Healthcare organizations in Michigan face a uniquely restrictive compliance environment shaped by the state's enforcement of the Corporate Practice of Medicine (CPOM) doctrine. For compliance professionals managing multiple entities, this creates what many describe as persistent uncertainty about whether their ownership structures remain valid—especially when physician licenses approach renewal dates or new partners join the practice. Unlike states that permit flexible ownership structures, Michigan requires 100% licensed professional ownership for all medical practice entities. This fundamental requirement, codified in MCL 450.1284 for Professional Corporations and MCL 450.4904 for Professional Limited Liability Companies, means that non-physician investors, business managers, and even family members without professional licenses cannot hold equity interests in medical practices. This creates significant structural constraints that healthcare compliance professionals must navigate from initial formation through ongoing operations.
Michigan law recognizes three professional entity types for healthcare organizations: Professional Corporations governed by MCL 450.1281 through MCL 450.1285, Professional Limited Liability Companies under MCL 450.4903 through MCL 450.4908, and Limited Liability Partnerships regulated by MCL 449.45 through MCL 449.47. Each structure requires exclusive ownership by Michigan-licensed professionals in the same field, connecting individual licensing status directly to entity ownership eligibility.
When you form a Professional Corporation in Michigan, you're operating under dual statutory authority. The primary framework appears in MCL 450.1281 through MCL 450.1285 as part of the Michigan Business Corporation Act, with foundational provisions in MCL 450.224 under the Professional Service Corporation Act of 1962.
The shareholder requirements under MCL 450.1285 mandate that all shareholders be "duly licensed or legally authorized in this state to render the same professional services as those for which the professional corporation was incorporated." Corporate names must include "Professional Corporation" or "P.C." per MCL 450.1283, and all PCs must comply with MCL 333.17048 under the Michigan Public Health Code.
Professional Limited Liability Companies offer greater structural flexibility while maintaining the same fundamental licensing requirements. MCL 450.4904 explicitly states that "a person shall not be a member or manager of a professional limited liability company organized to render professional services within this state unless that person is licensed or legally authorized to render the professional service or services."
The statute explicitly lists healthcare professions eligible for PLLC formation, including chiropractic, medicine, osteopathic medicine and surgery, podiatric medicine and surgery, and physician's assistant practice. Names must contain "Professional Limited Liability Company," "P.L.L.C.," or "PLLC" according to MCL 450.4903.
PLLCs offer flexible management structures and pass-through tax treatment by default.
Limited Liability Partnerships operate under MCL 449.45 through MCL 449.47 within the Michigan Uniform Partnership Act. Names must include "Registered Limited Liability Partnership," "Limited Liability Partnership," "R.L.L.P.," "L.L.P.," "RLLP," or "LLP" per MCL 449.45.
The primary advantage of LLP structure lies in liability protection: partners receive protection from obligations arising from errors, omissions, negligence, incompetence, or malfeasance committed by other partners or employees under MCL 449.45-449.47. This structure appeals particularly to multi-physician specialty practices seeking partnership taxation with limited liability protection. All partners providing healthcare services remain subject to Michigan Public Health Code licensing requirements.
Michigan actively enforces the CPOM doctrine through statutory restrictions, Attorney General opinions, and court decisions. Michigan Attorney General Opinion No. 6592 (1989) established that for-profit corporations formed under the Business Corporation Act may not engage in activities that may only be performed by learned professions, including medicine. Only professional service corporations organized under Michigan's Professional Service Corporation Act may lawfully engage in medical practice.
A critical exception exists for nonprofit entities. Attorney General Opinion No. 6770 (1993) permits nonprofit hospitals and corporations incorporated under the Michigan Nonprofit Corporation Act to employ physicians without violating CPOM, provided the corporation's purposes are lawful and involve no pecuniary gain for officers, directors, or members. This explains the prevalence of nonprofit health system employment throughout Michigan.
Miller v. Allstate Insurance Company, 275 Mich. App. 649 (2007) affirmed that corporations cannot fulfill the licensing and ethical requirements demanded by medical practice because licensing statutes and ethical obligations apply to natural persons, not artificial corporate entities. More recently, Stewart Knoepp, MD v. IHA Health Services Corporation, Inc. (2023) upheld the validity of corporate employment agreements with physicians under properly structured contractual terms, demonstrating that compliant employment relationships can withstand judicial scrutiny when they maintain appropriate physician autonomy.
