(This is an excerpt from chapter 9 of “Growing a Medical Practice: From Frustration to a High Performance Business”)


Medical practices, like any business, can be structured in various ways; each with its pros and cons. It’s important to reflect on your current business structure from time to time to ensure its still meeting your needs, goals and business aspirations.

Changing and adapting your business structure is critical as your practice ebbs and flows thru its growth cycle.

According to the Melbourne University General Practice trends report:

  • 61% of GP’s work in a practice with 6+ doctors
  • About 35% work in practices with 2 -5 GPs
  • And less than 10% of doctors work in a sole practice


hand moving boxes around

Doing a regular review of your business structure is critical for long term growth


1.Sole Trader

In this set up you treat and earn income in your own name.  A sole trader does not need to set up any formal business structure and its best suited to those who are running a sole GP practice, are locums or contracting.

You are responsible for business debts; there is no succession plan if something were to happen to you and there is limited flexibility for growth (if that’s what your aiming for).


2.Medical Company

A company is a separate legal entity; an incorporated company that operates as a medical practice earns income from patients and pays the business expenses. The remaining profit is distributed to the doctor/s or owners.

The advantage is that the practice is better established for long term growth, there are tax benefits, and the company itself will continue regardless of which doctors are part of the practice.

There are however on-going costs for reporting requirements.


3.Discretionary trust

More commonly known as the family trust.  The trust can be set up to receive income and pay business expenses. The trust’s profits are paid by way of distributions to its beneficiaries.

The key difference between a trust and company is that a trust is not a separate legal entity.


4.Service Business

This involves setting up a separate business entity that provides administrative support. The service business “looks after” the costs of operating the practice (such as leasing and equipment) and receives a fee from the “practice” for doing so.

The advantage of using a service business is that it provides asset protection by isolating risk away from the individual.



Generally, two doctors working side by side.  A partnership isn’t a separate legal entity, so income, expenses, and profit is collated and split evenly between the two doctors and is reported as personal income.

This model is becoming less popular as most sophisticated structures are more advantageous.


6.Joint Venture

Individuals who enter a business relationship with a specific purpose.  The main disadvantage is that the joint venture only exists for as long as it takes for the goal to be achieved and venturers are responsible for the debts.

However, depending on the goal in mind a joint venture can be a viable way to achieve a set outcome.


What Next?

Correctly structuring your business and practice is crucial for long-term success and to help guard against unwanted events.  Shareholder agreements are also critical in the setting up stage and go hand in hand with having the right business structure.

As with any key business decision, it pays to seek the advice of a qualified accountant or lawyer who can guide you through the process.



If you have any legal issues you would like to discuss,  get in touch with us today our team at You Legal is always ready to help.

* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.