THE MEDICALENTREPRENEURPEARLS, PITFALLS AND PRACTICAL BUSINESS ADVICE FOR DOCTORSPEARLS, PITFALLS AND PRACTICAL BUSINESS ADVICE FOR DOCTORS

Steven M. Hacker, MDSteven M. Hacker, MDThird Edition

Foreword written by Daniel M. Siegel, MD, MSNew 2016 Bonus Section for Third Edition Includes:

Author’s Recommendations for Vendors, Products and Services.

iii

Nano 2.0 B

usiness Press

Copyright ©

2010 1st edition, C

opyright © 2013 2

st edition, Copyright ©

2013 2st

nd Edition,

Copyright ©

2015 3rd E

dition

Steven M. H

acker, MD

All rights reserved.

ISBN

-10: 0615407137

EA

N-13: 9780615407135

Library of Congress C

ontrol Num

ber: 2010938047

Nano 2.0 B

usiness Press, Delray B

each, FL

REV

IEWS FR

OM

LEAD

ING

PH

YSICIA

NS A

ND

BUSIN

ESS EX

PERTS:

“We do not do enough to prepare our trainees for the business of practice. Likew

ise, so

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good idea does not a successful business make. H

acker’s book is a gem in that it speaks to

both of these challenges in an engaging way. It is chock-full of w

isdom, easily read, and

very enjoyable reading. I’ll be recomm

ending it to all of our trainees.”Joseph C

. Kvedar, M

DD

irector, Center for C

onnected Health

Partners H

ealthCare System

, Inc.A

ssociate Professor of D

ermatology

Harvard M

edical School

“After reading this book, I am

now m

ore certain than ever that my im

pressions of Dr.

Hacker nearly tw

enty years ago were correct. H

is book is an honest, open, forthright

attempt to share w

ith his colleagues those precious details he has learned about establish-

ing a medical practice and becom

ing an entrepreneur. I thought this book was fun to read,

informative, concise, and blatantly honest. A

s I told Dr. H

acker after reading his book, ‘I

think you have taught an old dog some new

tricks.’”F

ranklin P. Flow

ers, MD

Professor, U

niversity of Florida C

ollege of Medicine

Departm

ent of Medicine, D

ivision of Derm

atology and Cutaneous Surgery

viv

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Excerpts from

foreword w

ritten by Dr. D

aniel Siegel“Part I allow

s the reader to envision the necessary activities for opening his or her own

practice in the voice of the author, while Part II is a guide for budding entrepreneurs.

Part II covers victories and defeats in clear, concise tones that anyone can appreciate and

empathize w

ith.

Hem

ingwayesque, concise, and practical, this book w

ould be an ideal gift from depart-

ment chairs to their senior residents at the start of their last year of training, or a personal

purchase around the same tim

e if the chairperson is too cheap to buy it for you. If you

are reading this, turn the page and take the roller-coaster ride. Enjoy!”

Daniel M

ark Siegel MD

, MS (M

anagement and P

olicy) C

linical Professor of D

ermatology, SU

NY

Dow

nstate A

merican A

cademy of D

ermatology P

resident 2012

“Dr. H

acker’s book effectively dispels the notion that ‘doctors aren’t good business peo-

ple.’ His personal exam

ple proves otherwise, and now

his book can help other doctors

break through that mold, too. W

ritten with clear exam

ples drawn from

his experience,

the book lays out—step by step—

the tools and mind-set needed to create, launch, and

SURÀ�WDEO\�UXQ�D�EXVLQHVV��.XGRV�WR�WKH�DXWKRU�µ

Jeff Zbar, A

uthor & B

usiness Journalist

CO

MPLET

E FOR

EWO

RD

by D

aniel Mark Siegel M

D, M

S

Steve Hacker is a neat guy. (If I thought he w

asn’t, I would not have agreed to w

rite

this foreword!).

In addition to being a real doc who sees patients in a private practice that he built

from the ground up, he is a serial entrepreneur (unlike a serial killer w

ho may dine on his

victims, Steve can, as you w

ill learn after reading the book, sometim

es afford steak and

OREVWHU���ZKR�KDV�IRXQG�D�Z

D\�WR�ORRN�DW�DQ�XQÀ�OOHG�QLFKH�LQ�WKH�EXVLQHVV�ZRUOG�DQG�À�OO�LW�

LQ�D�SURÀ�WDEOH�IDVKLRQ�

In contrast to many of us w

ho can simply connect the dots, he can w

ring money out

of the dots and the lines between them

that, in this regard, makes him

more like Steve

Jobs than you or me. In fact, Steve H

acker goes one up on Steve Jobs, as the latter has

never been known to effectively treat skin cancer (though an app for that is rum

ored to

available in the next version of the iPhone OS).

