> ## Documentation Index
> Fetch the complete documentation index at: https://www.practiceownersguide.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Choose your legal entity

> A correctly formed professional entity, tax election made, identifiers issued — with no re-dos, because re-forming means re-credentialing.

**Goal:** a correctly formed professional entity, tax election made, identifiers issued. No re-dos, because re-forming means re-credentialing.

**Before you start:** engage a healthcare attorney in your state and a practice-experienced CPA. This guide makes you a competent client, not a substitute.

## 1. What your state requires

Most states require a **PC or PLLC** owned by licensees for entities that practice ([why: CPOM](/concepts/cpom-and-the-pc)). Some states are permissive, some strict (California, Texas, New York, each differently). Your attorney answers: which forms may practice, who may own shares, and whether your intended co-owners are permissible.

## 2. Tax posture

Entity form and tax election are separate decisions. Most small practices land on PC/PLLC with an **S corporation election** (Form 2553), splitting owner pay between salary and distributions. Your CPA runs the numbers.

## 3. File, then paper the inside

Formation is a state filing. The internal documents matter more: bylaws or operating agreement, and with any co-owner a **buy-sell agreement** covering death, disability, license loss, departure, and deadlock, with a valuation method. Practices without one negotiate it during a dispute, the most expensive possible time.

## 4. Identifiers, in order

```mermaid theme={null}
flowchart LR
    A[Entity filed] --> B[EIN<br/>irs.gov, immediate] --> C[Type 2 NPI<br/>NPPES] --> D[State registrations<br/>board, tax, UI] --> E[Bank accounts<br/>same week]
```

EIN: [irs.gov](https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online). NPI: [NPPES](https://nppes.cms.hhs.gov/); keep the credentials, the same login world feeds [PECOS](/guides/get-credentialed). Accounts: [banking setup](/start-here/03-setting-up-your-banking).

## 5. The expensive mistakes

* **Re-formation.** Payer contracts attach to the TIN. Dissolve and re-form and you re-credential for months.
* **Commingling.** From dollar one, entity money is not your money.
* **The DBA gap.** Operating under a brand name? Register the fictitious name. Banks won't deposit checks payable to a name not on the account.
* **Multi-state.** Professional entities don't simply "foreign qualify" like normal LLCs. Expansion across state lines is a structure conversation first ([MSO-PC Wiki](https://mso.getlemma.com)).