Healthcare organizations in Texas face a particularly complex regulatory landscape that sets the state apart from most other jurisdictions. The state actively enforces the Corporate Practice of Medicine doctrine, with a 2023 Travis County jury awarding $10 million for CPOM violations. Texas also imposes strict ownership restrictions, requires coordination across multiple state agencies for compliance, and recently enacted comprehensive non-compete restrictions taking effect September 1, 2025. If you're establishing a practice in Texas, you'll need to coordinate requirements from the Texas Secretary of State, Texas Comptroller of Public Accounts, and Texas Medical Board simultaneously, each with distinct filing deadlines and penalties for non-compliance.
Physicians must choose between Professional Associations (PAs) or Professional Limited Liability Companies (PLLCs), both requiring strict physician ownership under Texas Business Organizations Code Chapter 301. Despite availability of Professional Corporations (PCs) for other professions, Texas law explicitly prohibits physicians from using the PC structure. All professional entities must comply with ownership requirements mandating that only licensed professionals authorized to provide the entity's services may serve as owners or managers.
Professional Associations represent a traditional entity structure for Texas medical practices and remain widely used across the state. Governed by Texas Business Organizations Code Chapter 302, PAs must comply with both general professional entity provisions in Chapter 301 and PA-specific requirements. Only licensed medical professionals may serve as owners and governing persons, ensuring physician control over all medical decision-making.
Formation requires filing Form 204 - Certificate of Formation - Professional Association with the Texas Secretary of State. PAs must file annual Form 803 statements ($35 fee) with the Secretary of State in addition to franchise tax reports with the Comptroller.
Professional Limited Liability Companies provide one of the two primary alternative structures for physician practices in Texas and have gained popularity due to flexible management options and simplified annual compliance. PLLCs are governed by Texas Business Organizations Code Chapters 301 and 304, with Chapter 301 establishing universal professional entity requirements. The critical ownership restriction appears in Section 301.006, which mandates that only licensed professionals may provide professional services and serve as members or managers.
PLLCs form by filing Form 206 - Certificate of Formation - Professional Limited Liability Company. PLLCs avoid the annual Secretary of State Form 803 filing required for PAs while maintaining similar liability protection, making them administratively simpler for many practices.
Texas explicitly prohibits physicians from forming Professional Corporations, despite PCs being available for other healthcare professions. Texas Business Organizations Code Chapter 301 creates this statutory restriction, limiting medical practice to Professional Associations (PAs) and Professional Limited Liability Companies (PLLCs) only. Attempting to practice medicine through a prohibited entity structure creates both regulatory violations and potential professional licensing consequences.
Texas actively enforces a robust Corporate Practice of Medicine doctrine with recent enforcement demonstrating substantial liability for violations. The primary codification appears in Texas Occupations Code Chapter 162, which prohibits corporations from interfering with, controlling, or directing a physician's professional judgment. Texas law prohibits corporations from controlling medical decisions and requires written policies ensuring independent medical judgment.
Permissible structures include Management Services Organizations (MSOs) providing administrative support only (billing, HR, marketing, facilities), and physician-owned professional entities where physicians maintain control and majority ownership.
Healthcare professionals forming entities in Texas must complete several sequential steps, each with specific fees and requirements. The following table summarizes the critical formation requirements:
Payment methods include check, money order, debit card (no additional fee), or credit card (2.7% convenience fee). All formation documents must specify the type of professional service and demonstrate that organizers hold appropriate licenses. When you're choosing between PA and PLLC, consider both upfront costs ($790 versus $340) and ongoing compliance burden.
Texas healthcare professional entities face compliance obligations across multiple state agencies with distinct deadlines and requirements. Unlike many states with a universal annual reporting system, Texas distributes compliance requirements among the Texas Comptroller of Public Accounts (franchise tax and public information reports), the Texas Secretary of State (annual statements for professional associations), and the Texas Medical Board (registration for jointly-owned physician-physician assistant entities).
All taxable healthcare professional entities must file an annual Franchise Tax Public Information Report with the Texas Comptroller of Public Accounts by May 15 each year. This requirement applies regardless of whether the entity owes franchise tax. Healthcare entities with annualized total revenue at or below the $2.47 million no-tax-due threshold are not required to file a franchise tax report but must still file the Public Information Report.
Failure to file triggers a $50 penalty, with potential forfeiture of registration and loss of right to transact business in Texas courts.
Healthcare professional entities in Texas must comply with franchise tax requirements administered by the Texas Comptroller of Public Accounts. The critical no-tax-due threshold is $2.47 million in annualized total revenue (effective January 1, 2024), and entities below this threshold are not required to file a franchise tax report. However, this exemption does not eliminate the mandatory Public Information Report requirement. Entities above the threshold must calculate taxable margin using one of four approved methods and pay tax at the standard rate of 0.75% for most healthcare professional entities, or 0.331% under the simplified EZ Computation method for entities with $20 million or less in revenue. All franchise tax reports and Public Information Reports must be filed by May 15 annually with the Texas Comptroller. Professional Associations specifically must also file Form 803 Annual Statement with the Texas Secretary of State for a $35 fee.
Professional Associations specifically must file Form 803 Annual Statement with the Texas Secretary of State at a cost of $35.
Healthcare entities jointly owned by physicians and physician assistants must file annual reports with the Texas Medical Board by April 30 each year. This requirement applies to entities formed on or after June 17, 2011 that include both physician and physician assistant ownership. The annual fee is $18 for entities formed on or after June 17, 2011, per 22 Texas Administrative Code §174.5.