Despite the explosive grow

th of digital technologies, medical students, residents, and

fellows still w

alk around with a soft-cover, often spiral-bound “m

anual” that is a concise,

readable summ

ary of the core techniques and knowledge of a particular specialty tucked

into the pocket of their white coat. T

hese white coats they w

ear have large pockets, as this

little tome (I am

assuming handbook sized or annotatable electronic, as a big, hardcover

book such as Surgery of the Skin: Procedural Derm

atology, by Robinson, H

anke, Siegel, and

)UDWLOD��GRHV�QRW�À�W�LQ�D�SRFNHW�EXW�VKRXOG�EH�ERXJKW�DQ\ZD\�w

ill be a requirement for

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PDS�WR�WKHLU�À�UVW�\HDU�LQ�SUDFWLFH�

Part I, in the voice of the author, allows the reader to envision the necessary activities

for opening his or her own practice, w

hile Part II is a guide for budding entrepreneurs.

vi

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vii

Part II covers victories and defeats in clear, concise tones that anyone can appreciate and

empathize w

ith.

Hem

ingwayesque, concise, and practical, this book w

ould be an ideal gift from

department chairs to their senior residents at the start of their last year of training, or a

personal purchase around the same tim

e if the chairperson is too cheap to buy it for you.

If you are reading this, turn the page and take the roller-coaster ride. Enjoy!

Daniel M

ark Siegel MD

, MS (M

anagement and P

olicy) C

linical Professor of D

ermatology, SU

NY

Dow

nstate D

irector, Procedural D

ermatology F

ellowship

Am

erican Academ

y of Derm

atology President 2012

AC

KN

OW

LEDG

MEN

TS

I would like to thank the follow

ing people:

The loves of m

y life: my w

ife, Jill, and my children, Sim

on, Em

ily, and Elliot. T

heir endur-

ing patience with all m

y crazy ideas, including the writing of this book, m

ade everything

possible.

My dad. H

e inspired me to be an entrepreneur.

Gary Lesnik and C

raig Sterling. As the closest of friends, their encouragem

ent and will-

ingness to discuss my business ideas are w

hat made m

any of them both successful and

possible.

ix

TABLE O

F CO

NT

ENT

S

YOU

CA

N BE A

CA

RIN

G D

OC

TO

R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi

AN

D A

SAV

VY BU

SINESSPER

SON

PAR

T I: EV

ERY

TH

ING

YO

U N

EED

TO

KN

OW

BEFO

RE Y

OU

SEE YO

UR

FIR

ST PA

TIEN

T

Congrats, you’re a doctor, now

how do you m

ake money? . . . . . . . . . . . . . . . . . . . . .1

Licenses, laws, and acronym

s (DE

A, N

PI, CA

QH

, PEC

OS, . . . . . . . . . . . . . . . . . .24

HIPA

A, H

ITE

CH

, CLIA

)

Hospital privileges, M

edicare, and managed care plans . . . . . . . . . . . . . . . . . . . . . . .44

Em

ployees, contracts, and payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59

Billing and getting paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75

7HFKQRORJ\�DQG�WKH�HOHFWURQLF�KHDOWK�UHFRUGV�IRU�WKH�RIÀ�FH . . . . . . . . . . . . . . . . . . .81

3ODQQLQJ��GHVLJQLQJ��DQG�ORFDWLQJ�DQ�RIÀ�FH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93

Marketing and Public R

elations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104

CO

NC

LUSIO

N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

PAR

T II: FO

R A

LL PHY

SICIA

N EN

TR

EPREN

EUR

S

An idea and a dream

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115

8QGHUVWDQGLQJ�À�QDQFLDO�VWDWHP

HQWV��LQWHOOHFWXDO�SURSHUW\� . . . . . . . . . . . . . . . . . . . .118and raising capital

