If you're running a healthcare practice in Arizona, you face an overwhelming compliance landscape shaped by the state's strong enforcement of the Corporate Practice of Medicine doctrine, established by binding case law in 1935. This doctrine requires physician control over medical practices, fundamentally affecting how healthcare entities structure ownership and operations. Beyond ownership restrictions, Arizona imposes entity-specific annual reporting, Transaction Privilege Tax obligations, and strict change reporting requirements under A.R.S. § 32-2125. These requirements create unique compliance challenges for healthcare organizations.
Arizona recognizes three primary professional entity structures for healthcare organizations, each with distinct compliance obligations, formation requirements, and administrative burdens you must carefully evaluate when establishing or maintaining your Arizona operations.
Professional Corporations operate under A.R.S. Title 10, Chapter 22, §§ 10-2201 through 10-2243, which establishes comprehensive governance requirements for healthcare practices. The name must include "professional corporation," "P.C.," or similar designations per A.R.S. § 10-2223. Ownership under A.R.S. § 10-2220 is limited exclusively to licensed individuals authorized to render the professional services, and you may render services only through properly licensed officers, employees, or agents per A.R.S. § 10-2240.
PLLCs combine limited liability protection with professional practice requirements under A.R.S. Title 29, Chapter 4, Article 11, §§ 29-4101 through 29-4106. Membership is restricted exclusively to licensed persons authorized to provide the professional services, partnerships where all partners hold appropriate licenses, or other professional entities per A.R.S. § 29-4105. The name must contain "professional limited liability company" or "P.L.L.C." per A.R.S. § 29-4106.
Limited Liability Partnerships operate under A.R.S. Title 29, Chapter 1, Articles 1 and 10. Formation requires filing a statement of qualification with the Arizona Corporation Commission per A.R.S. § 29-1101. The name must contain "registered limited liability partnership," "limited liability partnership," or "L.L.P." as required by A.R.S. § 29-1102. Partners are not personally liable for partnership obligations solely by reason of being a partner per A.R.S. § 29-1026.
Arizona definitively enforces the Corporate Practice of Medicine doctrine through binding case law established in Funk Jewelry Co. v. State ex rel. La Prade, 42 Ariz. 408, 26 P.2d 656 (1935), which established that corporations cannot practice medicine. This precedent was reaffirmed in Blende v. Maricopa County Medical Society, 96 Ariz. 240, 393 P.2d 926 (1964).
The CPOM doctrine prohibits non-physician corporations from employing physicians or owning medical practices. However, A.R.S. § 32-3230 permits limited non-physician ownership provided licensed physicians retain ultimate control over medical decisions.
Healthcare entities in Arizona require no pre-approval from the Arizona Medical Board. Formation involves filing Articles of Incorporation (PCs) or Articles of Organization (PLLCs) with the Arizona Corporation Commission, along with statutory agent acceptance and required compliance statements. Processing times range from standard service to 2-hour expedited filing. The table below details specific requirements and fees.
Per Arizona Legislature HB2273 requirements, you must maintain current registered agent information with the Arizona Corporation Commission and file Form M002 (Statutory Agent Acceptance) with formation documents.
Arizona creates a fundamental distinction in annual compliance obligations based on entity structure. If you choose a Professional Corporation, you must file annual reports while Professional Limited Liability Companies remain exempt from this requirement, creating significantly different administrative burdens depending on your chosen structure.
If you operate as a Professional Corporation, you must file annual reports on or before the anniversary date of your corporation's formation or registration in Arizona. The standard filing fee is $45, with expedited processing available for an additional $35 (total $80 for 3 to 5 days), $100 additional (total $145 for next day), $200 additional (total $245 for same day), or $400 additional (total $445 for 2-hour review). All fees are non-refundable. Annual reports are filed through the Arizona Business Center portal. Late filings are subject to penalties under Arizona Revised Statutes §10-1622.F, potentially resulting in administrative dissolution or revocation of corporate status.
Professional Limited Liability Companies are not required to file annual reports with the Arizona Corporation Commission. This exemption applies to all LLCs, including Professional Limited Liability Companies, representing Arizona's longstanding policy approach. However, beginning in 2025, the Arizona Corporation Commission announced a new policy requiring LLCs that have made no filings for two consecutive years to electronically confirm continued existence through an "Attestation of Existence" within 60 days of notice. The policy is pending launch of the new online filing system, with specific implementation details to be determined. Failure to respond triggers a 120-day administrative dissolution process.
Arizona does not impose a franchise tax on business entities. Instead, all healthcare professional entities engaged in taxable business activities must comply with Arizona's Transaction Privilege Tax (TPT) system administered by the Arizona Department of Revenue.
TPT License and Registration: You must obtain a TPT license from the Arizona Department of Revenue and file regular TPT returns based on your assigned frequency.
Filing Frequency and Deadlines: Filing frequency varies based on tax liability (monthly, quarterly, or annual as assigned by AZDOR). Electronic filing is required through the AZTaxes.gov portal.
Tax Rate Determination: TPT rates are complex and location-specific, varying based on business classification code, geographic location (combining state, county, and city rates), and the type of healthcare services you provide. Consult the current TPT Rate Table on azdor.gov for exact rates applicable to your specific circumstances.
Penalties and Interest: Late filing and payment incur penalties and interest, with possible license cancellation for non-compliance.
