When can your optical shop be considered a separate business?

[ilanh]

I was wondering if anyone has visited this issue in the past. For those of us who own their own optical shops while also running an optometric or ophthalmological practice; can the optical business be considered a totally separate business? I seem to recall that most regulatory agencies will not consider a business as separate if that business relies exclusively on referrals from the main business. However, I also heard that if the optical shop is not 100% owned by the doctor it could be considered a separate business (I seem to recall 79% ownership as the cutoff point). There are many tax ,pension, and asset protection implications in this topic and it can get complicated. The ultimate goal would be to create a second, totally independent incorporated company with its own employees.

[For-Life]

If I am correct (I have a HBComm, but only took a few classes in Accounting, so I can be wrong). Accounting wise, as long as you opening up "the second business." Meaning that it can be in the same location with the same ownership, but different name and such.

If you are talking licensing wise, I think you need a second main entrance.

[Johns]

If you operate under a seperate tax ID#, and the employees worked exclusivley for that company, it should be considered seperate.

I operate 3 different businesses out of one location (wholesale, retail, & equipment sales ), and I operated them as seperate for both tax and liability purposes.

[ilanh]

I think that the crucial feature here is that the question involves an optometrist or an ophthalmologist owning the optical shop. Of course, if you are an optician you can own as many optical shops as you like and you can consider them all separate businesses. However, I think that for OD/MD's the presumption is that it is not a "separate" business because it is entirely dependent on the referral flow from the first and main business.

[For-Life]

I think that the crucial feature here is that the question involves an optometrist or an ophthalmologist owning the optical shop. Of course, if you are an optician you can own as many optical shops as you like and you can consider them all separate businesses. However, I think that for OD/MD's the presumption is that it is not a "separate" business because it is entirely dependent on the referral flow from the first and main business.

It really depends on the laws in your State.

For instance in Ontario, an optician cannot work for an OD and an OD cannot work for an optician. So if you want to work close to each other the best you can do it open next door to each other and have seperate entrances. Now, can the OD own both practices? I am not sure, because in that case the optician would be working for the OD. See what I mean?


FYI - Here, the OD can dispense without an optician. However, it is not the OD who is doing the dispensing. Ridiculous law (rant mode off).

[a1vo]

It really depends on the laws in your State.

That's right.


Last time I check w/ California State Medical Board, they sent me the pages of regulation related to the relationship between opticians and eye doctors.

If I read correctly, it says the only legal relationship is "optician can be hired by doctor". Doctor cannot be optician's landlord, doctor cannot co-own any percentage of optical business with optician and doctor cannot be hired by optician.

Of course, there must be some loophole. Many optical retail chains have OD on there permise. One of the loophole which I have heard of is starting a HMO (don't ask me details). The other loophole in my imagination would be both doctors and opticans lease space from the same landlord. And recent LC win over State of California could change things around a little (http://www.optiboard.com/forums/newr...reply&p=167673).

[ilanh]

I think that I am not stating my point clearly: My question does not entail whether or not an OD/MD can work for an optician or an optical chain. My question fully assumes that the optician is a direct employee of the OD/MD. The issue is whether or not the OD/MD can set up a separate corporation in which the optical shop is a distinct and separate entity from his other practice, and the employees within that shop are not considered employees of the OD/MD main practice. For example, let's say that you are examined by Dr. Smith at his office (incorporated as John Smith OD, inc). He then suggests that you get glasses in his optical shop (incorporated as Optical Paradise inc.). Can John Smith OD be the CEO of both John Smith OD inc AND Optical Paradise inc. as two distinct and separate businesses?? If so, he could have 2 different tax returns, 2 different pension plans, 2 different sets of employee benefits etc etc. I can see that this could set up the potential for abuse, as an employer could shuffle around his employees and his revenues in whichever way he finds beneficial.

[a1vo]

You should address your questions to your lawyer/accountant. Too much issues involved here.

But I do have a question:

If "John Smith OD, inc." and "Optical Paradise inc." are true two distinct and separate businesses, how can they shuffle their employees around? If an employee is paid for by "Optical Paradise inc." for the hour, he need to physically reside in the "Optical Paradise Inc" and fulfill the jobs responsibility only related to the "Optical Paradise Inc.".

