# Starting a NEMT Business with a Partner in 2027: Medicaid Checks, Ownership, and the Operating Agreement

Canonical URL: https://nemtguide.com/guides/nemt-business-partnership/ · Updated 2026-10-03

A NEMT business partnership works best as an LLC with a written operating agreement. Medicaid screens every owner of 5 percent or more and every partner in a partnership, so one partner's exclusion or conviction can end the company's enrollment. The agreement should name who signs Medicaid filings, how ties are broken, and how a departing partner's whole share is bought out.

- Medicaid collects each partner's name, birth date, and Social Security number, and the state checks each one against federal exclusion lists at least monthly.
- If a partner is excluded from federal health programs, the OIG can exclude your whole company, so the buyout terms must force a sale of that partner's entire share.
- With no written agreement, state default rules decide votes and payouts, and a 50/50 deadlock can end in a court-ordered dissolution.
- Every partner who owns 20 percent or more must personally guarantee an SBA loan in full.
- Report a partner's exit to Medicaid within 35 days, or sooner where your state requires, such as 7 calendar days in Washington.

Two people often start a NEMT company together: one knows driving and the vans, the other knows billing and the brokers. A partner can double your money, your hours, and your contacts. In Medicaid transportation, though, a partner also becomes part of your company's enrollment. Their record, their other businesses, and the way they leave can decide whether your company keeps getting paid.

## Who Medicaid screens when you have a partner

When your company enrolls, the state collects the name, address, date of birth, and Social Security number of every person with an ownership or control interest, and asks whether any of them are related as spouse, parent, child, or sibling ([42 CFR 455.104](https://www.ecfr.gov/current/title-42/section-455.104)). The [LLC guide](https://nemtguide.com/guides/llc-for-nemt/) covers the whole disclosure, and the [disclosure of ownership worksheet](https://nemtguide.com/templates/medicaid-disclosure-of-ownership/) helps you fill it in. With a partner, the question is who counts.

- **Owners of 5 percent or more.** Ownership through another company counts. Under [42 CFR 455.102](https://www.ecfr.gov/current/title-42/section-455.102), 10 percent of a holding company that owns 80 percent of yours is an 8 percent interest. Federal rules define ownership as equity in the company's capital, stock, or profits, so a partner who only shares profits still counts.
- **Every partner in a partnership.** Federal rules count any partner in a company organized as a partnership, and CMS's Medicaid Provider Enrollment Compendium, last updated November 17, 2025, says all general and limited partnership interests must be disclosed regardless of percentage.
- **A partner who lends instead of buying in.** A person holding 5 percent or more of a note or other debt secured by the company counts once that share equals at least 5 percent of the company's assets. Holding 10 percent of a loan secured by 60 percent of your assets is a 6 percent interest.
- **Whoever runs the day-to-day operation.** A managing employee is disclosed whether or not they are on your payroll.
- **Anyone you authorize to act for the company.** Federal rules call this person an agent, and the state screens agents along with owners.

Texas shows how this works on a form. Its provider manual (September 2026) requires an owner, creditor, or principal entry from every 5 percent owner, officer, director, managing employee, limited or general partner, and creditor with a secured interest of at least 5 percent. The principal who signs the provider agreement certifies that every one of those entries is complete and correct.