Reality check before you launch your dream

business . . . . . . . . . . . . . . . . . . . . . . .150

The m

anagement team

, board of directors, and advisors . . . . . . . . . . . . . . . . . . . .152

xix

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Everything is negotiable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .156

Hope for the best, prepare for the w

orst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .160

CO

NC

LUSIO

N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .164

PAR

T III: PEA

RLS A

ND

PRO

CEED

ING

S FRO

M

TH

E MED

ICA

L ENT

REPR

ENEU

R

SYM

POSIU

M

DA

Y ON

E TO

DA

Y TH

REE: PEA

RLS A

ND

PRO

CEED

ING

S . . . . . . . . . .169-187

NEW

BON

US SEC

TIO

N: V

END

OR

REC

OM

MEN

DA

TIO

NS

. . . . . . . . . . . . .188

APPEN

DIX

I: TH

E FIRST

25 STEPS T

O TA

KE . . . . . . . . . . . . . . . . . . . . . . . . .192

WH

EN SET

TIN

G U

P YOU

R PR

AC

TIC

E

APPEN

DIX

II: A LIST

OF TA

BLES IN BO

OK

. . . . . . . . . . . . . . . . . . . . . . . . . . .194

ABO

UT

TH

E AU

TH

OR

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195

ABO

UT

TH

E EXPERT

CO

NT

RIBU

TO

RS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .197

YOU

CA

N BE A

CA

RIN

G D

OC

TO

R

AN

D A

SAV

VY BU

SINESSPER

SON

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in private practice and in business. I have written this book because m

edical school does

not prepare physicians for business. As doctors, w

e spend so much tim

e learning about

the human condition that w

e neglect to learn the basic fundamentals of running a busi-

ness. The irony is that to practice m

edicine successfully today, a doctor must be equally as

versed in the art of business as he or she is in the art of medicine.

A doctor can w

ear both hats. He or she can be both a caring physician and a savvy

businessperson. This book steps in w

here no other book or course does for physicians.

As a physician in private practice, I bring a unique perspective that offers practical

knowledge to doctors, young and experienced, w

ho open the pages of this book. I have

gone through the challenges of setting up my ow

n solo practice. I set up my practice

imm

ediately out of residency. It became very successful and quickly grew

to over twenty

thousand patients.

At the sam

e time I also built and sold tw

o unrelated Internet-based technology busi-

nesses. As a “serial entrepreneur,” I have started com

panies that have grown to becom

e

household names. T

he companies that I have started have gone on to serve m

illions of

people and generate hundreds of millions of dollars in cum

ulative revenue over the last

decade. While practicing m

edicine, I single-handedly negotiated deals with Fortune 500

companies, including M

icrosoft, Holland A

merica Lines, L’O

real, and more.

I have made several m

istakes. I write this book in the hopes of helping others avoid

those mistakes. T

he lessons I learned from m

y mistakes as a businessm

an and physician

are the basis for this book.

I have written this book in three parts.

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tice, young physicians that are in residency training programs, and experienced health care

xii

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xiii

Steven M. H

acker, MD

providers that are leaving a group practice to “go it alone.” I write about the struggles I

encountered and mistakes I m

ade as I set up my ow

n practice. I will detail the initial criti-

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The second part of the book is for all health care providers, no m

atter their age or

specialty, including those in academia, research, and private practice. It is not uncom

mon

for academic or research-based physicians to w

ant to comm

ercialize their research or

ideas or medical device developm

ent. Since they have no experience in creating entrepre-

neurial ventures or medical devices, this part of the book w

ill help academic physicians

better understand this process. Also, due to decreased reim

bursements, m

any creative

physicians in private practice want to supplem

ent their incomes w

ith entrepreneurial ven-

tures. This part of the book explains w

hat these doctors need to consider before launch-

ing any business. The second part of this book w

ill teach an understanding of raising

capital, negotiating contracts, hiring a managem

ent team, organizing corporate structure,

delegating board seats, medical device developm

ent and more.

The third part of this book is new

for the second edition. This portion of the book

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held in Delray B

each, Florida. This part of the book w

ill contain pearls and proceedings

from the m

any expert lectures and discussions that took place at this exciting meeting.

This is a business book for all health care providers regardless of their specialty.

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remem

bered. I notate those sections with term

s familiar to m

edical students and

doctors, such as “Pearls” and “Pitfalls to Avoid.” A

pearl is a term that w

e used in

medical school to refer to sm

all facts about a condition that should be remem

bered.