[chip anderson]

When you do not share "a common roof" or someone else owns the business. Put it in your wife or child's name like all the other tax dogers and go ahead on.

[fjpod]

The issue is whether or not the OD/MD can set up a separate corporation in which the optical shop is a distinct and separate entity from his other practice, and the employees within that shop are not considered employees of the OD/MD main practice. ... If so, he could have 2 different tax returns, 2 different pension plans, 2 different sets of employee benefits etc etc.

Yes to the first question.

Yes to the second question, except if an employee complained, and the IRS did an investigation, and if they determined that the only reason you set up two separate entities was to pay less taxes or to deny benefits that you are paying other employees, you can get into trouble. You can have two businesses, and you don't necessarily have to offer equal everything to all, but if you can't prove another reason for the disparity, watch out.

[Dannyboy]

You are probably thinking about safe harbor issues. Those are two different things. The thinking is that if a doctor owns two companies, a professional association and a retail operation such as the optical and the only source of referrals is the professional association then safe harbor is not met unless you have complete and total disclosure to your patients etc...including the tax man (or lady). The problem gets more complicated when one doctor owns the optical and other in the P.A. do not. This is a very confusing issue. Antikickback laws apply. It use to be a touchy subject in the past because some MDs did not want their patients to know they owned the optical store and benefited financially from what they prescribed (no offense here..please) but today it just expected for the ophthalmolgists to benefit from the optical store so most practices incorporate the optical into the business and thats that. Optometrists never had these problems only MDs as far as I know. There use to be an expert here in the past (Gil Weber I believe) who was the wiz in this and other practice issues.

As far as owning two different businesses, I believe you can as any Joe can, but do not forget the safe harbor deal and total disclosure, PLAY IT SAFE.




Dannyboy

[Texas]

I am a newcomer to the site and just returned after a long absence. Replying to the question about the optical being a separate entity, I operate an optical in Texas as a separate business from our medical practice. We consulted an attorney when we formed the business and chose a limited partnership as the type of entity. We have a separate tax ID number and file a separate tax return for this entity. Our primary reason was for the optical and the PA to separate liability from each other. The optical employees receive paychecks issued from the separate bank account of the optical entity. However, the employer provided benefits (health and dental insurance, 401k) are the same for the optical and the medical practice employees. This is due to the rules that require entities with common ownership to provide the same benefits to employees to prevent special or better benefits being provided to a selected group of employees in a separate shell company. I believe 50% or more is all it takes for "common ownership" to apply.

Good point about safe harbor. Despite a differnt name on the door of the optical, we always disclose that the doctor owns the optical.

[Andrew Weiss]

As the guy who practiced law for 20+ years, it's great to come on and see such good, detailed answers to a legal question, especially from Dannyboy and Texax. :D

Of course in theory the doctor can set up two separate corporations, one to own his practice and the other to own the optical shop. However, if he's the majority shareholder in both (majority means over 49%), he can run into trouble. It will look like he's established the two separate corporations to evade something -- like taxes, or his obligation to provide equal benefits to all employees. I would never recommend that kind of setup; it's inviting trouble.

Just having separate tax ID#s and different names doesn't cut it if the two -- the practice and optical shop -- don't have legally separate ownership.

If you have two separate legal entities -- an optometric/opthalmic practice and an optical shop, owned by two separate entities (corporations, partnerships, etc.) -- then they really should be separate: different ownership (even if the doc owns shares in the optical, it would have to be 49% or less -- and even then you'd have to do safe harbor disclosures, etc.), different management (the doc should not be the CEO of the optical shop), etc. Doing anything else invites sniffing from the powers that be (state licensing boards, tax authorities, etc.), and if you're "caught", you all could be in trouble, the doc especially.

You should really see a lawyer who knows both corporate law and the laws and regulations relating to your profession in your state. You need advice tailored to your specific situation. I'll just caution you the way I used to caution my law clients: do it right the first time and don't sneak around the edges. ;)