### What the state checks about each partner

- **Exclusions, every month.** The state checks owners, agents, and managing employees against federal databases, including the HHS OIG exclusion list, at least monthly ([42 CFR 455.436](https://www.ecfr.gov/current/title-42/section-455.436)).
- **Convictions.** The state must deny or end enrollment when a 5 percent owner was convicted of a Medicare, Medicaid, or CHIP crime in the last 10 years, unless it documents why that is not in the program's best interest ([42 CFR 455.416](https://www.ecfr.gov/current/title-42/section-455.416)). It may also refuse to sign or renew an agreement when any owner, agent, or managing employee has a conviction tied to Medicare, Medicaid, or the federal social services program (title XX), however old ([42 CFR 455.106](https://www.ecfr.gov/current/title-42/section-455.106)).
- **Fingerprints.** Where your state rates NEMT providers as [high risk](https://nemtguide.com/glossary/provider-risk-levels/), each 5 percent owner submits fingerprints, within 30 days of a request ([42 CFR 455.434](https://www.ecfr.gov/current/title-42/section-455.434)). Arizona lists non-emergency transportation providers as high risk in its notice revised December 17, 2024. CMS's compendium says the 5 percent line applies to partnerships too, so a 12 percent partner is fingerprinted.
- **Past companies.** Depending on the option your state chose, you list each owner's and manager's affiliations in the past five years with any provider that has a disclosable event, either with every application and revalidation or when the state asks ([42 CFR 455.107](https://www.ecfr.gov/current/title-42/section-455.107)). That means unpaid Medicare or Medicaid debt, a payment suspension, an OIG exclusion, or a denied, revoked, or terminated enrollment. The state can deny or end your enrollment if it finds an affiliation poses an undue risk of fraud.

One partner's silence can cost both of you. The state must end the enrollment when a 5 percent owner fails to give timely, accurate information or to cooperate with screening, and the rule has no best interest exception.

### Check a partner before you sign anything

1. **Search the exclusion lists.** Look up your future partner on the [OIG exclusion list](https://nemtguide.com/glossary/oig-exclusion-list/), on [SAM.gov exclusions](https://nemtguide.com/glossary/sam-exclusions/), and on your [state's Medicaid exclusion list](https://nemtguide.com/glossary/state-medicaid-exclusion-lists/). Record each search in an [exclusion screening log](https://nemtguide.com/templates/exclusion-screening-log/).
2. **Ask about every company they owned or managed in the last five years.** Ask whether any owed Medicare or Medicaid money, had payments suspended, or lost its enrollment.
3. **Ask about convictions in writing.** Health program crimes in the last 10 years are the hard stop, and your state may screen for more.
4. **Ask how they will own their share.** Shares held through a holding company, a trust, or a spouse are still disclosed, and the SBA combines a spouse's and minor children's ownership with the partner's.
5. **Agree on the split before you file.** California, for one, measures later ownership changes from your last approved application.

## Why a handshake partnership is risky in NEMT

You do not need paperwork to become partners. In Florida, two or more people who carry on a business together as co-owners for profit form a partnership whether or not they mean to, and a person who shares the profits is presumed to be a partner (2026 Florida Statutes, 620.8202). Every partner is then personally liable, jointly and severally, for all of the partnership's obligations (620.8306). For a company whose vans carry riders every day, that is a lot of personal exposure.

A general partnership is also fragile for Medicaid. The IRS says a partnership needs a new EIN when one partner takes it over to run alone, or when the old partnership ends and a new one begins (page updated July 21, 2026). A new tax ID can restart your approvals: Washington ends the provider agreement on the date a change of ownership brings a new tax ID. The same IRS page says a partnership that converts to an LLC taxed as a partnership keeps its EIN, so a handshake partnership can move into an LLC without a new number. Ask your state Medicaid agency before you convert, since the legal entity on your enrollment changes.

An LLC usually rides out a partner's exit better, because the IRS list of LLC changes that need a new EIN does not name a change in members. The same list does name a one-owner LLC that files employment taxes, so ask your CPA before a two-owner LLC drops to one.

Form the LLC in the state where you drive before your first Medicaid application. The [LLC guide](https://nemtguide.com/guides/llc-for-nemt/) covers the structure, taxes, and fees, and [how to start a NEMT business](https://nemtguide.com/guides/how-to-start-a-nemt-business/) puts it in order with the rest of your setup.

