Who Can Own a Professional Practice in New York?
The Rule That Almost Killed a Practice Sale

A dentist spent thirty years building his practice. When it came time to sell, he had the perfect plan: 50% to a younger dentist who would take over patient care, and 50% to his cousin, who had helped run the business side for years.
One problem. Under New York law, his cousin could not own a single share.
The Rule Most Practice Owners Discover Too Late
New York regulates who may own the entity through which a licensed profession is practiced. If a practice operates as a professional service corporation (PC) or a professional service limited liability company (PLLC), every shareholder or member must be licensed in that profession in New York.
This is not a technicality. It applies to optometrists, dentists, physicians, veterinarians, chiropractors, physical therapists, accountants, engineers, and dozens of other licensed professions. And there are no exceptions for family. A spouse cannot own an interest. A child or cousin cannot own an interest. A longtime business manager cannot own an interest. If they are not licensed in the profession, they are out.
The rule reaches further than most owners expect:
Sales and buy-ins. Shares or membership interests can only be transferred to individuals licensed in the same profession. A sale that puts equity in unlicensed hands is not just voidable. It can jeopardize the entity's authority to operate.
Death of an owner. When a licensed owner dies, the estate cannot simply hold the interest. New York law requires the interest to be transferred to a licensed person or redeemed by the entity within a limited window. Families who inherit a practice often learn this during the worst possible month to learn it.
Fee splitting. Even without equity, an unlicensed person generally cannot receive a percentage of professional revenue. New York treats percentage-based compensation to non-licensees as impermissible fee splitting, which is professional misconduct for the licensee.
So Was the Deal Dead?
No. But it could not be done the way everyone assumed.
The 50% sale to the younger dentist was straightforward. He was licensed, so he could hold equity in the professional entity directly.
The cousin's half required a different structure. When someone unlicensed needs to participate economically in a professional practice, the answer is almost never equity in the professional entity. It is one or more of the following:
A management services organization (MSO). The cousin can own a separate, ordinary business entity that provides the non-clinical side of the practice: administration, billing, staffing, marketing, equipment, facilities. The professional entity pays the MSO under a management services agreement. Done correctly, this gives the cousin a real business with real value. Done carelessly, with fees pegged to a percentage of professional revenue or with the MSO controlling clinical decisions, it collapses into fee splitting and the unlawful corporate practice of a profession.
Real estate and equipment. If the practice's office or equipment has value, the unlicensed family member can own it through a separate entity and lease it to the practice at market rates. This is often the cleanest way to move value to family without touching the ownership restriction.
Seller financing. Part of the purchase price can be paid over time through a promissory note. The selling owner (or his family) holds a debt claim against the practice rather than equity in it. A creditor does not need a license.
Every one of these tools has guardrails. Compensation must be fair market value, not a disguised profit share. Clinical control must stay with the licensed professionals. The documents have to say what the arrangement actually is, and the parties have to operate the way the documents say.
Why This Matters Before You Sign Anything
The painful version of this story is the one where the deal closes first and the problem surfaces later: during a bank financing review, a regulatory audit, a malpractice case where the entity's validity gets attacked, or a falling out between the owners where one side suddenly has every incentive to point out that the other's ownership was never lawful.
By then, unwinding the structure is expensive, and the leverage belongs to whoever benefits from the defect.
If you own a licensed practice and are thinking about a sale, a partner buy-in, succession planning, or bringing family into the
business, the ownership rules should shape the deal from day one, not get discovered at closing. The structures that work are well established. They just have to be built on purpose.
Herd Law Office LLC advises professional practice owners across New York on entity structure, practice sales, and succession planning. This article is for general information and is not legal advice about any specific situation.
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