Exemptions: For-profit healthcare professional entities do not qualify for TPT exemptions. Only qualifying nonprofit healthcare organizations organized under section 501(c) and using at least 80% of gross receipts for health and medical services may apply for exemptions with AZDOR approval.
You must report to the Arizona Corporation Commission within 10 days of changes in officers, directors, members, or managers; changes in control of the entity; amendments to organizational documents; ownership changes of 10% or more; or dissolution of the entity according to A.R.S. § 32-2125. This 10-day change reporting obligation is separate from and in addition to annual report requirements.
Between 2023 and 2025, Arizona enacted significant legislative changes directly affecting healthcare entity compliance. Senate Bill 1655 (effective September 14, 2024) established mandatory incorporation and licensing requirements for behavioral health entities. Senate Bill 1267 (effective September 14, 2024) revised physical therapy licensing and supervision requirements. Senate Bill 1108 (effective February 21, 2025) created new provisional licensure categories for international medical graduates with modified licensure requirements.
Physicians must maintain active, unrestricted licenses with the Arizona Medical Board to meet entity ownership requirements under the Corporate Practice of Medicine doctrine.
The Arizona Medical Board regulates physician licensing and establishes continuing medical education requirements that affect entity ownership eligibility. Physicians must complete 40 Category 1 CME hours per two-year renewal period, including a minimum of 3 hours on opioid education for those prescribing Schedule II controlled substances, according to Arizona Administrative Code R4-16-102 and R4-16-301.
Physician licenses must be renewed every two years on or before the physician's birthday per Arizona Revised Statutes § 32-2523. The renewal fee is $500. License expiration or suspension directly affects entity ownership eligibility, as Arizona's Corporate Practice of Medicine doctrine requires medical practices to be owned 100% by actively licensed physicians.
Arizona law provides no explicit guidance on required ownership transfers when a physician's license is suspended or revoked. This regulatory silence creates substantial compliance risk for healthcare entity owners. When a physician's license is suspended or revoked, your healthcare entity may fail to meet Arizona's requirement for 100% licensed physician ownership—yet no Arizona statute explicitly addresses the required timeline for ownership transfer or temporary ownership arrangements during such periods. You should consult Arizona healthcare attorneys to establish contingency ownership plans and operating agreements addressing potential license discipline scenarios before compliance issues arise.
Physicians may co-own entities with non-physician healthcare professionals, but Arizona's Corporate Practice of Medicine doctrine imposes mandatory restrictions requiring physician control over medical decision-making. Non-physician healthcare professionals may hold minority ownership interests, provided physicians retain majority ownership and ultimate authority over all medical decisions.
No. Arizona definitively enforces the Corporate Practice of Medicine doctrine through binding case law established in 1935, prohibiting non-physician corporations from directly employing physicians or owning medical practices. This precedent established in Funk Jewelry Co. v. State ex rel. La Prade (1935) remains controlling law and was reaffirmed in Blende v. Maricopa County Medical Society (1964). A limited exception exists under Arizona Revised Statutes § 32-3230, permitting limited non-physician ownership provided licensed physicians retain control over all medical decisions. Management Service Organizations can provide administrative services to physician-owned entities, but clinical decision-making must remain under exclusive physician control.
This presents a critical compliance gap in Arizona regulations. When a physician's license is suspended, revoked, or expires, that individual no longer qualifies as a "licensed physician," potentially causing the entity to fail ownership requirements. However, Arizona statutes provide no explicit guidance on required timelines for ownership transfer or mechanisms for temporary arrangements during suspension periods. You should establish contingency ownership plans in operating agreements and consult healthcare attorneys immediately if license discipline occurs to avoid entity compliance violations.
No. If you operate as a Professional Corporation, you must file annual reports with the Arizona Corporation Commission on or before the anniversary date of formation, with a $45 filing fee. Late filing may result in administrative dissolution and loss of good standing. In contrast, Professional Limited Liability Companies are not required to file annual reports. Beginning in 2025, PLLCs that have made no filings for two consecutive years will receive an Attestation of Existence requirement with a 60-day response window. Both entity types must comply with Transaction Privilege Tax filing requirements and report ownership or control changes within 10 days per A.R.S. § 32-2125.
Yes. Name reservation is optional but recommended, costing $10 for a 120-day protection period through the Arizona Corporation Commission. The reservation is non-renewable but transferable to another party, with expedited options available. Healthcare entity names require dual approval from both the Arizona Corporation Commission for general name availability and the relevant professional licensing board for compliance with professional practice standards. Professional Corporations must include "professional corporation," "P.C.," "professional association," "P.A.," "service corporation," or "S.C." in the name. Professional Limited Liability Companies must contain "professional limited liability company," "P.L.L.C.," or "P.L.L.C." according to A.R.S. § 10-2223 and A.R.S. § 29-4106.
No. There are no explicit pre-formation approval requirements from the Arizona Medical Board before filing Articles with the Arizona Corporation Commission. For Professional Corporations, per A.R.S. § 10-2210, you must attach a statement from the Arizona licensing authority verifying at least one shareholder or employee is licensed to render the professional service. For Professional LLCs, per A.R.S. § 29-4102, the Articles of Organization must include statements confirming compliance with professional licensing laws and specifying the professional services the PLLC will provide. Changes in officers, members, or managers must be reported to the state within 10 days according to A.R.S. § 32-2125.
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