## What your operating agreement should cover

The IRS notes that a partnership agreement can be oral or written, and that where it is silent, local law fills the gap (Publication 541, revised December 2025). State default rules were not written for a Medicaid provider. In Florida, for example:

- **Votes go by profit share.** Each member of a member-managed LLC votes in proportion to their share of the profits, and acts need a majority in interest (605.04073). Two 50 percent owners cannot outvote each other.
- **Changes need everyone.** The operating agreement can be amended only with the consent of all members.
- **Payouts follow contributions.** Distributions are shared by the agreed value of what each member put in, as stated in the company's records (605.0404).
- **A departing member gets nothing automatically, but keeps their share.** Leaving does not by itself entitle a member to a payout (605.0404). The member loses the vote but keeps their share of the profits as a transferee (605.0603).

Write your own terms instead. For a NEMT company, cover at least these:

1. **Who owns what, and what each person put in.** List cash, vans, and equipment at an agreed value. Title every van in the company's name.
2. **Who does which job.** Name the person who runs daily operations. That person is your managing employee for Medicaid.
3. **Who signs.** Name who signs Medicaid applications, revalidations, and broker agreements. The authorized official on your NPI record must be a general partner, a direct owner of 5 percent or more, or an officer such as the CEO or CFO, under CMS's NPI form (Rev. 02/25).
4. **How votes work.** Set which decisions need both partners, such as new debt, a new broker, or a new partner, and which one partner can make alone.
5. **How ties are broken.** Name a tie-breaker, such as a trusted adviser, mediation, or a buy-sell offer. In Florida, a member can ask a court to dissolve an LLC when a deadlock threatens irreparable harm, but a deadlock sale clause already started under the operating agreement applies instead (605.0702). Dissolution means winding up the company itself.
6. **How partners get paid.** Set fixed pay for work and a rule for profit distributions. The IRS treats fixed payments to a partner for services as guaranteed payments: deducted on Form 1065, listed on the partner's K-1, and not subject to income tax withholding. See [NEMT business taxes](https://nemtguide.com/guides/nemt-business-taxes/).
7. **Compliance duties.** Require each member to give Medicaid accurate information, submit fingerprints within 30 days of a request, and tell the other partner at once about any charge, conviction, or exclusion.
8. **Access to records.** Give every partner access to claims, remittances, bank statements, and broker portals.
9. **Exit terms.** Set the buyout rules in the next section.

## Buyout terms that keep the company enrolled

Every partnership ends someday. A buy-sell section decides whether the company keeps running when it does. Name the events that start a buyout:

- A partner dies, becomes disabled, or wants out
- A divorce would hand part of a share to a spouse who would then be disclosed as an owner
- A partner is excluded, convicted of a health program crime, or refuses to cooperate with Medicaid screening
- A deadlock lasts past a set number of days
- A partner seriously breaks the agreement

The exclusion trigger matters most in NEMT. The HHS OIG may exclude a whole company when a person with an ownership or control interest in it has been excluded or convicted of a covered offense ([42 CFR 1001.1001](https://www.ecfr.gov/current/title-42/section-1001.1001)). Moving the share to a family member or someone in that person's household, before or after the conviction or exclusion, does not avoid it. The excluded person can also face civil money penalties for keeping a 5 percent stake, or for staying on as an officer or managing employee ([42 CFR 1003.200](https://www.ecfr.gov/current/title-42/section-1003.200)).

Removing that partner from management is not enough on its own. Under Florida's default rules, a member who walks away or is expelled keeps their share of the profits, and Medicaid counts a share of the profits as ownership. Florida lets the operating agreement name the events that end a membership (605.0602). So name the exclusion and conviction triggers there, remove the partner from management at once, and require a sale of the entire share to the remaining partners or to an outside buyer with no family tie.

