If you're managing a Tennessee healthcare practice, you face a uniquely complex compliance landscape that extends far beyond standard business formation requirements. The state strictly enforces the Corporate Practice of Medicine doctrine, restricts professional entity ownership to licensed practitioners, and maintains a bifurcated regulatory structure involving the Secretary of State, Department of Revenue, and multiple professional licensing boards. Missing a single compliance deadline or failing to maintain proper entity structure can trigger license revocation, substantial civil penalties, and potential entity dissolution. For practices managing multiple entity types, this creates what many describe as operational overwhelm—the existential dread of not knowing whether you've missed a critical deadline or filing.
Tennessee recognizes four professional entity types, each with distinct statutory provisions. Professional Corporations operate under TCA § 48-101-610, Professional Limited Liability Companies under TCA §§ 48-249-1104 and 48-249-1109, Professional Associations under TCA § 63-1-150 and TCA Title 48, Chapter 286, and Limited Liability Partnerships under TCA §§ 61-1-1001 and 61-1-1005. Each structure creates different fee obligations and compliance burdens.
Professional Corporations represent the most cost-effective entity structure for physician-owned practices in Tennessee. Under TCA § 48-101-610, ownership is strictly restricted to physicians licensed under TCA Title 63, Chapters 6 and 9. Officers and directors (excluding secretary, assistant secretary, treasurer, and assistant treasurer) must be eligible shareholders, ensuring physician control over medical decision-making.
Formation requires filing a Charter For-Profit Corporation with the Tennessee Secretary of State using Form SS-4417. The corporate name must include "Professional Corporation" or "P.C." as mandated by TCA § 48-101-609. All PCs must maintain a registered agent with a physical Tennessee address and file annual reports at a fee of $20, with an additional $20 fee if registered agent or office information changes during the filing period.
Additional governance requirements are established through Tennessee Compilation of Rules & Regulations 1050-02-.19, which establishes comprehensive rules for Medical Professional Corporations (MPCs). These regulations ensure that corporate structure does not interfere with physician independence in patient care decisions.
PLLCs offer liability protection similar to PCs but with a member-based fee structure ($50 per member, with a minimum of $300 and maximum of $3,000) that can become substantially more expensive for multi-physician practices. TCA § 48-249-1104 (2024) authorizes PLLCs to render professional healthcare services, while TCA § 48-249-1109 (2024) restricts membership exclusively to licensed professionals within the designated discipline.
Formation requires filing Articles of Organization using Form SS-4270 with fees structured at $50 per member, with a minimum of $300 and a maximum of $3,000. Entity names must include "Professional Limited Liability Company," "PLLC," or "P.L.L.C." Articles must certify that all members are qualified persons with no disqualified persons holding membership interests, and must specify the licensed professional services to be provided.
Professional Associations follow either PC or PLLC requirements depending on their formation structure. Under TCA § 63-1-150, PAs are defined as "healthcare organizations." Corporate PAs pay $20 annual reports; LLC-structured PAs pay $300-$3,000 annually ($50 per member). When structured as corporations, PAs file Articles of Incorporation. When structured as LLCs, they follow PLLC requirements under TCA §§ 48-249-1104 and 48-249-1109. All must appoint registered agents with physical Tennessee addresses and comply with licensing board requirements under TCA Title 63.
Limited Liability Partnerships must register using Form SS-4482 with fees of $50 per partner, minimum $250, maximum $2,500. LLP names must include "Registered Limited Liability Partnership," "LLP," or "L.L.P." Registration requires fiscal year end date, addresses, NAICS business codes, partner names, and registered agent information. Professional LLPs rendering healthcare services under TCA § 61-1-1005 must designate their professional status during registration.
Tennessee definitively enforces the Corporate Practice of Medicine doctrine through both common law and statutory provisions. The Tennessee Supreme Court established controlling precedent in State ex rel. Loser v. National Optical Stores Co., 189 Tenn. 433, 225 S.W.2d 263 (1949), holding that corporations cannot practice medicine in Tennessee. Tennessee Attorney General Opinion No. 07-116 (August 8, 2007) explicitly confirms this common law prohibition continues as controlling authority.
TCA § 68-11-205 serves as the primary CPOM statute, explicitly prohibiting unauthorized corporate practice of medicine while creating a carved-out exception for licensed hospitals and their affiliates to employ physicians. TCA § 63-6-204 establishes that employment arrangements cannot control, limit, or delegate patient treatment decisions or medical judgment, and explicitly prohibits non-compete clauses in physician employment agreements.