I annotate “Pearls” for those facts that I think you absolutely need to remem

ber. I

annotate “Pitfalls to Avoid” so you w

ill not make costly m

istakes as you set up your

practice. Throughout the book, I have also included lists of action item

s on a variety

of subjects. For your reference, I have designated these areas as “Tables”.

I have also included unbiased expert opinions from attorneys on critical topics

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Consults” and separated them

into easy to read textboxes. As a result, this book w

ill pro-

vide you with instant access to expert legal opinions that w

ould generally cost hundreds

of dollars per hour if you were to ask an attorney the sam

e question.

AC

AD

EM

IA O

R P

RIV

AT

E P

RA

CT

ICE

?

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ible and inspiring career. It is different from private practice. A

cademia w

ould include

faculty positions at teaching institutions. The rew

ards of academia often are less tangible

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personal decision. Teaching and research can provide exciting, engaging, and unique life

opportunities. I wrestled w

ith this decision throughout my residency training. For m

any

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the book is for those doctors, like myself, that have elected to enter private practice rather

than academia.

IS PR

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AN

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EL

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Anyone that is a health care provider can go into private practice and be successful

regardless of age, sex, race, and faith. You can be successful regardless of governmental

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The private practitioner is prototypical of the sm

all Am

erican business. The private

practitioner, no matter the political rhetoric, w

ill always survive and thrive. W

e are the

essence of small business in A

merica. W

e are emblem

atic of the spirit of capitalism.

And although corporate A

merica w

ants to shut you down, acquire you, convert you, or

push you into a large group, as long as capitalism survives in A

merica, you w

ill not only

survive, you will succeed.

Initially it may be intim

idating, but don’t allow it. A

nyone, even without any form

al

business education or experience, can start his or her own practice.

In most situations, you w

ill make m

ore money than you w

ould in a group practice.

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own rules and your ow

n hours. You will answ

er to no one. Going it on your ow

n is excit-

ing, liberating, and rewarding. So, don’t hesitate! You w

ill not regret it.

Everyone that I have ever spoken to, encouraged, or helped to go into solo private

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I have never met a single doctor w

ho has started his or her own practice and regret-

ted it. Have the “guts” to do it! You and your fam

ily will be grateful.

xiv

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WH

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DO

YO

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O W

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A G

RE

AT

IDE

A?

Part II of this book is for you, the creative doctor, in private practice or academia,

young or old, who has the desire to create another business or m

edical device and become

an entrepreneur. If you have a great idea or a creative urge to try another business, then

this section is a must read. If, like m

any other doctors, you are looking for additional

sources of income or are inspired to have a side business, then m

y experiences will help

you avoid making the sam

e mistakes that I m

ade. If you are in academia and w

ould like

to comm

ercialize your research, then this section will help you understand how

to create

that business.

In medical school w

e are not prepared for business. We are not taught how

to raise

capital. We are not taught about the business ow

ner or founder’s liabilities and the impli-

cations of raising capital. We do not learn about “burn rates,” “dilution,” “board seats,”

“options,” and “angel investors.” We are given no books to read about venture capitalists,

trademark protection, patent protection, online com

merce, and W

eb development. W

e

are not schooled in executive managem

ent, organization charts, and sales and marketing

teams. W

e are not given courses on negotiating contracts and leases.

,�KDYH�IRXQGHG�WHQ�FRUSRUDWLRQV�LQ�WKH�ODVW�À�IWHHQ�\HDUV�ZKLOH�SUDFWLFLQJ�P

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My experience in raising capital and selling these com

panies is invaluable for health care

providers. I am excited to share m

y stories with you and, m

ost importantly, point out the

mistakes I m

ade and successes I had. This part of the book w

ill provide you with real-life

advice based upon the incredible ups and downs I have had as a m

edical entrepreneur.

I have added a Part III to this book in the second edition of the book. Part III cov-

ers the salient details, pearls and excerpts from our annual m

eeting. I tried to pick out the

details I thought would be m

ost helpful. If you cannot attend in Florida in April, then you

will still get valuable inform

ation by reading this section. Regardless, I encourage you to

attend the next Medical E

ntrepreneur Symposium

in Delray B

each, Florida in April 2013.