Then set the terms:

1. **Who may buy.** Give the remaining partners the first right to buy. Any outside buyer must pass the same Medicaid screening before closing.
2. **The price.** Use a formula or an outside valuation, and say who picks the appraiser.
3. **How it is paid.** Set a down payment, a schedule, and interest. An SBA 7(a) loan can fund a buyout between existing owners. Under SBA's lending rules (SOP 50 10 8.1) effective October 1, 2026, partners who buy out another owner's entire interest must have been actively working in the business for at least the last 24 consecutive months, and loans for a change of ownership are amortized over no more than 10 years, except for any real estate in the deal.
4. **The timeline.** Close in time to file the ownership change by your state's deadline.

For a sale of the whole company to an outsider, see [how to sell a NEMT business](https://nemtguide.com/guides/how-to-sell-a-nemt-business/).

## SBA loans and personal guarantees with a partner

A lender looks at every owner. Under SBA's loan rules effective October 1, 2026 (SOP 50 10 8.1, which applies [13 CFR 120.160](https://www.ecfr.gov/current/title-13/section-120.160)), each person who owns 20 percent or more, directly or indirectly, must give an unlimited full personal guarantee. A spouse who owns less than 20 percent must also guarantee in full when the spouses and minor children together own 20 percent or more. A minor child may not own 20 percent or more.

Cutting a partner's share just before you apply does not help. Anyone who had to guarantee six months before the application still must, unless they fully left the business before you applied, including any job there, for the life of the loan. After a partial buyout, a selling partner who stays on with less than 20 percent must still guarantee the full loan for at least two years after the final disbursement. Every direct and indirect owner must also be a U.S. citizen or U.S. national living in the United States. The [NEMT business loans](https://nemtguide.com/guides/nemt-business-loans/) guide covers the rest of what lenders require.

## Can partners agree not to compete?

Owners have more room here than employees do. Several states that void noncompetes for workers make an exception between co-owners:

- **California.** A partner may agree not to carry on a similar business in a set area when the partnership dissolves or the partner leaves it (Business and Professions Code 16602). An LLC member may agree to the same when the company dissolves or the member's interest ends (16602.5).
- **North Dakota.** Partners, members, or shareholders may agree not to compete in a reasonable area when the company dissolves, when a partner or member leaves, or in an agreement covering the sale of an owner's interest (Century Code 9-08-06).
- **Minnesota.** Owners may agree not to compete in a reasonable area when the company dissolves or is about to (Statutes 181.988).
- **Oklahoma.** Partners may agree not to compete when the partnership dissolves, within a named county and the counties next to it, or a named city or town (15 O.S. 219).
- **Washington.** Its 2026 law voids every noncompete from June 30, 2027, but not one signed by a person buying or selling an ownership interest of 1 percent or more (Chapter 149, Laws of 2026).

Rules for employees are much tighter. See [training repayment agreements and noncompetes](https://nemtguide.com/guides/training-repayment-agreements/) before you ask a driver or dispatcher to sign one.

## When a partner leaves: what to file and when

1. **Sign the buyout papers.** Keep the signed agreement and proof of payment. Washington, for one, asks for a copy of the contract of sale.
2. **Remove access the same day.** Take the departing partner off bank accounts, broker portals, and the Medicaid portal.
3. **Report the change to Medicaid.** Federal rules allow 35 days after a change in ownership (42 CFR 455.104). Some states set a shorter clock: Washington wants written notice within 7 calendar days ([WAC 182-502-0018](https://app.leg.wa.gov/wac/default.aspx?cite=182-502-0018)), and Texas wants changes in ownership, officers, directors, and managing employees reported within 30 calendar days. See [how to report changes to Medicaid](https://nemtguide.com/guides/report-changes-to-medicaid/) for state deadlines and portals.
4. **Ask whether it needs a new application.** A big enough shift can count as a [change of ownership](https://nemtguide.com/glossary/change-of-ownership/). California requires a new application after a cumulative 50 percent change in owners since your last approved application.
5. **Check your EIN with a CPA.** A general partnership taken over by one partner needs a new EIN, and a new tax ID can mean a new enrollment.
6. **Update your NPI record.** If the departing partner was your authorized official, name a new one. CMS's form requires changes within 30 days, and so do federal rules for covered providers ([45 CFR 162.410](https://www.ecfr.gov/current/title-45/section-162.410)).
7. **Tell every broker and health plan in writing.** Read each agreement's notice and change of ownership terms first, since some require a new agreement.
8. **Ask your lender about guarantees.** Ask in writing how it will handle the departing partner's personal guarantee.
9. **Update your insurance.** Change the named insureds and the list of drivers on your policies. See [NEMT insurance requirements](https://nemtguide.com/guides/nemt-insurance-requirements/).