This means non-physician owned entities (including nurse practitioners, physician assistants, registered nurses, and licensed practical nurses) cannot own medical practices that employ physicians under Tennessee Code Annotated § 68-11-205 and the common law Corporate Practice of Medicine doctrine. Violations can result in license revocation for both the employing entity and participating physicians. The Tennessee Board of Medical Examiners actively enforces CPOM restrictions through multiple mechanisms including: screening for CPOM violations during physician licensure and renewal processes, professional entity formation review and compliance monitoring, investigation of complaints involving alleged CPOM violations, and formal disciplinary proceedings against physicians and entities violating CPOM restrictions.
Formation documents must certify compliance with professional entity requirements, including statements confirming that all members are appropriately licensed and that the entity will render only authorized professional services. The Articles of Organization for Professional Limited Liability Companies (PLLCs) must certify the PLLC's purpose to render licensed professional services and specify licensed professional services to be provided. No explicit pre-approval from professional licensing boards is statutorily mandated, but individual practitioners must maintain active licenses with appropriate Tennessee boards throughout entity operation.
You're juggling three separate annual compliance requirements for your Tennessee healthcare entity: Secretary of State reports, franchise tax filings, and excise tax obligations. Missing any of these triggers penalties and potential entity dissolution—and the deadlines don't align.
Secretary of State Annual Reports: Annual reports remain an active, ongoing requirement for all professional entities and must be filed through the Tennessee Consolidated Access for Business (TNCaB) online portal. Professional Corporations (PCs) pay an annual report fee of $20 (or $20-$40 if changing registered agent or office information), while Professional Limited Liability Companies (PLLCs) pay on a sliding scale: $50 per member with a $300 minimum and $3,000 maximum fee.
Franchise and Excise Taxes: Both PCs and PLLCs must file franchise tax returns with the Tennessee Department of Revenue at a rate of 0.25% of the greater of: (1) net worth, or (2) book value of real or tangible personal property in Tennessee. A $100 minimum applies annually. As of January 1, 2024, Public Chapter 950 eliminated the property measure calculation, simplifying returns to use only net worth on Schedule F. Additionally, entities taxed as corporations must file excise tax returns at 6.5% of net earnings on the same return as franchise tax.
Filing Deadlines and Compliance Calendar: Calendar year entities must file franchise and excise tax returns by April 15, while fiscal year entities file 15 days after the close of their taxable year. Healthcare entities should budget for minimum annual costs of $120 for PCs (including the $20 annual report, $100 franchise tax minimum, and excise tax on earnings) and $400 for PLLCs (including the $300 annual report minimum, $100 franchise tax minimum, and excise tax on earnings).
While annual reports are mandatory, the official sources do not specify the exact annual deadline for filing. Healthcare entities should verify their entity-specific deadline through the TNCaB portal and implement annual verification processes to confirm deadlines haven't changed.
Public Chapter 2011 (effective July 1, 2024) significantly expanded HIPAA compliance requirements. Healthcare professionals and entities acting as business associates under HIPAA must adhere to federal privacy standards and comply with federal laws regulating information blocking practices. The Attorney General may seek civil penalties up to $250,000 for intentional violations committed for financial gain, substantially increasing compliance risk.
Public Chapter 75 (2024) provides franchise tax proration for new entities based on the proportionate part of the year since incorporation, creating more equitable first-year tax treatment. Public Chapter 2434 (2024) establishes liability limits for cybersecurity events, though limits do not apply if events were caused by willful misconduct or gross negligence.
The professional privilege tax will be repealed effective June 1, 2025, eliminating an annual tax obligation for healthcare professionals—including physicians, dentists, and other licensed healthcare professionals—operating as professional entities and reducing overall tax burden for Tennessee medical practices.
The Tennessee Board of Medical Examiners maintains regulatory authority over physician licensing and professional conduct. The Board can be contacted at 665 Mainstream Drive, 2nd Floor, Nashville, TN 37243, by phone at (615) 532-3202 or (800) 778-4123, or by email at Medical.Health@tn.gov.
Tennessee healthcare professionals, particularly physicians, face mandatory continuing medical education (CME) requirements as a condition of professional license renewal. The Tennessee Board of Medical Examiners requires 40 hours of CME during each 24-month renewal period, with licenses renewing every two years in the physician's birth month.
Mandatory Controlled Substance CME: All physicians must complete a minimum of 2 hours specifically related to controlled substance prescribing, with content addressing Tennessee Department of Health treatment guidelines on opioids, benzodiazepines, barbiturates, and carisoprodol. Physicians board certified by the American Board of Medical Specialties (ABMS), American Osteopathic Association (AOA), or American Board of Physician Specialties (ABPS) in certain specialties are exempt from this requirement.