For the third edition, I have added a bonus section that includes many of the cur-

rent products and services I use every day in business (and in the medical practice). I

added this section so the reader would have easy access to vetting out their ow

n decisions

regarding products and vendors. So, as the reader, do your own due diligence, research,

and bidding process and then make selections on the m

erit of your own research. D

o not

rely solely on what I have w

ritten in this book. As for any inform

ation in this book, you

should make your ow

n decisions, after careful evaluation, and understand that choosing

any product or service or vendor based upon information in this book is done at your

own risk.

PART

I: PA

RT I:

Everything you need to know

before you see E

verything you need to know before you see

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answer. T

hroughout medical school and residency, the allure of academ

ics and the urging

of my professors had led m

e down the path of academ

ics. The collegiality and sense of

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my professors. H

owever, I w

anted to get into private practice. Honestly, I w

anted to make

some m

oney. It had been a long haul, and twelve years of education and training had

brought me to this juncture. I had no debt, thankfully. I had no m

oney either.

My biggest concern w

as the same concern that m

any residents had: if I chose private

practice, would m

y professors consider me a sellout? If I did not join them

in academics,

would their disappointm

ent affect my ability to get a com

petitive job in private practice?

I knew I needed their letters of recom

mendation to get a position after residency. I w

as

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ulty that I would not be entering academ

ics. I was hesitant to let them

know that I w

ould

be looking for a job during my senior year of residency.

It turns out, after speaking to many residents, that these trepidations are com

mon.

Many during residency share them

. How

ever, these concerns are unfounded. The fac-

ulty are aware of and understand your situation. T

hey are eager to help you get a job

after graduation. Teachers know you m

ust begin looking for work. Y

ou may feel like you

are betraying an unspoken code of comm

itment to academ

ia. You are not. Planning for

private practice should begin in your senior year of residency. And, if you are going to

set up your own solo practice, then you m

ust start at least ten to twelve m

onths before

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Steven M. H

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Once you have decided to m

ake the leap into private practice, you must decide if you

are going to join a group practice or set up a solo practice. I wrestled w

ith this decision

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no private practice experience. I was w

orried because I didn’t understand medical billing.

I was concerned that I m

ight need “backup” if I didn’t know how

to treat a patient. I

didn’t think patients would w

ant to come see m

e as their doctor. It is easy to understand

why m

ost people choose group practices over a solo practice. These concerns and fears

are universal. They are also com

pletely unfounded.

Nevertheless, I w

ent down the path of joining a group practice. I interview

ed with

several groups. Each group had a different personality. In selecting a group practice, I had

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be well respected, and the physicians had to tolerate various personality types. A

group

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odds are overwhelm

ing that you will not be happy in that practice.

The experiences I had w

hile interviewing w

ere interesting. I won’t forget the tim

e a

senior partner of a large, well-know

n practice went out of his w

ay to let me know

that all

the doctors in the group were expected to attend the sam

e church. Although these w

ere a

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The one group I liked the best happened to be the m

ost successful and most

respected group in our area. They entertained m

y wife and m

e with a very expensive din-

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my personality. I w

as told that partnership would be offered. H

owever, after I received

the contract offer in writing, the details of the partnership and com

pensation were low

er

than I expected. It appeared that I would generate hundreds of thousands of dollars

in revenue for their practice. I would only receive a fraction of the revenue collected. I

would w

ork for three to four years before becoming a partner. Partnership m

eant that I

would be able to keep w

hat I collected minus the cost of overhead. A

nd yet, the overhead

expenses included, amongst other things, rent in the building that som

e of the partners

owned. T

he discrepancy in my incom

e as compared to the am

ount of revenue I generated

was so great that it prom

pted me to consider other options.

Solo practice was one of these options. I m

odeled out what I thought I could gener-

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I still would m

ake more m

oney than I would if I joined the group practice. I realized that

it did not make sense for m

e to join the most alluring, m

ost well respected practice in our

area. I politely sent a letter thanking the practice for my offer and their tim

e. I comm

itted

myself to learning everything I could about starting m

y own practice. Ironically, that sam

e

group practice split up over the ensuing few years due to partner disagreem

ents.

