Managing healthcare entity compliance in Washington State means juggling multiple state agencies, conflicting deadlines, and regulations that can dissolve your entity if you miss a filing by days. The Corporate Practice of Medicine doctrine, Professional Service Corporation rules, and the Washington Medical Commission's licensing requirements create a compliance web where one missed CME deadline can invalidate your professional license, immediately terminating your entity ownership rights. You'll juggle compliance across three separate agencies: the Washington Medical Commission for your professional license, the Secretary of State for entity filings, and the Department of Revenue for tax obligations. Tracking deadlines across scattered records becomes overwhelming, and the constant anxiety of missed filings affects every healthcare administrator managing professional entities.
Professional Service Corporations (PSCs) are the traditional entity structure for Washington healthcare practices, governed comprehensively by RCW Chapter 18.100. Under RCW 18.100.040, entity names must include "Professional Service," "Professional Corporation," "P.S." or "P.C." to properly designate professional status. Ownership is strictly limited to licensed professionals under RCW 18.100.090, with no statutory percentage restrictions on ownership allocation among qualified shareholders.
PSCs permit broad multi-discipline ownership among 12 healthcare professions per RCW 18.100.050(5)(a), including physicians, nurses, and dentists. Physical therapists and occupational therapists may only co-own among themselves per Washington Attorney General Opinion 2020 No. 5.
All individuals rendering professional services must maintain appropriate professional licensure.
Professional Limited Liability Companies (PLLCs) operate under RCW 25.15.046, which imposes unique requirements distinguishing them from both standard LLCs and professional corporations. Entity names must include "Professional Limited Liability Company," "Professional Limited Liability Co.," "P.L.L.C." or "PLLC" to comply with naming requirements. The statute uniquely requires professional liability insurance or equivalent financial responsibility, a mandate not imposed on professional corporations. Membership is limited to licensed professionals under the same subsection of RCW 18.100.050(5), making multi-discipline ownership more restrictive than PSCs per Washington Attorney General Opinion 2020 No. 5.
PLLCs must file an initial report within 120 days of formation, creating an additional compliance obligation not required for professional corporations.
Washington enforces the Corporate Practice of Medicine doctrine through binding Supreme Court precedent. Columbia Physical Therapy, Inc., P.S. v. Benton Franklin Orthopedic Associates, P.L.L.C. (2010) permits physician-owned PSCs to employ other healthcare professionals without violating RCW Chapter 19.68, while Washington Imaging Services, LLC v. Washington State Dept. of Revenue (2011) allows management service organizations to use independent contractor relationships.
The Washington Medical Commission actively enforces CPOM principles through Guideline GUI2020-02 "Medical Directors: Roles, Duties and Responsibilities", reaffirmed October 11, 2024. Pending legislation further strengthens enforcement: Senate Bill 5387 and House Bill 1675 in the 2025-26 legislative session would explicitly prohibit unlicensed entities from owning healthcare practices or employing licensed providers.
Your healthcare entity faces three primary annual compliance obligations with specific deadlines and significant financial implications.
Your healthcare entity must file annual reports with the Secretary of State by the last day of the month in which the entity was originally formed. An entity formed in March must file by March 31 annually, while a June formation requires filing by June 30. The filing window opens 180 days before the due date, providing advance notice for compliance planning.
Failure to file within 120 days triggers administrative dissolution ($140 reinstatement plus missed fees). Standard fees: $70, or $95 with delinquency. Expedited processing: +$100 (3 days) or +$150 (same-day).
Washington does not impose a separate franchise or privilege tax, as confirmed by Washington Department of Revenue Determination No. 15-0324. Instead, healthcare entities are subject to Business & Occupation (B&O) tax, a gross receipts tax calculated without deducting business expenses. Healthcare services are classified under the "Service and Other Activities" classification, which is taxed at approximately 1.5% of gross receipts.
Filing frequency for B&O taxes depends on tax liability: annual filers submit returns by April 15 for the previous calendar year, quarterly filers by the 15th of the month following quarter end, and monthly filers by the 15th of the following month. Healthcare providers should verify their filing frequency threshold directly with the Department of Revenue based on anticipated revenue.
A significant exemption substantially reduces tax burden for many healthcare providers. Effective January 1, 2021 through January 1, 2032, healthcare providers can exclude income from services covered by qualified health plans under RCW 41.05.410 from B&O tax calculation. This qualified health plan exemption represents the most significant recent financial compliance change for healthcare entities serving patients with Exchange plans, allowing complete exclusion of qualified health plan revenue from B&O taxation rather than being subject to the standard approximately 1.5% service and activities rate.
Additional healthcare-specific provisions include special rates and deductions for public and nonprofit hospitals under WAC 458-20-168, while income from licensed adult family homes is B&O tax-exempt per Washington Department of Revenue B&O Tax Classification Definitions.
The most significant new compliance requirement takes effect January 1, 2026. House Bill 1162 requires healthcare employers to promptly investigate workplace violence incidents and file quarterly reports of workplace violence incidents. This creates four additional annual compliance filings for healthcare entities, with specific reporting procedures pending implementing regulations from the Washington Department of Labor & Industries. Healthcare entities must establish incident tracking and quarterly reporting systems before January 1, 2026 effective date to ensure compliance.
Other 2024-2025 healthcare legislation primarily affects clinical practice standards rather than broader entity compliance obligations, including HB 2115 (effective June 6, 2024) addressing abortion medication prescription labeling, SHB 2295 (effective June 6, 2024) establishing Hospital at Home program rules, and ESSB 6127 (effective January 1, 2025) requiring HIV postexposure prophylaxis in emergency departments.
