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Incorporating a GP Practice – is it right for your practice?

If you are a primary care partnership looking into alternative ways to deliver your core services, then this article is for you. There are a number of legal and tax related implications to consider before incorporating, and in this blog we look into some of the pros and cons of incorporating a GP Practice.

What is incorporation?

‘Incorporation’ means to constitute (a company, firm or other organization) as a legal corporate entity separate from its owners.

You may already have set up a limited company, for example, to hold your premises, deliver consulting services or to subcontract some of your core services. This blog concentrates on transferring the whole of the practice – namely the core GMS or PMS contract – into a limited company.

Why incorporate?

Whilst there are clearly many positive attributes to the partnership model, there are also a few problems, including:

  • unlimited joint and several liability
  • lack of a legal entity to contract. In a partnership it is the partners who contract personally

Some of the benefits of delivering your core services from a limited company include:

  • a limited company is a legal entity in its own right and may hold assets and liabilities and enter into contracts in its own name. The directors and shareholders may change, but ownership of the assets and liabilities by the limited company remains the same. This simplifies matters when dealing with changes in property ownership, as there will be no need to change the name of the registered owners at the Land Registry, deal with Bank refinancing, or change the names on any contracts.
  • a shareholder’s liability is limited to the value of their shareholding, which is usually limited to a few hundred pounds. Incorporation separates business assets from personal assets and creditors cannot come after a shareholder’s personal assets for a debt owed by the limited company.
  • the management and ownership roles are separated. This allows for a wider range of business models than the partnership model allows, such as bringing in business managers as directors without the requirement for them to contribute capital or incur risk. Similarly, shareholders may contribute capital and receive profits without having any day to day involvement in the running of the practice.
  • all staff, including directors, are normally employees and therefore paid under PAYE and have full employment rights. The partners in a partnership are self-employed and have very limited employment law protection, but what they lose in employment protection they gain in tax relief and partnership status. With the current challenges in recruitment of new partners, the protection afforded by a directorship in a limited company may be more attractive to some.

But incorporation does present its own problems, including:

  • you are bound by the strict regulations set out in the Companies Act 2006. These override all your own governance rules, and you are not at liberty to run your business in a way that suits you and your partners, without reference to the Act. Partnerships by contrast are governed by the Partnership Act 1890 which is a much simpler and more flexible set of regulations, most of which you are able to tailor to your own needs.
  • whilst limited liability is a major benefit for the shareholders of a limited company, it is a significant disadvantage for creditors who may be unwilling to lend to a limited company unless it has sufficient assets (such as a surgery) over which they can take security. Banks may ask for personal guarantees from the shareholders, and landlords could ask for guarantees from the directors.
  • there is no ‘expulsion’ mechanism to remove a partner in the event that you can no longer work together. Special rules need to be written into the company’s Articles but even then, it is likely to be complicated to expel as it will involve terminating a person’s status as an employee, director and shareholder.
  • you will need to make annual filings, including accounts, at Companies House and such information is publicly available. You will need to hold regular board meetings, record the minutes and document certain decisions in a specific way.
  • shareholders do not have individual capital accounts. When a company makes a profit (or loss) this is not divided up amongst shareholders, but is retained by the company for its own benefit. The directors may then recommend that a dividend is paid to the shareholders as a return on their capital invested in the company, but this is only made from a combined ‘pot’ of retained profits. It is illegal to make a dividend payment unless there are sufficient retained profits in the company as a whole.


Whilst limited liability is a hugely attractive benefit, limited companies are not panaceas to all the issues of running a primary care practice, and there are definitely both pros and cons. We have certainly seen a trend towards practices incorporating, but any decision to do so should only be taken after seeking expert advice from both tax accountants and specialist primary care solicitors so that you can be advised on your particular situation. Incorporating a GP Practice certainly works for some, but many others discover that it is not for them.

Our specialist team at DR Solicitors are happy to answer any queries you may have about incorporating a GP Practice, and can also put you in touch with some expert accountants. Please contact us here or telephone 01483 511555.