When you form a healthcare entity in Michigan, you must navigate specific filing requirements with the Michigan Department of Licensing and Regulatory Affairs (LARA). The following table provides comprehensive formation requirements:
Name distinguishability requirements under Michigan law create important considerations for healthcare practices. The LARA Business Name requirements specify that punctuation marks, articles, and conjunctions are ignored when comparing names. However, required designators themselves (such as P.C. versus PLLC) are considered when determining distinguishability—entities must ensure substantive name differentiation beyond just the designator choice.
The Michigan LARA Restricted Words List includes extensive healthcare profession titles requiring licensing verification: acupuncturist, chiropractor, dentist, nurse, physician, podiatrist, psychologist, and others. Entities must comply with Michigan Public Health Code and professional licensing regulations, with all owners holding appropriate licensure for the entity to lawfully operate. The use of restricted words in the entity name requires approval before filing formation documents.
Michigan does not recognize "P.A." (Professional Association) as a valid professional entity designator under state law. Healthcare professionals in Michigan must select from three structures exclusively: Professional Corporation (P.C.), Professional Limited Liability Company (PLLC), or Limited Liability Partnership (LLP).
The annual report filing carries a $25.00 fee for both Professional Corporations and Professional LLCs. Filings must be submitted online through the Michigan LARA Corporations Online Filing System; paper filings are no longer accepted. Professional Corporations must submit an Annual Information Update listing all shareholders and attesting that all shareholders are licensed or authorized in Michigan to provide the same professional services rendered by the corporation. Professional LLCs must submit an Annual Statement documenting member and manager licensing status.
Failure to file by the formation date anniversary results in administrative dissolution for corporations or revocation of authority to do business in Michigan. No specific monetary late fees are assessed prior to dissolution proceedings. You should note that each entity has a unique annual deadline based on its formation date, requiring individualized compliance calendaring rather than industry-wide deadline tracking.
Michigan imposes a 6.0% Corporate Income Tax on C-corporations, including healthcare Professional Corporations, with no exemptions for professional entities. Quarterly estimated payments and annual returns follow federal schedules through Michigan Treasury Online.
Michigan does not impose franchise or privilege taxes on professional entities; the Michigan Business Tax was repealed effective January 1, 2012.
Additionally, healthcare entities structured as pass-through entities (such as Professional LLCs or S-corporations) are subject to different Michigan tax treatment. House Bill 4961, effective January 1, 2025, requires Michigan-specific calculations for bonus depreciation, research and experimental expenses, business interest deductions, and Section 174 expenses for tax years 2025 and onward. Healthcare entities must track these differences when preparing quarterly estimated payments and annual returns.
The Michigan Board of Medicine operates within LARA's Bureau of Professional Licensing under the regulatory framework established by the Michigan Public Health Code, Article 15, Part 170. According to the Michigan Medical Doctor Licensing Guide, all physician licensing matters are managed through the MiPLUS system. For questions regarding physician licensing and compliance, healthcare professionals can contact LARA at (517) 241-0199 or BPLHelp@michigan.gov.
Michigan requires 150 hours of continuing education every 3 years prior to license renewal according to Michigan Medicine CE Requirements. At least 75 hours must be Category 1 approved courses, at least 1 hour must cover medical ethics, and at least 3 hours must address pain and symptom management (including controlled substances prescribing) effective December 6, 2017.
Category 1 CME includes approved courses, specialty board examinations (up to 50 hours), and maintenance of certification activities (up to 30 hours).
Physicians must retain documentation of CME completion for 4 years. CME documents are not submitted with renewal applications, but the Board of Medicine conducts random audits and may request CME documentation at any time. Failure to provide evidence when requested can result in reprimand, probation, suspension, or revocation according to Renew a Medical License.
Michigan physician licenses renew on a 3-year cycle with a 60-day grace period after the expiration date, during which physicians may renew by paying an additional $20 late fee per license type. The critical compliance point: the expiration date remains the original expiration date, meaning the grace period does not extend legal validity. If not renewed within 60 days, the license lapses and the physician cannot legally practice. Lapsed licenses require the full relicensure process rather than simple renewal.
