Tips for handling the business side of medicine
Michael L. Stark, JD, touches upon the three major phases in a physician’s career and how they should plan accordingly
Listen to the entire conversation: In this three-part track, Michael L. Stark, JD, elaborates on various salient points.
Part 1: How Stark got his start; physician career phases; concerns for inception of a medical practice
Part 2: Planning head—In event of death, disability insurance, retirement, withdrawal
Part 3: Effects of divorce, shareholder involvement, winding down a career
DR. NOREIKA: Please tell us how you came to represent so many physicians?
Michael L. Stark, JD: I originally was an accounting major who planned to be a CPA. In my senior year in college, I made the mistake of interning at a large, Big Eight accounting firm during the busy season: Dec. 31 to April 15. I saw they worked 14- to 18-hour days for 4 months. It did not seem like a lot of fun. So I decided to go to law school instead. It was a decision that changed my life.
When I came out of law school, in the 1960s, I went to work for a large forward-looking law firm that encouraged me to look for any new areas of law in which we could develop a practice. I decided to look at physicians. I found that they were not a good potential market for legal services at that time because of laws that prohibited them from acting as a business. Up to that point, everybody was in a profession but not in a business. In order to get into a business, it would have been necessary for physicians to incorporate. Only about five states permitted physicians to incorporate at that time. On top of it, the Internal Revenue Service said even if you are a corporation in those five states, doctors cannot act like a corporation for tax reasons. You could not elect a fiscal year, take advantage of corporate tax structures, set up a retirement plan with tax-deductible contributions, or take deductions for expenses such as medical insurance or life insurance.
But then a group of doctors in Cleveland, Ohio, retained a large law firm to get the Internal Revenue Service’s regulations, which were called the Kintner regulations, declared unconstitutional. They took that case to the U.S. Supreme Court. About 2 months after I joined my law firm, the Supreme Court ruled that doctors could incorporate and take advantage of business tax-deduction provisions.
That was an opportunity I couldn’t pass up. I started representing physicians in forming corporations, setting up retirement plans and group insurance plans, and creating medical expense reimbursement plans. I built a practice within about 2 years that kept me completely busy for about the next 30 years.
DR. NOREIKA: Would you say this was the watershed moment in which physicians went from their professional roots into a more business-like environment?