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call “sex appeal”) of another practice. Analyze objectively, not em

otionally, the offer you

receive before accepting it. Do not get seduced by the practice size and appearance. I

often advise senior residents to not sign an employee contract w

ith any group practice

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practices. You may spend tw

o days a week w

ith one practice and three days a week w

ith

another. You will learn all you need to about yourself and the practice in that tim

e period.

You will see if there are any “w

arts” in the practice. You will avoid contractual problem

s

in the event the practice is not right for you. It is very comm

on for doctors to sign an

employee contract, join the w

rong practice and regret their decision later.

If you are set on joining a group practice, make sure you understand the rev-

enue model for ow

ners, partners, associates and employees. C

alculate the precise

amounts you w

ill make for the practice and m

ake for yourself. You can estim

ate how

much revenue you w

ill earn by understanding how m

any patients you will be seeing

per day. Multiply that num

ber by the average amount billed or the average am

ount

collected per patient. Subtract the overhead percentage from that total am

ount.

That is w

hat is left over for you and the practice. These num

bers are readily avail-

able. The partners in the practice can provide them

for you. In order for this to be

an accurate estimate, the am

ounts must be relevant for the type of practice you w

ill

have. In other words, if you w

ill be mostly surgical or m

edical, then the respective

fees projected should reflect that. Understand w

hat “partnership” means. If, as a

partner, you have to pay overhead to other partners, then be cautious. Make sure you

ask about “comm

on” revenue earned and shared. For instance, lab revenue gener-

ated from the practice is considered com

mon revenue. F

ind out how you share in

that revenue as either a partner or employee. G

o through the exercise of analyzing

amount collected versus am

ount received with any group practice offer. Y

ou will

find more often than not that you w

ill make m

ore money on your ow

n than in the

group practice. The reason is sim

ple. The group practice m

ust make a percentage

of the revenue you generate. The am

ount that it makes from

your work w

ill be the

extra amount you w

ould keep for yourself if you went into solo practice. A

side

from incom

e issues, some specialists feel that they m

ust join a group practice due

to call and hospital coverage. How

ever, now there are m

any “hospitalists” and other

soloists that share call or provide hospital inpatient coverage with each other. T

he

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burden of call and cross coverage is much easier to overcom

e today than it was

years ago. So, don’t worry about that.

You will earn m

ore money in solo practice, have m

ore personal freedoms, and be

your own boss. It is a no-brainer. You m

ust go out on your own. A

nd you must get started

as soon as possible.

FIR

ST ST

EP, SE

T U

P A

CO

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OR

AT

ION

There are m

any theories about picking a name for your practice. You can pick a nam

e

that uses your real name and is very professional, such as John D

oe, MD

PA.

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Medical Institute.” You can do both. U

se one as a corporate name registered w

ith the

state. Use the other nam

e as a “D/B

/A” (Doing B

usiness As) nam

e.

Years ago people would create a nam

e for the business starting with an A

. The

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Pages. For instance, my practice nam

e was A

dvanced Derm

atologic Care and C

ancer

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The Internet is now

more im

portant than the Yellow Pages for advertising. Sophisticated

search engines utilize complex search algorithm

s to populate search returns. This m

akes

having an A to start your practice nam

e obsolete. Sites do not get listed on search engines

in alphabetical order.

The nam

e of your business should be short. It should be easy to remem

ber so

patients can easily recall your Web site. T

he name itself m

ay include comm

on search

terms or com

mon keyw

ords. Terms should be relevant to your practice.

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purchased a matching Internet dom

ain name.

The Internet dom

ain name is the U

RL (U

niversal Resource Locator) or the W

eb

address of your Web site. You should have a W

eb site domain nam

e that matches your

practice name. M

ake sure your domain nam

e is available on the Internet. This is easy to

check by visiting sites such as Netw

ork Solutions or GoD

addy.com. You can search these

sites and buy the domain nam

e that closely matches your practice nam

e.

You need to decide what type of corporation you w

ill be forming. B

usinesses incor-

porate for many reasons, including tax advantages and debt and liability protection. In the

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tion. The corporate veil w

ill protect your personal assets from debt or liabilities associated

with the corporation.

There are a few

different corporation types to choose from. E

ach structure has tax

implications and liability im

plications. The corporation types that you m

ay choose from are

subchapter C corporations (C

corps), subchapter S corporations (S corps) and Limited Lia-

bility Corporations (LLC

s). The S corporation rules are contained in subchapter S of C

hap-

ter 1 of the Internal Revenue Code (sections 1361 through 1379). A

C corporation is a cor-

poration in the United States that, for federal incom

e tax purposes, is taxed under 26 U.S.C

.

