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Dallas G. Thomsen, LL.M.

Dove Lewis VetWrap

May 2016

Dallas G. Thomsen, LL.M.

Published in the Dove Lewis May 2016 VetWrap Issue

Responsible Vet Ownership: Oregon Broadens Eligible Owners of Veterinarian Practices

As of January 1, 2016, Oregon no longer requires that only Oregon-licensed veterinarians own veterinarian practices in Oregon. With few exceptions, any individual, partnership, LLC, profit or non-profit organization, or other business entity is allowed to own veterinary facilities. This new change in the law opens ownership to be shared with family or employees leading to new opportunities for using ownership for a variety of benefits, including estate planning and employee incentives that may not have been available in the past. 

In Oregon, the rule that only veterinarians can own veterinarian practices dates to the late 1990s, when corporate chains of veterinary practices emerged. This rule was designed to prevent the rise of big veterinary corporations in Oregon; however, the rule was ineffective, as these corporations found legal ways to work around the rule. On the other hand, the rule may have been unintentionally more effective in preventing smaller, family-owned veterinarian practices from transferring ownership to family members or sharing ownership with employees. The rule was not accomplishing its intended purpose and was having unintended effects. Therefore, last July the Oregon Legislature passed new rules, which the Oregon Veterinary Medical Examining Board (the "Board") approved, that removed the requirement that only Oregon-licensed veterinarians own veterinarian practices in Oregon.

How Will the New Rules Work?

Veterinary facilities must register with the Board and designate an Oregon licensed veterinarian as Managing Veterinarian ("MV"). If a facility fails without good cause to register with the Board, the practice of veterinary medicine in the facility may be restricted or suspended. The MV does not have to be an owner, but may be an owner, employee or even a volunteer.  Nevertheless, the MV will be responsible to the Board for maintaining current facility minimum standards. A summary of the facility minimum standards may be viewed on the Board's website: www.oregon.gov/OVMEB/pdfs/Rules/Facility_Minimums_9.2015.pdf.

For 2016 registration, a MV must certify compliance with current facility minimum standards. For 2016 only, failure to meet current facility minimum standards, unless particularly egregious and harmful to public or animal health, will be addressed by the Board through education and a reasonable opportunity to achieve compliance.  Routine registration inspections by the Board are planned to begin in January 2017.  The Board will continue to inspect any facility that is the subject of a valid complaint.  The Board may implement further compliance standards after the rules are in place for a period of time and compliance is evaluated.

New Opportunities

Veterinarian owners will have new opportunities with the change in rules. Veterinarians can now use direct ownership in estate planning with non-veterinarian recipients. Ownership of a veterinarian facility can be passed to the next generation before the children are licensed (or even if they do not want to be licensed) to ensure succession of the business and utilize tax-advantaged structures. Ownership can be transferred to a non-licensed spouse of a veterinarian to provide security or take advantage of planning opportunities.

Non-licensed employees can now be owners. Veterinarian owners can use incentive programs utilizing ownership for such non-licensed employees. Valuable non-licensed employees are now targets for business partners or potential business succession.

Veterinarian owners can offer ownership to investors. If the veterinarian owner does not qualify for a loan or does not want to take out a loan, the veterinarian owner can enter into business with a non-licensed partner without resorting to complicated and cumbersome business structures.

On the surface, allowing non-licensed persons to own veterinarian practices with licensed veterinarians may seem like Oregon is opening the door for large corporate veterinarian practices. However, in practice, the old rules did not prevent large corporate veterinarian practices, and the new rules open up opportunities for all veterinarians.

The author, Dallas G. Thomsen is a business, tax and estate planning attorney with the Portland law firm Sussman Shank LLP. He can be reached at 503.227.1111 or dallas@sussmanshank.com.

Link to article in the Dove Lewis Vetwrap Newsletter: 

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