Managing healthcare entity compliance in Colorado creates what many compliance officers describe as overwhelming administrative complexity. The state's dual regulatory structure requires coordination between the Secretary of State's business entity registration system and the Department of Regulatory Agencies' professional licensing framework, with healthcare professionals navigating both Colorado Revised Statutes Title 7 business law provisions and Title 12 profession-specific statutes while ensuring entity ownership remains exclusively with licensed practitioners in good standing. Organizations that fail to properly coordinate these requirements risk entity rejection, professional license discipline, or involuntary dissolution.
Colorado law recognizes four professional entity types for healthcare organizations: Professional Corporations (PCs) governed by C.R.S. Title 7, Articles 101-117 and Article 59, Professional Limited Liability Companies (PLLCs) under C.R.S. Title 7, Article 80, Professional Associations (PAs) under Article 59, and Limited Liability Partnerships (LLPs) governed by Article 58 of Title 7.
Professional Corporations constitute the traditional entity structure for medical practices in Colorado, governed by C.R.S. Title 7, Articles 101-117 for general corporate structure, with Article 59 addressing professional-specific requirements and C.R.S. § 12-240-138 establishing the framework for physician professional corporations. All shareholders must be licensed physicians or physician assistants, with physicians holding majority ownership when physician assistants participate in equity ownership, and shareholders must be actively engaged in medical practice with limited exceptions for leaves of absence or heirs holding shares for up to two years as nonvoting shareholders.
Corporate governance must be managed by licensed physicians, and the entity bears joint and several liability for acts, errors, and omissions of employees acting within the scope of employment, with mandatory professional liability insurance. The naming requirement mandates inclusion of "Professional Corporation" or "P.C." in the legal entity name per C.R.S. § 7-90-601.
Professional Limited Liability Companies provide liability protection similar to standard LLCs while maintaining professional practice compliance under C.R.S. Title 7, Article 80 (the Colorado Limited Liability Company Act), with naming provisions in C.R.S. § 7-90-601. PLLCs must include "Professional Limited Liability Company," "PLLC," or "P.L.L.C." in their legal names, with physical therapists receiving explicit statutory authority to form PLLCs under C.R.S. § 12-285-131. The required filing document is Articles of Organization for a Limited Liability Company.
Professional Associations operate under C.R.S. Title 7, Article 59. Accessing the full Article 59 provisions requires consultation of the official Colorado General Assembly document or paid legal research platforms.
Limited Liability Partnerships are governed by C.R.S. Title 7, Article 58, the Colorado Uniform Partnership Act of 1997. Physical therapists receive explicit statutory authority to form LLPs under C.R.S. § 12-285-131. The required filing document is a Statement of Registration for LLP, and the entity name must include "Limited Liability Partnership," "LLP," or "RLLP."
Colorado strictly enforces the Corporate Practice of Medicine doctrine through both statutory law and binding case precedent. C.R.S. § 12-240-138 mandates that all shareholders of professional medical corporations must be licensed physicians or physician assistants, with physicians holding majority ownership when physician assistants are included.
C.R.S. § 12-240-121 defines practicing medicine as a partner or employee of a non-licensed individual or entity as unprofessional conduct, subjecting the physician to license discipline. C.R.S. § 12-240-132 explicitly prohibits fee-splitting arrangements between physicians and non-licensed individuals or entities. The Colorado Supreme Court affirmed these principles in Pediatric Neurosurgery, P.C. v. Russell, 44 P.3d 1063 (Colo. 2002), establishing that professional corporations properly structured under the statute can be held vicariously liable for physician negligence.
However, C.R.S. § 25-3-103.7 creates a significant statutory exception permitting hospitals, hospices, long-term care facilities, and other licensed healthcare facilities to employ physicians, subject to two mandatory conditions: the facility cannot limit or control the physician's independent professional judgment regarding patient care decisions, and the facility cannot require the employed physician to refer patients exclusively to the employing facility or affiliated providers.
The Colorado Secretary of State strongly recommends online filing for immediate processing, as paper filings require 7-10 business days. Healthcare professionals should contact their profession-specific licensing board before filing formation documents to confirm the required coordination sequence.
All Colorado healthcare professional entities must file an annual Periodic Report to maintain good standing status under Section 7-90-501, C.R.S. According to the Colorado Secretary of State, the due month varies by individual entity with a four-month filing window (two months before and two months after the designated due month). Healthcare organizations must verify their specific entity's due month through their Secretary of State account.
The Colorado Secretary of State Fee Schedule establishes timely filing within the four-month window at $25.00, late filing after deadline but before delinquency at $25.00 base fee plus $50.00 penalty, and Statement of Curing Delinquency at $100.00 (total cost if delinquent: $125.00).
Colorado imposes no franchise or privilege tax on healthcare professional entities, providing a significant cost advantage. However, entity structure affects income tax obligations: C-Corporations (including professional corporations structured as C-corps) are subject to 4.4% corporate income tax on net income with April 15 filing deadline, while pass-through entities (LLCs, S-Corporations) are not subject to entity-level income tax. Per the Colorado Department of Revenue Tax Topics guidance, minimum penalty is 5% of unpaid tax (assessed immediately upon delinquency), monthly penalty accrues at additional 0.5% per month of continued delinquency, maximum penalty cap is 12% of total unpaid tax amount, and interest accrues separately at quarterly-adjusted rates.
