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Texas Physicians: Choosing an Entity to Reduce Vicarious Liability
Entity Choice Matters
For Texas physicians, the choice of practice entity is a core risk-management decision. The right structure can reduce personal exposure to vicarious liability for the acts of other owners, employed clinicians, and staff—while complying with Texas’s corporate practice of medicine rules. Below is a concise overview of the common options, how they address vicarious liability, and practical tips for structuring and maintaining protections.
Why Entity Choice Matters
- Vicarious liability arises when an owner is held responsible for another’s negligence (e.g., a partner’s malpractice or a staff member’s error).
- Most professional entities insulate individual physicians from liability for others’ acts—but not from their own negligence or from the entity’s obligations they personally guarantee.
- Protection depends on proper formation, ongoing compliance, and clear governance and supervision practices.
Common Texas Structures for Physician Practices
| Entity Type | Who Typically Owns | Owner Exposure to Others’ Acts | Entity Exposure | Notes |
|---|---|---|---|---|
| Professional Association (P.A.) | Licensed physicians (and certain closely related professionals, as permitted) | Usually protected from vicarious liability for other owners/employees if not directly involved or supervising negligently | The P.A. can be liable for employees’/agents’ acts within scope | Longstanding, physician-specific form; corporate formalities and malpractice coverage remain essential |
| Professional LLC (PLLC) | Licensed physicians (and certain permitted professionals) | Members generally not liable for other members’/employees’ malpractice absent personal involvement | The PLLC can be liable for employees’/agents’ acts within scope | Flexible governance; observe separateness and professional ownership rules |
| Limited Liability Partnership (LLP) | Partners who are physicians | Partners are generally not liable for partnership obligations arising while LLP status is in effect, except for their own acts | The partnership can be liable for employees’/agents’ acts within scope | Must maintain LLP registration and required insurance or financial responsibility |
| Nonprofit Health Organization (NPHO) | Certified nonprofit that may employ physicians | Directors/officers typically insulated; individual physicians remain liable for their own care | The NPHO may face exposure depending on control over clinical acts | Requires state certification and strict safeguards for independent medical judgment |
| General Partnership | Partners who are physicians | Partners are generally liable for partnership obligations and other partners’ acts | Entity exposure and full partner-level exposure | Typically not recommended for liability reasons |
| Sole Proprietorship | Single physician | Full personal liability for all practice acts | N/A | Not advisable from a liability perspective |
Practical Design Tips to Strengthen the Shield
- Keep physician ownership and control compliant with Texas corporate practice of medicine requirements.
- Use written governance documents that allocate clinical oversight and administrative control clearly (e.g., medical director duties, supervision protocols).
- Maintain entity formalities: separate bank accounts, documented meetings/consent actions, and clear employment/independent contractor agreements.
- Ensure adequate malpractice and entity-level insurance (and tail coverage on exit).
- Calibrate compensation and incentive models to avoid creating unintended “control” that could support vicarious liability.
- Periodically review supervision and delegation policies for APPs and staff; document training and QA/peer review processes.
- For LLPs, monitor renewal filings and financial responsibility requirements to avoid lapses that can forfeit protection.
Choosing Among the Options
- Small groups frequently select P.A. or PLLC structures for simplicity and strong protection from others’ malpractice.
- Multi-physician groups that prefer partnership-style economics sometimes use an LLP to reduce partner-to-partner exposure while retaining partnership tax and governance features.
- Systems or community models may consider an NPHO, but certification and strict observance of independent medical judgment are critical.
Bottom Line
P.A.s, PLLCs, and LLPs are the most common Texas vehicles for physicians seeking to reduce vicarious liability. They can shield individual doctors from others’ malpractice if properly formed, maintained, and operated—while leaving each physician responsible for their own professional acts and ethical obligations. Work with healthcare counsel to match the entity to your practice model, verify ownership and control rules, and build governance and insurance programs that preserve the liability shield.
This post provides general information, not legal advice. Consult Texas healthcare counsel for advice tailored to your practice.