## Frequently asked questions

### Does a silent partner have to be on our Medicaid application?

Yes, if they own 5 percent or more, directly or through another company, and a share of the profits counts as ownership even without a vote. In a general or limited partnership, CMS says every partner must be disclosed regardless of percentage. A friend who lends you money secured by the company's vans can count too, once their share of the loan equals at least 5 percent of the company's assets. Texas asks each of these people for their own entry.

### Can someone with a criminal record be my NEMT business partner?

It depends on the crime. The state must deny or end your enrollment if a 5 percent owner was convicted of a crime tied to Medicare, Medicaid, or CHIP in the last 10 years, unless it documents why that is not in the program's best interest. It may also refuse an agreement over any owner's conviction for a Medicare, Medicaid, or title XX social services crime, no matter how long ago it was. Other offenses fall under your state's own rules and any fingerprint check.

### What happens if my partner and I own 50/50 and disagree?

Without a tie-breaker, nothing gets decided. Florida's default rule needs a majority of the members by profit share, which two 50 percent owners can never reach alone. A deadlock that threatens irreparable harm lets a member ask a court to dissolve the company. A deadlock sale clause in your operating agreement, started before the court rules, takes priority over that remedy, so write one.

### If my partner leaves, do we need a new Medicaid enrollment?

Usually you report the change rather than reapply. Federal rules give you 35 days to disclose new ownership, and some states are faster, such as 7 calendar days in Washington. A buyout can trigger a new application, though: California requires one after a cumulative 50 percent change in owners, and a general partnership taken over by one partner needs a new EIN.

### Do both partners have to guarantee an SBA loan?

Each partner with 20 percent or more must give an unlimited full personal guarantee under SBA rules in effect October 1, 2026. A spouse with less than 20 percent must also guarantee when the spouses and minor children together own 20 percent or more. A partner who dropped below 20 percent in the six months before you apply stays a required guarantor unless they fully left the business.

### Can I stop my former partner from starting a competing NEMT company?

Often, if you agree to it as owners. California allows a partner or LLC member to agree not to compete in a set area when they leave or the company dissolves. North Dakota allows the same when a partner leaves or sells their interest. Minnesota allows it when the company dissolves, and Oklahoma when a partnership dissolves, within a named county and its neighbors or a named city or town. Put the terms in your operating agreement.

### How do partners in a NEMT LLC get paid?

However your agreement says. Without one, Florida splits distributions by the agreed value of what each member contributed. In an LLC taxed as a partnership, the IRS treats fixed pay for a partner's work as guaranteed payments, which the company deducts on Form 1065 and lists on the partner's K-1, and which are not subject to income tax withholding.

## Official resources

- [HHS OIG: List of Excluded Individuals and Entities](https://oig.hhs.gov/exclusions/)
- [SAM.gov: Search exclusions](https://sam.gov/)
- [eCFR: 42 CFR 455.104, Disclosure of ownership and control](https://www.ecfr.gov/current/title-42/section-455.104)
- [IRS: Do you need a new EIN?](https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein)
- [IRS: Publication 541, Partnerships](https://www.irs.gov/publications/p541)
- [CMS: NPPES, update your NPI record](https://nppes.cms.hhs.gov/)