Health Law Pointers - Volume VI, No. 2
SELECTING A NAME FOR YOUR PRACTICE
Selecting a name for your professional entity is important because the name serves as a unique identifier for your practice. Professional practice names typically reflect variations of the following:
(1) The name of the practitioner(s) (ex. “Robert A. Smith, M.D., LLC”);
(2) The type of practice (ex. “Cosmetic Dentistry, P.C.”); and
(3) The geographic location of the practice (ex. Springfield Physical Therapy, LLP”).
An important limitation on the selection of a practice name is that the proposed name must be distinguishable from names used by other professional entities. The New York Department of State maintains “name availability” records and may be contacted to determine whether the proposed name of a professional service corporation, professional service limited liability company or registered limited liability partnership conflicts with or is indistinguishable from the real or fictitious name of an existing professional practice entity.
Applicable Department of State regulations provide that a proposed name will be rejected if the only “significant difference” between the proposed name and the existing name is one or more of the following:
“(1) a change in tense, reference to singular as opposed to plural, hyphenation of words, or the addition or omission of prepositions or contractions;
(2) the spelling of a word, including abbreviations, that has the same meaning in both spellings;
(3) the same number expressed in arabic or roman numerals;
(4) the addition or deletion of the word ‘company’; or
(5) among organizations of the same form, a change in the indicator of organizational form.”
For professional entities that are not formed through the New York Department of State (i.e., general partnerships and sole proprietorships), the availability of a proposed name may be checked against the records of the County Clerk’s office in which the practice is located. Internet searches can also reveal whether a particular name is already being used by another entity.
WHAT TO DO IF A PROPOSED NAME IS REJECTED
The New York Department of State may reject a proposed name for a number of reasons. The most common reasons include: (i) the name is already in use or is indistinguishable from a name already in use; (ii) the name implies that the entity will have a purpose for which it is not authorized; or (iii) the name contains a word or words the use of which requires the prior consent of another regulatory agency.
If a proposed name is rejected by the Department of State, the applicant may request reconsideration of the decision by writing to the Director of the Division of Corporations of the Department of State. The request for reconsideration should be accompanied by a copy of the rejection and a written statement setting forth the applicant’s grounds for reversing the initial decision to reject the proposed name.
In our experience, the Department of State has been most responsive to reconsideration requests that involve an applicant seeking to use a name that the applicant had already been using in connection with an existing business. This scenario can arise when an applicant seeks to incorporate a sole proprietorship using the name of the sole proprietorship for the new entity. In these cases, the Department of State appears to recognize that requiring an applicant to adopt a new name would be detrimental to the applicant’s existing business.
IS A JOINT VENTURE RIGHT FOR YOUR PRACTICE?
Collaboration among professional practices is becoming an increasingly popular method of doing business. There are a number of considerations in determining whether to participate in a joint venture with another practice.
One reason why a practice may enter into a joint venture or collaboration with another practice is that the practice is unable to accomplish a specific practice goal independently. For example, a practice may find that it does not employ an adequate number of medical technologists to utilize its medical equipment efficiently. Such a practice may seek out a partner that has adequate personnel but is in need of additional medical equipment. A successful joint venture generally involves parties that each “bring something to the table” that the other practice cannot provide on its own. Joint ventures can also promote the full utilization of staff and/or practice assets.
The potential for cost savings is another reason why forming a joint venture may be advantageous. A practice may decide to enter into a sharing arrangement with another practice in order to purchase expensive medical equipment. This type of sharing arrangement can achieve cost savings for both practices, particularly where the practices would be otherwise unable to afford the equipment purchase on their own. Any cost savings that is achieved through the use of a joint venture also increases the profitability of each practice.
A joint venture can also lead to additional collaborative efforts between the parties. In some cases, a successful joint venture may even result in a more formalized business relationship through a merger or other similar practice consolidation.
In selecting a joint venture partner, it is important to identify the specific goal or goals of the joint venture and the terms and conditions of the joint venture arrangement. Joint venture arrangements should be in writing in order to help prevent any misunderstanding between the parties as to the nature of the arrangement. Consultation with an attorney is recommended to ensure that the arrangement complies with all applicable federal or state anti-referral or fraud and abuse laws and regulations.
Copyright © 2004 Hurwitz & Fine, P.C. All Rights Reserved.