The 2025 Colorado legislative session produced twelve healthcare-related bills affecting professional entities. Healthcare compliance officers should review bills including SB25-071 (340B drug restrictions), SB25-084 (Medicaid infusion pharmacy fees), HB25-1094 (PBM practice regulations), and HB25-1222 (rural pharmacy access) to determine implementation requirements for affected practice areas.
The Colorado Medical Board operates under the Division of Professions and Occupations (DPO) within the Colorado Department of Regulatory Agencies (DORA) with regulatory authority established under Title 12, Article 240 of the Colorado Revised Statutes. Healthcare professionals can access licensing information through the Medical Board website.
C.R.S. § 12-240-130.5 establishes that physicians must complete 30 CME credit hours every 24 months in the period immediately preceding license renewal, reinstatement, or reactivation, effective starting with the 2027 renewal cycle. Acceptable credits include AMA PRA Category 1 Credit™ or equivalent programs from the American Academy of Family Physicians (AAFP) or American Osteopathic Association (AOA). Colorado requires a minimum of 2 hours on substance use prevention and treatment per renewal cycle.
C.R.S. § 12-240-138 establishes that active physician licensure constitutes a legal prerequisite for professional medical corporation ownership. All shareholders must be licensed physicians or physician assistants, with physicians holding majority ownership when physician assistants are included as shareholders. Shareholders must be actively engaged in medical practice or as physician assistants (except during limited leaves of absence).
Loss of active licensure through suspension or revocation directly impacts entity ownership eligibility. Physicians who lose licensure cannot maintain shareholder status in professional medical corporations, cannot participate in corporate governance, and must divest ownership interests except under limited heir provisions permitting nonvoting shareholder status for up to two years.
Colorado law explicitly prohibits different healthcare professions from co-owning a single professional entity. C.R.S. § 12-240-138 permits only licensed physicians to form professional service corporations for practicing medicine, with all shareholders required to be licensed to practice medicine in Colorado. This prohibition means that physicians cannot co-own practices with nurses, dentists cannot co-own with physicians, and similar cross-profession ownership structures are prohibited. Under C.R.S. § 12-240-138, the only cross-profession exception permits physicians and physician assistants to co-own medical professional corporations, provided physicians maintain majority ownership.
Healthcare professionals seeking to collaborate across professions must establish separate professional entities for each licensed profession and explore contractual arrangements such as management services agreements or space-sharing arrangements while maintaining separate ownership structures.
No. Colorado strictly enforces the Corporate Practice of Medicine doctrine through C.R.S. § 12-240-138, which requires all shareholders of professional medical corporations to be licensed physicians or physician assistants (with physician majority ownership). However, C.R.S. § 25-3-103.7 creates a critical exception permitting hospitals, hospices, long-term care facilities, and other licensed healthcare facilities to employ physicians, provided the facility does not limit the physician's independent professional judgment and does not require exclusive referrals.
According to C.R.S. § 12-240-138, active physician licensure in good standing is a legal prerequisite for professional medical corporation ownership. If a physician's license lapses, they immediately become ineligible to maintain shareholder status and must divest their ownership interest. Limited exceptions exist only for heirs, who may hold shares as nonvoting shareholders for up to 2 years following a shareholder's death.
Yes. All healthcare professional entities must file annual Periodic Reports under Section 7-90-501, C.R.S. According to the Colorado Secretary of State, the due month varies by entity with a four-month filing window. The timely filing fee is $25.00, with a $50.00 late penalty and $100.00 delinquency cure fee if the entity becomes delinquent. Colorado does not impose franchise tax or privilege tax on professional entities.
Both structures provide liability protection and comply with Colorado's professional practice requirements. Professional Corporations operate under C.R.S. Title 7, Articles 101-117 and Article 59, while PLLCs operate under Article 80. Both require $50.00 filing fees with immediate online processing. The primary differences involve governance structure (corporate formalities for PCs versus flexible LLC operating agreements), tax treatment options (C-corporation or S-corporation election for PCs versus partnership or corporation taxation for PLLCs), and naming requirements. Healthcare attorneys can evaluate specific practice circumstances to determine the optimal structure.
No. Colorado law explicitly prohibits different healthcare professions from co-owning a single professional entity. Under C.R.S. § 12-240-138, only licensed physicians or physician assistants may be shareholders in a professional medical corporation. Healthcare professionals from different disciplines seeking to collaborate must establish separate professional entities for each licensed profession and structure their relationship through contractual arrangements.
Managing healthcare entity compliance across formation requirements, annual periodic reports, professional licensing coordination, and ongoing regulatory changes creates a significant administrative burden for Colorado healthcare organizations. The coordination required between the Secretary of State's business entity system and DORA's professional licensing framework, combined with regular license verification for equity holders and tracking profession-specific legislative changes, diverts valuable resources from patient care that many compliance officers describe as "existential dread."
Discern provides comprehensive entity management solutions that reduce administrative complexity. With support for all professional entity types recognized by Colorado (Professional Corporations, Professional Limited Liability Companies, Professional Associations, and Limited Liability Partnerships), Discern handles the technical complexity of Colorado healthcare entity management while your healthcare team focuses on delivering exceptional patient care.
Book a demo with Discern today and see how we can reduce your administrative burden while ensuring your Colorado entities stay in good standing.
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