What does a management fee between my entities look like in practice?

The management fee starts with an invoice. Each month, or whatever schedule your MSA specifies, the management company sends an invoice to the clinical entity for the fee amount. That amount comes from the agreement your attorney drafted. It might be a flat monthly fee, a percentage of revenue, or another formula.

The clinical entity then pays that invoice. Actual money moves from the clinical entity’s bank account to the management company’s bank account. This is not a journal entry or a paper exercise. Real dollars transfer between two separate accounts on a regular schedule.

On the clinical entity’s books, the payment shows as a management fee expense. On the management company’s books, it shows as revenue. Each entity’s financial records stand on their own. If someone reviewed just the clinical entity’s books, they would see expenses going out. If they reviewed just the management company’s books, they would see income coming in. Both sets need to be complete and consistent with what the MSA says.

The documentation chain ties it together. The invoice from the management company should reference the MSA and match the fee calculation in that agreement. The payment should match the invoice. The bank statements should show the transfer. If the arrangement is ever questioned in an audit or by regulators, you need to show this chain clearly.

Problems grow when the fee exists on paper but the money never actually moves. Some owners set up the MSA structure but leave everything in one account, or they record journal entries without making actual payments. This creates tax issues because you’re claiming deductions or reporting income that doesn’t match your cash flow. It also creates compliance risk because the whole point of the MSA structure is a legitimate business arrangement between separate entities. If money isn’t changing hands, regulators may question whether the arrangement is real.

Pay on a consistent schedule. If the MSA says monthly, pay monthly. Irregular payments or payments that only happen when convenient raise questions about whether the agreement is actually being followed.

A note on scope. Designing your management fee belongs with your healthcare attorney. They structure the MSA to comply with corporate practice of medicine rules in your state and determine what fee amount or formula is appropriate. Multi-entity and MSA accounting is about making your books match the agreement. We record what the MSA dictates, keep both entities’ books accurate and separate, and ensure the payments are made and documented properly.

If you run a med spa or similar medical business with both a management company and a clinical entity, bookkeeping for medical businesses at Hunter Green CPA includes keeping both sets of books clean and consistent with your agreement. Book a consultation if you want to review whether your current setup is working correctly.