Senate Bill 1318 (89th Legislature) takes effect September 1, 2025 and restricts healthcare employment non-compete agreements for physicians, dentists, nurses, and physician assistants. The legislation imposes four mandatory restrictions: non-compete buyout payments capped at employee's annual salary, geographic restrictions limited to 5-mile radius, duration capped at one year, and physician non-competes void if physician is involuntarily discharged without good cause. Healthcare employers should review existing agreements before September 1, 2025 to ensure compliance.
Healthcare entities must comply with requirements from the Texas Medical Board (professional licensing), Texas Secretary of State (formation and filing), and Texas Comptroller (franchise tax). These obligations reflect distinct regulatory requirements that healthcare organizations must manage across multiple state agencies.
Physicians licensed by the Texas Medical Board must complete 48 CME credits every 24 months during each biennial registration period. At minimum, 24 hours must be formal Category 1 credits from approved sponsors. Within these 24 formal hours, physicians must include at least 2 hours of Medical Ethics/Professional Responsibility, at least 2 hours of Pain Management and Opioid Prescribing, and one HHSC-approved course on Human Trafficking Prevention.
Texas physicians must renew licenses every two years on a biennial cycle governed by Texas Occupations Code, Chapter 156. All licenses expire on one of four dates annually: February 28, May 31, August 31, or November 30. Even-numbered licenses expire in even-numbered years; odd-numbered licenses expire in odd-numbered years.
Biennial renewal fees total $491.48, with an additional $50 penalty for choosing paper registration when online is available. Late renewals incur penalties from $75 to $150 depending on timing, with license cancellation after one year of non-renewal.
The Texas Medical Board actively enforces rules preventing lay control of medical practice per the September 2024 TMB Bulletin. Active physician licensure is a prerequisite for professional entity ownership under the Corporate Practice of Medicine doctrine. License suspension, revocation, or lapse creates immediate compliance issues for the entity itself. When a physician owner's license status changes, the entity may need to restructure ownership or management to maintain compliance with Texas Business Organizations Code Section 301.006.
Texas permits limited multi-discipline ownership between physicians and certain healthcare professionals with significant restrictions. Texas Business Organizations Code § 152.0551 allows physicians to co-own professional entities with physician assistants under strict conditions: PAs may hold only minority ownership interests that don't equal or exceed any physician's interest and cannot serve as officers or general partners. These provisions apply to entities formed on or after June 17, 2011 and require annual registration with the Texas Medical Board.
Texas law does not permit physicians and nurse practitioners to co-own clinical practice entities. Unlike physician assistants who may hold minority ownership interests under Texas Business Organizations Code § 152.0551, no statutory provision exists for nurse practitioner co-ownership.
Can a non-physician corporation employ physicians to provide medical services in Texas?
No, the Texas Corporate Practice of Medicine doctrine prohibits non-physician corporations from employing physicians. Texas Occupations Code Chapter 162 prohibits corporations from controlling medical decisions. A 2023 Travis County jury awarded $10 million against a management company for CPOM violations involving control over physicians' medical decisions. Permissible structures include MSOs providing administrative support only, and physician-owned professional entities maintaining physician control.
What happens if a physician owner's license lapses while they maintain ownership in a Texas professional entity?
License lapse creates immediate compliance violations under Texas Business Organizations Code Section 301.006, which requires that only licensed professionals may serve as owners and managers. The entity faces potential sanctions including fines, suspension of ability to operate, and possible dissolution orders. Entities should monitor all physician owners' license status and address potential lapses in operating agreements.
Does my Texas PLLC need to file a Franchise Tax Public Information Report with the Texas Comptroller, even if below the no-tax-due threshold?
PLLCs in Texas do not file annual reports with the Texas Secretary of State. According to involuntary termination documentation, PLLCs' primary annual compliance obligation is the Franchise Tax Public Information Report with the Texas Comptroller, due May 15 annually. All entities must file the PIR by May 15 regardless of whether they owe franchise tax, with a $50 late penalty for missed filing. Entities with jointly-owned physician and physician assistant structures formed on or after June 17, 2011 must also file annual reports with the Texas Medical Board by April 30 ($18 fee).
What are the key differences between forming a Professional Association versus a PLLC for my medical practice in Texas?
Professional Associations and PLLCs both provide liability protection and require physician ownership and control, but differ in formation costs and ongoing compliance. PAs cost $790 to form ($40 name reservation plus $750 filing fee) using Form 204, while PLLCs cost $340 ($40 name reservation plus $300 filing fee) using Form 206. PAs must file annual statements with the Secretary of State ($35 fee) in addition to franchise tax obligations, while PLLCs file only the franchise tax Public Information Report with the Comptroller.
When does the September 1, 2025 non-compete restriction law take effect, and do existing agreements need to be revised?
Senate Bill 1318 takes effect September 1, 2025 and applies to healthcare employment agreements for physicians, dentists, nurses, and physician assistants. The legislation imposes four mandatory restrictions: non-compete buyout payments capped at employee's annual salary, geographic restrictions limited to 5-mile radius, duration capped at one year, and physician non-competes void if physician is involuntarily discharged without good cause. Healthcare employers should review existing agreements before September 1, 2025 to ensure compliance.
Managing healthcare entity compliance across multiple Texas agencies with different deadlines, forms, and requirements creates administrative burden that diverts attention from patient care. Tracking Franchise Tax Public Information Reports, professional association annual statements, Texas Medical Board jointly-owned entity registrations, physician license renewals, and registered agent obligations simultaneously overwhelms many healthcare organizations.
Ready to simplify your healthcare entity compliance? Book a demo with Discern today and see how we can reduce your administrative burden while ensuring your Texas entities stay in good standing.
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