§ 11 and Subchapter C (26 U

.S.C. § 301 et seq.) of C

hapter 1 of the Internal Revenue Code.

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corporation types. I relied completely on m

y accountant. In hindsight, he was not the

best person for the job. He w

as what I call a “schm

oozer.” He spent m

ore time asking m

e

personal questions about my fam

ily then he did actually working on m

y accounting. He

was “too” friendly. H

e would try to im

press me by rem

embering the ages and birthdates

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accountant can be great, while a bad accountant can be disastrous. I have gone through

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Initially we set up m

y practice as a C corporation. A

lthough not wrong, it certainly created

extra work. E

very year we had to pay attention to incom

e and expenses to avoid double taxa-

tions. Subsequently, I went through a series of accountants. A

ll of them suggested I convert

to an S corporation. I eventually did convert from a C

to an S corporation. I was w

arned that

if I sold my practice w

ithin ten years of converting from a C

to an S corporation, I would

still be taxed and potentially double taxed as a C corporation. D

ouble taxation occurs when a

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of the year) and then again at the individual level (personal income).

There are differences betw

een corporation elections (types) that are important to

understand. You should understand these differences so you can elect the most appropri-

ate for your situation.

PE

AR

LSom

e advantages of S corporation:

1. Avoidance of double taxation.

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Steven M. H

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2. Savings on payroll taxes via shareholder (owners of the com

pany) distributions.

3. Taxes may be less on sale of practice if S corporation.

4. Income passes through to individual shareholder.

A C

corporation carries the risk of “double taxation,” or tax on corporate income and on

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through to the shareholders’ (owners’ of the com

pany) individual tax returns. This m

eans that

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for sole proprietorships and LLCs (lim

ited liability corporations). In summ

ary, the S corpora-

tion itself does not pay income tax. It is often the easiest election for a doctor to m

anage.

PE

AR

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e of the requirements of an S corporation election are:

1. Each S corporation shareholder m

ust be a U.S. citizen or resident.

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interests. For example, if you only ow

n 10 percent of a business, then you can only

claim 10 percent of the am

ount lost or earned from that business on your personal

income tax.

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shareholders that own m

ore than 2 percent of the corporation.

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Once you have decided on the corporation nam

e and elected a corporation type

(i.e., S corp or C corp), you w

ill need to write the articles of incorporation and corporate

bylaws and create a board of directors. You w

ill need the help of a corporate attorney

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so that you can issue stock to shareholders. In a medical practice, you are usually the sole

shareholder.

Don’t let these steps intim

idate you. They are m

ostly boilerplate processes. Attor-

neys will do the w

ork for you. There are “do it yourself” W

eb sites and forms for this.

How

ever, the few dollars an attorney charges are w

orth it. This w

ill ensure that the setup

process is done right from the outset.

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STAT C

ON

SULT

FRO

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A C

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Everyone is entitled to conduct business through a corporate entity to avoid personal liability for

obligations to vendors and other creditors. Doctors should take advantage of this and avoid operating as

sole proprietors. However, doctors, like other regulated professionals, cannot avoid liability for m

alprac-

tice by operating as a corporation or LL

C. A

ny practicing doctor should investigate the pros and cons

of acquiring malpractice insurance.

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between your salary, subject to withholding taxes, and dividends, subject only to ordinary in-

come tax rates applicable to dividends, generally lower than the withholding tax burden. The

IRS m

ay review this allocation and insist on payment of “reasonable” salaries. A

s an obvi-

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dend distribution of $500,000. If you demonstrate consistency with salary and bonus paym

ents,

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accountant on this issue. If you have other partners or investors in your business, dividends must be

distributed to them on a pro rata basis, tied to ownership of shares in your com

pany.

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After you have filed form

al paperwork w

ith the state for your corporation and

purchased a matching dom

ain for your Web site, you can tradem

ark the name. T

his

is something you can do by yourself. It is very easy. Y

ou can trademark the nam

e at

ww

w.uspto.orgw

ww.uspto.org. If an attorney is already preparing your corporation docum

ents, you

could also ask him or her to tradem

ark your business name, too. A

sk him or her to

do this for the amount of the filing fee ($275-$300) since he is already doing other

work for you.

