Pulley vs. Carta for an Outpatient PT Network's Equity

It depends on the state. Some states apply corporate-practice-of-medicine-style restrictions to physical therapy ownership, requiring a licensed PT to hold the clinical entity, while others don't restrict it the way they restrict physician-owned practices. A multi-state network needs this confirmed clinic by clinic, since a structure that's fine in one state can be a real problem in another.

Networks that expand by acquisition tend to inherit whatever structure the acquired clinic already had, which isn't always the structure the parent network uses elsewhere. Reconcile any inherited structure against your own standard approach shortly after each acquisition closes, rather than letting inconsistent structures accumulate across the network.

When a clinic joins the network, the founding therapist typically takes part cash and part equity in the parent management entity, a rollover meant to keep them invested in the broader network's growth. That rollover stake should be tracked at the management entity level, kept clearly separate from whatever clinical ownership structure your state requires at the individual clinic.

As with any rollover structure, write down what happens if the therapist's own clinic underperforms after joining, or if the therapist leaves clinical practice altogether but keeps their equity. Networks that grow through a steady cadence of acquisitions benefit from a single standard rollover template applied consistently, rather than negotiating each deal's terms from a blank page.

Phantom equity, in almost every case. A regional director overseeing several clinics is a critical retention target, but real equity is typically reserved for someone who actually sold a practice into the network or is taking on real ownership risk. Phantom equity tied to the region's performance rewards the director without diluting founding therapists' or investors' real stakes.

Tie the formula to metrics the director genuinely controls: visit volume, patient retention, and staff turnover across their region, rather than company-wide results that include clinics outside their oversight. A director managing three clinics shouldn't see their payout swing because of a struggling clinic in a different region they have no involvement with.

Early on, when the network has a small number of founding therapists' rollover stakes and no outside capital yet. Pulley gets a clean cap table set up quickly without a lot of process overhead, which matters most in the first year or two after a network starts consolidating, when the founding team is often doing this work themselves alongside everything else involved in integrating a new clinic.

Once the network has raised outside capital to fund clinic acquisitions, added a board, or is managing rollover equity across enough founding therapists that investor-grade, consolidated reporting becomes necessary rather than optional. That shift usually happens gradually rather than at a single obvious moment, so it's worth checking in on which side of the line you're actually on every time a new acquisition closes.

The first stock option grant with a strike price to a non-founder employee, whether that's a regional director, a VP of clinical operations, or an early corporate hire. Get the valuation before the grant, using a provider who understands how multi-location outpatient services businesses are actually valued, rather than applying a generic SaaS valuation approach to a very different kind of business.

Write a defined buyback or transfer mechanism into the original rollover agreement, covering price methodology, timing, and whether the network or its investors have a right of first refusal. Networks that leave this undefined tend to negotiate it for the first time under pressure, when a founding therapist unexpectedly wants liquidity and there's no agreed process to fall back on.

A regional clinical director's relationships with referring physicians and orthopedic practices are often as valuable as their clinical work, which makes a properly drafted non-solicit and non-compete, reviewed for enforceability in every state the region spans, an important companion to any phantom equity plan. Vesting discourages an early departure financially; the restrictive covenants are what actually protect the referral relationships if that person leaves anyway.

Settle these points before a founding therapist closes a deal to join the network:

• Whether your state requires a licensed PT to own the clinical entity, confirmed clinic by clinic for multi-state networks.
• How rollover equity is held at the management entity level, kept separate from any clinical ownership.
• A defined buyback or transfer mechanism covering price methodology, timing, and any right of first refusal.
• Phantom equity for regional directors tied to the aggregate performance of the region they oversee.
• A non-solicit and non-compete reviewed for enforceability in every state the region spans, plus a 409A valuation before the first option grant.