Accreditation and Documentation: All CME hours must be awarded by organizations accredited by the Accrediting Council for Continuing Medical Education (ACCME). Physicians must retain proof of CME completion for 4 years from the end of the calendar year in which the CME was completed.
Non-Compliance Penalties: Non-compliance triggers $100 civil penalties per deficient hour, plus makeup of deficient hours and an additional 10 penalty hours. A physician deficient by 10 hours would face a $1,000 penalty and must complete 20 total hours.
For healthcare entities employing or comprising physicians, CME non-compliance creates cascading compliance risks, as license sanctions resulting from CME deficiency can affect entity ownership eligibility and operational status.
A physician must hold a valid, active license to be eligible to own or establish professional healthcare entities in Tennessee. CME non-compliance can result in license sanctions, which directly affects entity ownership eligibility. Loss of license or inactive status would disqualify a physician from ownership of medical professional entities, potentially creating entity dissolution risk.
This creates a cascading compliance risk: CME deficiency leads to $100/hour penalties and requirement for additional penalty hours, which can trigger license sanctions, which triggers entity ownership disqualification, which creates entity dissolution risk. Healthcare organizations should implement automated CME tracking systems with 90-day pre-renewal alerts and designate compliance officers responsible for physician CME monitoring.
Tennessee substantially restricts multi-discipline healthcare entity ownership. Different healthcare professions (such as physicians and dentists, physicians and pharmacists, or dentists and optometrists) generally cannot co-own a single professional entity. Each profession must maintain separate professional entities owned by individuals holding the appropriate professional license for that specific discipline.
Tennessee Compilation of Rules & Regulations 1050-02-.19 allows Medical Professional Corporations and MPLLCs to render professional services within "two or more professions," but such purposes "shall not interfere with the exercise of independent medical judgment by physician members." This exception appears designed to accommodate physician-controlled entities with related medical specialties rather than permitting truly diverse cross-profession ownership.
Yes, but only under narrow statutory exceptions. TCA § 68-11-205 creates a carved-out exception allowing licensed hospitals and their affiliates to employ physicians, subject to strict conditions. Employment arrangements cannot control medical judgment, cannot include non-compete clauses, must provide anti-retaliation protections, and cannot control referrals. Non-hospital entities cannot employ physicians to provide medical services independently, per Tennessee Attorney General Opinion No. 07-116 (August 8, 2007).
Loss of license or inactive status disqualifies a physician from ownership of medical professional entities under Tennessee law. TCA § 48-101-610 restricts PC ownership to physicians licensed under TCA Title 63, Chapters 6 and 9, while TCA § 48-249-1109 limits PLLC membership exclusively to licensed professionals. If a physician's license lapses, the entity may be operating in violation of professional entity requirements, potentially triggering enforcement action from the Tennessee Board of Medical Examiners and requiring immediate ownership restructuring or entity dissolution.
Professional entities face three annual obligations: Secretary of State reports (PCs $20, PLLCs $300-$3,000), franchise tax returns due April 15 (0.25% of net worth, $100 minimum), and excise tax (6.5% of net earnings). Total minimum costs: $120 for PCs, $400 for PLLCs.
The choice depends primarily on ownership size and annual cost tolerance. Professional Corporations offer substantial cost advantages for practices with six or fewer physicians, with annual reports costing $20 to $40 compared to a $300 minimum for PLLCs (at least a 7-fold to 15-fold difference). Both entity types provide identical liability protection and face identical franchise and excise tax obligations. For practices with six or fewer professionals, PC structure offers annual cost savings of $260 to $2,980 without sacrificing liability protection, assuming physician ownership requirements are met. PLLCs may offer greater operational flexibility through operating agreements and member management structures that some practices prefer over corporate governance requirements.
No explicit Tennessee statute or administrative rule mandates pre-approval from professional licensing boards for healthcare professional entity formation. However, individual healthcare practitioners must maintain active licenses with appropriate Tennessee boards, and professional entities must comply with ownership and operation rules requiring all owners to be licensed professionals. The Tennessee Board of Medical Examiners monitors professional entity compliance through licensure processes but does not require formal pre-approval of entity formation documents.
Managing Tennessee's healthcare entity compliance requires tracking multiple distinct regulatory obligations. Discern provides comprehensive entity management solutions specifically designed for healthcare organizations navigating multi-state compliance requirements.
Ready to simplify your healthcare entity compliance? Book a demo with Discern today and reduce administrative burden while maintaining compliance.
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