have two doctors in a joint partnership
and one of the doctors is sued for negligence,
how does that impact the other doctor?
We also think about the nonprofit model
of business this week.
A nonprofit corporation is a legal entity that is formed
for a specific purpose other than making a profit.
Nonprofit corporations are typically organized
for healthcare, religious, charitable,
educational or scientific purposes,
and they're governed by a board of directors or trustees
similar to a corporation.
A big benefit of the nonprofit corporation
is they are exempt from paying federal income tax,
and in some cases, state and local taxes too.
Because their purpose is to serve the public good
rather than make profit.
However, this doesn't mean that nonprofit corporations
can't make a profit.
They can, but they should be using that profit
to either further fund their charitable
or educational purpose
to further expand on what their nonprofit does.
To form a nonprofit, it's very similar to a corporation,
you file articles of incorporation
with appropriate state agency.
That includes a statement that talks about
what the mission and activities of the nonprofit will be.
The nonprofit corporation must also create bylaws
and outline the procedure for how they run
that nonprofit business, how they have directors,
leadership structure,
how they hold meetings and conduct business.
Otherwise, very similar to a corporation.
So those are three basics.
There's a lot of different types of partnerships
and corporations and nonprofits,
but those are the big general entities
that we'll talk about this week.
Historically, many physicians were sole proprietors.
They worked by themselves 100 years ago.
That developed into a lot of partnership models
over the last couple of decades
and then into a corporate model
that we are seeing mostly happening today.
However, as you know, a lot of people in public health
are often working under a nonprofit.
So let's talk about these three types
and I'll see you in the discussion form.