Selecting the most appropriate structure often involves trading off various advantages and disadvantages of each of the structures. If the activities of the joint venture or strategic alliance are likely to expose the hospital to increased risk of liability either because the hospital no longer has complete control over the quality of the activities undertaken or because there will be an increased volume of activity, then the hospital may be more inclined to choose a structure that will limit its liability. A hospital which wishes to minimize its liability risks may prefer to structure its strategic alliance through a subsidiary corporation. The liability of a subsidiary corporation that undertakes an activity is limited to the assets of that subsidiary corporation. All of the risks of the strategic alliance are confined to the assets of the subsidiary corporation.
Partners are, however, liable for the activities of a general partnership.
The liability of participants in a strategic alliance or joint-venture contract would also be unlimited. Liabilities under contractual arrangements would depend on the terms of the contract and what has been agreed to be contributed. Selecting a subsidiary corporation does, however, have its own disadvantages, as in most cases the subsidiary corporation would be a tax-paying entity. Hospitals, as charitable organizations, are exempt from taxation. Charitable Status Hospitals are registered charities under the Income Tax Act.