It is vital you understand the principle of spreading out your legal risk and liability when you own a business and/or work in health care. This is even more important if you follow The Elite Nurse Practitioner Model and have multiple side businesses. There are just to many thirsty people wanting a hand out today. They will and CAN sue you for just about anything.
A great way to cover yourself thoroughly is by having multiple limited liability companies (LLC).
Each LLC is its own legal entity. Each entity shields the owner from liability. It is important you understand this when you own multiple businesses, real estate, business vehicles, etc. If one LLC is sued, then usually the other LLC’s you own will not be liable for the actions of another.
For this to be the case, you need to treat your LLC’s as totally separate entities. This means each entity has its own bank account, books, credit card, assets, and treated as a professional organization. There is a plethora of information online on how to keep your LLC compliant. Google it. It is vital you understand this.
So, let’s run a theoretical scenario:
Sally Jane NP owns a successful aesthetics practice. This small side business generates approximately $200,000 a year in revenue, nothing insane but a nice chunk of part-time money. She also works part time in the emergency department, has a rental property, and a sports utility vehicle titled in her name.
Sally Jane just has 1 LLC for her aesthetics practice. One day Sally gets into a serious motor vehicle accident that results in serious injuries to the driver of the other vehicle. She is deemed to be responsible for the accident and now is considered liable for all damages. What could happen? The plaintiffs lawyer could:
- Go after the maximum liability limit on the car insurance policy.
- Determine if Sally Jane NP has any assets, which she does, and could go after them if the liability policy is not sufficient enough to cover damages.
Sally has a duplex valued at $300,000 and $50,000 in savings. The lawyer could go after these assets. On the other hand, her aesthetics practice is safe since it is a separate legal entity, she is personally liable because the vehicle is titled in her name.
If Sally had her vehicle titled and owned by a totally separate LLC instead of herself, she would be personally protected. The lawsuit would probably have been settled by the insurance company alone.
If Sally had her rental property owned and titled by a separate LLC, it would be protected. If a tenant was injured on the property because they left the stove on and started a fire, she would be protected.
Imagine if Sally was sued because of an adverse event in the emergency department? She would be personally liable, which means all her assets in her name could be up for grabs if the malpractice policy is not sufficient to cover damages.
This is not an unrealistic scenario. I bet many people reading this has a company vehicle, a small side business and maybe a rental property. These things are not hard to obtain with persistence, living below your means, saving, and hard work. Lets look at another scenario:
Joe Smith NP owns a small hormone replacement clinic, a concierge primary care practice, 2 rental properties, and a business vehicle. Joe owns 1 LLC and operates everything underneath it.
He receives a letter in the mail from a law firm saying he is being named in a malpractice lawsuit. A 55-year-old female who he has been treating with hormone pellets over the past 5 years develops breast cancer. It is determined he is the cause of this and is now liable. What could happen?
- His malpractice policy would cover his personal liability up to the maximum limit. Hopefully this is sufficient to cover damages.
- If the plaintiffs lawyer decided to go after his LLC, then everything underneath its umbrella would be up for grabs. This is possible if the incident happened within his LLC.
If Joe was smart, he would have separated all his businesses and assets among multiple LLCs. This protects his businesses and those assets.
Since his 1 LLC is held liable for the incident, everything underneath it is up for grabs.
You need to spread your risk among multiple LLCs. This protects you personally and also protects the LLC’s holdings. If you have a successful and profitable business, you want to protect its interests. If you are holding significant personal assets such as a house, considerable savings, rental properties, etc., these could be at risk if you were ever held liable for an incident.
If you own multiple side practices, operate each one under a separate LLC. If you own a business vehicle, have it owned by a separate LLC. If you have rental properties, each one needs to be owned by its own LLC. If you really want to get deep into this, have everything you personally own be owned by a trust where you are the trustee. This shields those personal assets.
My business truck is owned by a totally separate LLC. My rental vacation condo is owned by its own LLC. The Elite NP is owned by its own LLC! Everything business related I own has its own LLC. The downside to this is you have to file a separate tax returns for each LLC, but this is not that big of an expense in the grand scheme of business. Plus it allows you to have multiple different tax expenses in each LLC! Remember, lowering your tax bill should be one of your top priorities when lowering your expenses!
You work to hard to lose everything because of a frivolous lawsuit that is out of your hands. Shit happens in life. People are always looking for a handout. You are a prime target as a business owner and a nurse practitioner. Protect the fruits of your labor and success.
I want to give a personal thank you to everyone who purchased The Elite Nurse Practitioner Model eBook! Thank you for the awesome reviews, comments, and support. It is much appreciated. I have extended my promotion until February 20th. If you purchase The Elite Nurse Practitioner Model eBook, you will also receive a free copy of “Marketing for The Elite Nurse Practitioner Side Business.” Click Here if you want to take advantage of this promotion.