The connection between licensing status and entity ownership eligibility is direct and unforgiving. According to MCL 450.1284(1), each shareholder of a professional corporation must be licensed or legally authorized in Michigan to provide the same professional service that the corporation renders. If a physician's license lapses (expires beyond the 60-day grace period without renewal), they lose the legal authority to serve as a shareholder in a professional medical corporation. This automatic loss of ownership eligibility creates non-compliance with the Professional Corporation Act and may trigger administrative dissolution proceedings.
Michigan prohibits different types of licensed healthcare professionals from co-owning a single professional entity. MCL 450.4904 and MCL 450.1284(2) require all members, managers, and shareholders to hold licenses in the same professional service rendered by the entity. A physician and dentist cannot co-own a professional entity; each distinct professional type must establish separate entities.
However, MCL 450.1284(2) permits physicians licensed under Part 170 of Article 15 to organize professional corporations with individuals licensed in specific related professions, including chiropractic, osteopathic medicine, and podiatric medicine. This limited exception allows for collaborative practice structures within closely related healthcare disciplines.
Can a for-profit corporation employ physicians to provide medical services in Michigan?
No. Michigan Attorney General Opinion No. 6592 (1989) establishes that for-profit corporations formed under the Business Corporation Act may not engage in activities that may only be performed by the learned professions, including medicine. Only professional service corporations organized under Michigan's Professional Service Corporation Act may lawfully engage in medical practice. The exception applies to nonprofit hospitals and corporations incorporated under the Michigan Nonprofit Corporation Act, which may employ physicians under Attorney General Opinion No. 6770 (1993), provided the corporation operates without pecuniary gain for officers, directors, or members.
What happens if a physician's license lapses and they own shares in a Professional Corporation?
If a physician's license lapses (expires beyond the 60-day grace period without renewal), they immediately lose legal authority to serve as a shareholder under MCL 450.1284(1). This creates automatic non-compliance with the Professional Corporation Act because all shareholders must be "duly licensed or legally authorized in this state to render the same professional services" the corporation provides. The entity faces potential administrative dissolution, and the physician cannot legally practice until completing the full relicensure process.
Are annual reports and annual filings due on the same date for all Michigan healthcare entities?
Yes, Michigan employs a formation date anniversary system under LARA Annual Filings requirements. Each healthcare professional entity must file its annual report on the anniversary of its formation or qualification date in Michigan. An entity formed on March 15th must file by March 15th annually; an entity formed on October 3rd must file by October 3rd annually. This requires individualized compliance calendaring for each entity rather than tracking industry-wide deadlines.
What are the key differences between forming a PC versus a PLLC for medical practice in Michigan?
Both structures require 100% licensed professional ownership and maintain identical licensing requirements under Michigan law. Key differences include: (1) Governance: PCs use traditional shareholder/director/officer structures, while PLLCs offer flexible member-managed or manager-managed options; (2) Taxation: PCs are taxed as C-corporations by default (6.0% Michigan CIT) unless electing S-corp status, while PLLCs provide pass-through taxation by default; (3) Formation costs: PC formation costs $10 versus $50 for PLLCs; (4) Formality: PCs require more corporate formalities (annual meetings, minutes), while PLLCs have simplified governance. Most Michigan healthcare professionals choose PLLCs for operational flexibility and tax advantages.
Does Michigan require approval from professional licensing boards before forming a healthcare entity?
No explicit requirement exists for licensing board pre-approval before forming the business entity. However, professional entities must comply with Michigan Public Health Code and professional licensing regulations. Professional licensing and entity formation operate as parallel processes rather than sequential requirements. All shareholders in a PC or members in a PLLC must hold appropriate Michigan professional licenses for the entity to lawfully operate. All owners must possess current Michigan professional licenses before commencing operations.
Managing compliance across Michigan's complex professional entity requirements creates a significant administrative burden for healthcare organizations—especially those managing multiple entities across different formation date anniversaries. Discern automates Michigan's entity compliance tracking, monitoring annual report deadlines, physician license renewal dates, and ownership eligibility requirements in real-time. Our platform reduces compliance tasks that traditionally take hours down to minutes, eliminating the uncertainty about whether your entities remain in good standing.
Ready to eliminate compliance uncertainty for your Michigan healthcare entities? Book a demo with Discern today and see how we automate the tracking, deadlines, and verification tasks that keep your professional corporations and PLLCs compliant.
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