Question

Scenario #3 A group of 2017 graduates from the WMU College of Health & Human Services decided to stay in the Kalamazoo area and begin their career. They decided that they wanted to help the frail elderly remain in their homes by providing health care services right in the home. This seemed to be a good idea because they surveyed the competition and the other agencies providing this service had long waiting lists and could not find enough health care professionals to meet the need. This group of graduates included one occupational therapist, a social worker, two nurses, and a physician assistant. One of the graduates knew a friend from Grand Valley State University who was graduating as a physical therapist and would be interested in joining them in practice. The physician assistant needed to work under the supervision of a physician; and for billing purposes the business model they were creating would need to be under the supervision of a physician. They therefore thought that the geriatrician working at a local hospital may agree to join their practice on a part-time basis. The services they decided to provide in the home included a broad range of care including skilled nursing care, physical therapy, occupational therapy, home health aide services, medical social services, and medication monitoring as well as medical services for the home bound. 1. What type of business structure would you recommend for this group of students? WHY? 2. What type of tax structure? (Profit or Nonprofit) WHY?

Answer 1

1. For this group of students I would recommend a limited partnership form of business structure. The reason why I am recommending this form of business structure is due to the fact that in a limited partnership there is a limit with regards to liability related to potential lawsuits and money that the partners will be exposed to. The liability of the partners will only be limited to the amount of capital that they have contributed. Secondly as their business and operation grows they will be able to attract new investors quite easily.

2. The type of tax structure that I would recommend is nonprofit. This is because the graduates here have a mission to serve the public interest in the Kalamazoo area. Being a nonprofit organization they will receive exemptions from both state and federal taxes and the federal 501(c)(3) status. The status mentioned here will not only exempt the entity from federal taxes but will also make contributions to the organization tax-deductible to the donor.

Thus the entity, by being a nonprofit entity, will be in a dual position of advantage – firstly by avoiding taxes and secondly by getting higher funds as donations.

Till the time the nonprofit entity does not get incorporated it will function as an unincorporated nonprofit association.