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defensible, but probably not as defensible as a registered trademark. R

egistering a trade-

mark online is inexpensive. It m

ay costs less than $300 if you do it yourself online. If

your name is original and you fear som

eone might steal it, then tradem

ark it. I register my

trademarks online w

ithout the help of an attorney.

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STAT C

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TRAD

EM

ARKS

What A

re They?

Trademarks protect the goodwill of your com

pany. They in effect identify your company as the

source of certain goods of a certain quality. A tradem

ark is any word, name, sym

bol, or device used

to identify the source or origin of products or services and to distinguish those products or services from

others. When you hear M

cDonald’s, it has a different connotation in your m

ind than Burger King,

even for very similar products. You, as a consum

er, know what to expect when you eat at McD

onald’s.

Now think how confusing it will be and how upset M

cDonald’s would be if Burger K

ing changed the

name of its fam

ous burger to the McW

hopper.

Everyone knows that words such as Sprite soda, C

orvette convertible, and Google searches are

valid and appropriate use of trademarks. It is also well known that num

bers and letters have become

very famous tradem

arks, such as BMW

, 3M, and 1-800-FL

OW

ER

S as sources of goods and ser-

vices; and, lastly, designs and logos also have great power as trademarks. Think of the N

ike swoosh,

Adidas stripes, Starbucks m

ermaid; all very strong tradem

arks in the mind of the consum

er.

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such as the roar of the MG

M lion, the opening notes of M

icrosoft software, and even an

attempt to tradem

ark the Harley-D

avidson engine sound. Fragrances such as stationery treated

with a special fragrance can be trademarks. Shapes such as the unique shape of the A

pple

iPod or Lego building blocks have been given tradem

ark protection. Colors such as the brown

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packets have all been used to establish brand awareness. I am sure that each of you, when

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that is the ultimate test as to whether som

ething has become a tradem

ark. Lastly, the overall

look, the trade dress, has been given trademark protection. For exam

ple, a distinctive décor

and layout for most franchise restaurants, such as H

ooters’ orange and white uniforms and

wooden décor or Chipotle’s accent colors, m

etal, and wood, would be given trademark protection.

The governm

ent, in effect, is giving you a monopoly over a word and its use in com

merce. So,

like patents, there are certain hurdles which must be overcom

e in order to establish the strength and

validity of your trademark. W

ords may be generic, descriptive, suggestive, or fanciful. W

here your

proposed trademark lies on that spectrum

will govern the strength of its use as a trademark. By

way of example, if you are a farm

er and you wish to brand your new red, shiny fruit APPL

E, the

government will not grant you tradem

ark rights because “apple” is generic for the red, shiny fruit.

What would other farm

ers call their red, shiny fruit?

Similarly, if you are a baker and you wish to tradem

ark your cakes and cookies which taste

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cookies you will not be allowed to enforce monopoly rights in that brand either. Such use is descriptive.

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the most part, not enforceable.

However, if you are m

anufacturing a perfume which sm

ells sweet or fruity and wish to brand that

perfume A

PPLE

perfume, then the word is only suggestive of a characteristic of the product, and you

will most likely be entitled to tradem

ark protection. Better yet, if you are starting a computer com

pany

and name your product line A

PPLE

, then this is fanciful and a strong mark.

However, words can change their status, and the spectrum

discussed above is only a general

yardstick. History is littered with exam

ples of marks across the spectrum

, including famous m

arks

which have become generic. G

eneric marks such as “aspirin” and” therm

os” both began as fanci-

ful marks; M

ovie Channel or H

ealthy Choice m

ay be considered descriptive bordering on suggestive

marks. Suggestive m

arks are marks such as Priceline.com

, and fanciful marks are m

arks like Kodak

and Windows.

There are other rules as to which types of m

arks are not acceptable for protection even if fanci-

ful. Imm

oral or scandalous matter, such as curse words, will m

ost likely not be granted trademark

protection. Deceptive m

atter such as “Fresh Florida Oranges” for oranges grown in C

alifornia, or

anywhere other than Florida, will not be granted protection. Lastly, surnam

es such as Anderson or

Smith or fam

ous names such as Johnny C

arson can’t be trademarked unless you are that person or

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