The Washington Medical Commission regulates approximately 34,000 licenses including physicians, osteopathic physicians, and physician assistants under Chapter 18.71 RCW and Chapter 18.71A RCW. Active licensure status directly affects entity ownership eligibility, creating critical coordination requirements between individual professional compliance and entity governance rights.
Physicians (MD/DO) must complete 200 hours of continuing medical education every four years under WAC 246-919-430. Failure to report CME hours invalidates license renewal. Because active licensure is required for entity ownership under RCW 18.100.050, CME non-compliance directly affects ownership rights.
Other professionals have varying requirements: PAs (100 hours/2 years), mental health professionals (36 hours with 6 in ethics), psychologists (60 hours/3 years with 4 in ethics).
Physicians must renew licenses biennially on or before their birthday under WAC 246-12-020 and WAC 246-919-421. The renewal window opens up to 90 days before expiration, but Washington provides no grace period. Renewal must be postmarked or received by midnight of the expiration date, with late fees applying to missed deadlines.
CME compliance enables license renewal, which maintains ownership eligibility. License lapses directly affect ownership rights under RCW 18.100.050. License restrictions, suspensions, or lapses directly affect ownership eligibility and operational rights. WAC 246-337-045 explicitly links licensure status to operational control rights for residential treatment facilities, establishing principles that apply across healthcare entity types.
RCW 18.71A.120(8) explicitly authorizes physician assistants with active licenses to own healthcare clinics. Washington Medical Commission Guidance Document MD2015-06 ("Ownership of Clinics by PAs Guidance Document," reaffirmed May 27, 2022) confirms PAs may own clinics while maintaining compliance with professional standards and recommends legal counsel for business structure compliance.
Professional Service Corporations permit the 12 healthcare professions listed in RCW 18.100.050(5)(a) to co-own the same entity without percentage restrictions. This means physicians and nurse practitioners can co-own the same professional entity when structured as a PSC. Professional Limited Liability Companies impose more restrictive rules, limiting PLLC membership to professionals licensed under the same subsection of RCW 18.100.050(5) per Attorney General Opinion 2020 No. 5.
Can a non-physician entity employ physicians in Washington State?
No, with limited exceptions. Washington prohibits unlicensed entities from employing physicians under the Corporate Practice of Medicine doctrine, established in State ex rel. Standard Optical Co. v. Superior Court (1943) and Morelli v. Ehsan (1988). However, Washington Imaging Services, LLC v. Washington State Dept. of Revenue (2011) allows management service organizations to operate using properly structured independent contractor relationships. Additionally, physician-owned professional service corporations can employ other licensed healthcare professionals per Columbia Physical Therapy, Inc., P.S. v. Benton Franklin Orthopedic Associates, P.L.L.C. (2010).
What happens to entity ownership rights when a healthcare professional's license lapses?
License lapse directly terminates entity ownership eligibility under RCW 18.100.050, which restricts professional entity ownership exclusively to licensed professionals. Because physicians must renew licenses biennially on or before their birthday with no grace period (WAC 246-919-421), missed renewal deadlines result in immediate lapsed licensure and loss of ownership eligibility. CME non-compliance creates the same result, as failure to report required continuing education hours (200 hours every 4 years per WAC 246-919-430) invalidates renewal and renders the license non-renewable. Entity operating agreements should address procedures for license lapses, including temporary ownership transfer mechanisms and reinstatement procedures.
What is the difference between filing annual reports with the Secretary of State and filing B&O tax returns?
These represent separate compliance obligations to different state agencies. Annual reports filed with the Washington Secretary of State maintain entity good standing and are due on the last day of the formation anniversary month (filing window opens 180 days early), cost $70 standard or $95 with delinquency, and trigger administrative dissolution after 120-day delinquency. Business & Occupation tax returns filed with the Washington Department of Revenue address tax obligations on gross receipts at approximately 1.5% for healthcare services, with filing frequency (annually by April 15, quarterly, or monthly) depending on tax liability. Healthcare providers can exclude income from qualified health plan services through January 1, 2032. Both obligations are independent and must be tracked separately.
Should a multi-specialty healthcare practice choose a Professional Corporation or Professional LLC?
Entity selection depends significantly on anticipated ownership composition and insurance considerations. Professional Service Corporations offer broader multi-discipline ownership flexibility under RCW 18.100.050(5)(a), permitting 12 healthcare professions to co-own the same entity without percentage restrictions, making PSCs ideal for integrated practices combining permitted professionals. Professional LLCs impose more restrictive ownership rules, limiting co-ownership to professionals licensed under the same subsection of RCW 18.100.050(5) per Attorney General Opinion 2020 No. 5. The PLLC structure uniquely requires professional liability insurance under RCW 25.15.046, adding an ongoing compliance obligation not mandated for PSCs, and requires initial reports within 120 days of formation.
What new compliance requirements take effect for Washington healthcare entities in 2026?
Two significant changes take effect: mandatory email addresses for registered agent and principal office fields (effective January 20, 2026), and House Bill 1162's requirement for healthcare employers to file quarterly workplace violence incident reports beginning January 1, 2026. Healthcare entities must establish incident tracking systems and quarterly reporting workflows before the effective date.
Managing Washington healthcare entity compliance creates administrative burden across multiple state agencies. Established obligations include annual reports to the Secretary of State, B&O tax returns to the Department of Revenue (filed annually, quarterly, or monthly depending on tax liability), and coordination with the Washington Medical Commission for licensing requirements.
Discern provides comprehensive entity management solutions that automate compliance filings, registered agent services, and deadline tracking. Replace hundreds of separate state invoices with consolidated entity payment management for ongoing compliance.
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