Common Legal Issues Impacting Physical Therapy Practices

Key Takeaways:

Physical therapy practice owners face a range of legal issues related to business formation, contracts and employment matters that can directly impact long-term stability and growth. Choosing the right business structure, putting clear ownership and employment agreements in place and using well-drafted contracts can significantly reduce the risk of disputes and costly legal problems. Working with a business lawyer for physical therapists allows you to address these issues proactively, protect your interests and focus on running a successful practice rather than reacting to preventable legal challenges.

Owning a physical therapy practice means wearing multiple hats. In addition to providing patient care, you’re responsible for running a business, managing employees, negotiating contracts and making decisions that carry legal consequences.

The legal issues facing physical therapy practices can be quite varied and impact many different areas of the business. A small business attorney who has experience working with physical therapy practices can help you prevent many of the issues discussed below from developing in the first place. In the event that one of these legal issues arises, your attorney can make sure it’s handled properly so that you minimize the risk of costly consequences that can potentially derail your business.

physical therapist working on a patient

Business Formation Issues in Physical Therapy Practices

Many legal problems in physical therapy practices can be traced back to how the business was formed in the first place. The steps you take during the business formation process will lay the foundation for a successful practice and reduce the likelihood of disputes developing over time. A small business attorney can help you address the following common business formation matters to ensure you set your physical therapy practice up for success.

Choosing the Right Business Structure

At a basic level, business formation determines how your practice is legally organized. That structure affects who owns the practice, how profits are handled, how decisions are made and whether personal assets are protected if something goes wrong.

There are four potential business entities you can choose for your physical therapy practice:

  • Sole proprietorship
  • LLC
  • Corporation
  • Partnership

The right business structure for your physical therapy practice will depend on the specifics of your business, including how many owners are part of the practice and your long-term growth goals. When you choose the right entity, it will provide your practice with important protections, ensure operations run smoothly and set you up for long-term growth. On the other hand, choosing the wrong entity can expose you to unwanted financial liability and potentially limit your long-term growth options. An experienced small business attorney can provide the guidance necessary to ensure you choose the right entity for the specific needs and goals of your physical therapy practice.

Ownership and Partner Arrangements

Multi-owner physical therapy practices often face unique challenges around ownership. Common issues include:

  • Unclear ownership percentages
  • Disagreements over decision-making authority
  • Confusion about profit distributions
  • Lack of clarity around what happens if one owner wants to leave

These problems typically arise when owners rely on informal agreements or assumptions rather than putting expectations in writing. A well-drafted operating or ownership agreement lays out who owns what, who controls which decisions and how changes in ownership are handled. By creating these ownership and partner agreements during the business formation process, you can ensure each owner clearly understands their role and prevent avoidable disputes that may arise between partners down the road. Working with an experienced business attorney for physical therapists is the best way to ensure these agreements reflect the needs of your practice.

man getting physical therapy treatments

Contract Law Issues Affecting Physical Therapy Practices

Contracts are the backbone of a physical therapy practice. They govern relationships with landlords, vendors, referral partners, employees and patients. Many disputes arise not because someone acted in bad faith, but because the contract itself was unclear or poorly drafted.

Physical therapy practices regularly rely on a variety of different types of contracts as part of their regular operations. These may include:

  • Commercial leases
  • Service agreements with vendors
  • Independent contractor agreements
  • Partnership or buy-in agreements
  • Employment agreements
  • Terms of service agreements with patients

These contracts define relationships with other individuals who interact with your business, create the rules that govern how your physical therapy practice operates and outline how disputes are handled when something goes wrong. Problems often arise when those contracts do not reflect how the practice actually functions. When contracts aren’t carefully crafted, it increases the risk of a misunderstanding that can escalate into a serious and costly legal dispute.

When you work with an experienced attorney for physical therapy practices who can draft these contracts or review contracts provided by others, it will minimize the risk of disputes and provide your practice with important protections.

Contract Disputes

Contract disputes are usually rooted in unclear expectations. When a dispute arises, the contract itself becomes the primary reference point. If the contract is poorly drafted, resolving the dispute becomes more difficult and expensive.

While drafting contracts that clearly define terms and expectations can significantly reduce the likelihood of a dispute, it can’t eliminate the risk entirely. In the event that a contract dispute arises, your small business attorney can help you resolve the dispute in a way that makes sure your rights and interests are protected as best as possible given the terms of the contract.

Employment Law Issues in Physical Therapy Practices

If you have employees at your physical therapy practice, there are a variety of employment-related legal issues that you may have to navigate. Some of the most common include:

  • Choosing the proper employee classification
  • Drafting employee agreements
  • Handling employee disputes

Choosing the Proper Employee Classification

Employees can be classified in two different ways:

  • Employees – A worker whose hours, methods and duties are controlled by your business, with the business providing tools, training and direction. Your business withholds payroll taxes for employees and often offers benefits such as health insurance or paid time off.

  • Independent Contractors – A self-employed worker who typically uses their own tools, invoices for services, and is responsible for their own taxes and benefits, rather than having them handled by your business.

When employees aren’t classified properly, it can potentially result in significant tax, wage-and-hour, and regulatory penalties for your business. Working with an experienced small business lawyer can help you navigate employee classification matters to ensure they’re addressed correctly.

Drafting Employment Agreements

Drafting clear employment agreements help set expectations around:

  • Compensation and bonuses
  • Work schedules
  • Non-compete or non-solicitation provisions
  • Termination procedures

Without clear written agreements, you increase the risk of potentially costly employment disputes. Your small business attorney can help you draft these agreements so that they clearly lay out expectations and are legally enforceable.

Handling Employee Disputes

Employee disputes often arise when expectations around pay, duties, schedules or workplace responsibilities are unclear or change over time. Many of these issues develop when expectations were never clearly defined in writing or when informal practices evolve without being documented. When a dispute arises, the lack of clear agreements or policies can make it difficult to resolve the issue quickly and may increase the risk of expensive consequences for your practice.

Working with a small business attorney can help you put clear agreements and workplace policies in place that reduce the likelihood of employee disputes and provide guidance if a disagreement does arise. Having proper documentation and legal support allows disputes to be addressed more efficiently and with less disruption to your practice.

woman undergoing a physical therapy session on a yoga ball

Elizabeth Lewis Can Help

The best way to avoid the serious consequences associated with these common legal issues is to work with an experienced small business lawyer. At the Law Office of E.C. Lewis, we’ll make sure your practice remains protected.

Elizabeth Lewis is a small business lawyer for physical therapy practices in the Denver area. As your dedicated attorney, she can help you navigate the varied legal challenges impacting your practice. Her expert legal services include:

  • Handling business formation matters
  • Drafting and reviewing contracts
  • Resolving contract disputes
  • Addressing employment law matters
  • Providing guidance during ownership changes

Contact us today to schedule a consultation. The Law Office of E.C. Lewis serves clients in Denver and the surrounding areas of Colorado.