Business Organizations. There are four types of business organizations that can be used for the practice of optometry:. general partnership limited liability company (LLC) professional association or corporation (PA or PC) subchapter S corporation.
The most common choices today are limited liability companies and subchapter S corporations.
A general partnership is the traditional method.
Generally higher earnings than solo optometrists
Shared overhead, less capital outlay per partner compared to solo optometrists
Office coverage during vacations, illness, personal holidays
Consultation with partners for business and patient management decisions
Expanded hours, convenience for patients
Investment in career protected and equity established for retirement, disability, or death
Loss of independence
Personality conflicts with partners or the spouses of partners
Differences in professional ideas and philosophies
Unequal distribution of patient load
Unequal distribution of income based on productivity of the partners
Articles of incorporation are filed in the state by the incorporators (only one is needed) to describe the purpose of the corporation, its stockholders, and its management.In a professional association (PA) or corporation (PC) the PA or PC may be formed by one or more licensed professionals, who constitute both ownership and management. Only licensed professionals can own stock and serve on the Board of Directors; however, non-professionals can be Officers.
Structure of Professional Associations/CorporationsShareholders(owners; may be one person; must be professional licensee)electBoard of Directors(long-term management; may be one person; must be professional licensee)who electOfficers(day-to-day management; may be one person; does not have to be professional licensee)
The PA or PC is responsible for its contracts, debts, and the negligence of its employees. The shareholders (owner) are not responsible for debts or liability claims, although in a one licensee PA or PC if the licensee is negligent he or she will be individually responsible and the PA or PC will also be responsible as employer.
PAs or PCs pay a federal income tax; a "double tax" is possible, if the PA or PC has a profit (35% bracket) and the shareholder-employee is paid a salary (10% to 35% bracket). PAs or PCs must file an annual tax return, on Form 1120.Most states also charge an income tax for corporations. In Alabama, for example, the tax rate is 5% of taxable income. A “business privilege tax” is also levied in Alabama against corporations and LLCs, at the rate of $1 per $1,000 of taxable income, or a minimum of $100.