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The Limited Liability Company: Creation and Benefits

You must create a separate legal entity before operating your own practice. Most individuals go with the limited liability company (LLC) for this purpose. There are different types of corporate structures out there that are beyond the scope of this article so we will just be discussing the LLC because of its simplicity.

An LLC is a pass-through entity. That simply means that your practices profits passes onto your personal income tax return. This makes the LLC simple for accounting purposes and is a great way to lower your tax obligations.

Getting started

First and foremost, decide what address you will use. Do not use your home address for heaven’s sake. Either use your practice locations address or get a P.O. box or UPS box. I recommend this a separate box. Very discrete and anonymous.

So how does a business inspiring nurse practitioner create a LLC? There are two chief ways.

  1. Pay a 3rd party to do it. Most people go this route. They utilize services like legal zoom and other LLC creation companies to start the LLC for them. The advantage going this route is its relative ease. You simply choose a name and pay. Usually you receive the final LLC in 2-4 weeks. These services will typically provide you operating agreements and the legal documentation for the LLC so you can hit the road running.
  2. Create it yourself. It is EASY and cheap. Most states have online services on their secretary of state’s website respectively. All you do is go to the site, create an account, and fill out a few simple forms. That’s it! Most of the time they provide the articles of organization within 24-48 hours.

I advocate doing it yourself. It is significantly cheaper. You are probably asking yourself where do you get the legal documentation for the LLC then? Find it online for free. All you need is a simple operating agreement.

There are so many templates online where you can just input the LLC’s name and your personal name as the manager into them. That is all these larger LLC creation services do. They have templates and input your information onto them. There is no lawyer creating a special operating agreement just for you. Don’t be fooled. That would be very expensive and total overkill on their part. If you consult with me, I will provide you them at no additional cost just FYI.

So, once you have your articles of organization from the secretary of state and your operating agreement, you now need to file for a federal tax ID or the FEIN. Very simple. Google FEIN registration and select the link from the IRS. It is free and takes 5 minutes. DO NOT PAY PEOPLE TO DO THIS FOR YOU. It is a rip off.

Once this is all complete, go open a business checking account and now you are ready to rock and roll. THAT’S IT! It is not complicated.

Depending if you have employees or not you might need to register with your state’s respective employment/revenue department as well.

This is the easiest way to start an LLC and should not take you more than 2 days and $100. If you are wise and want to protect your ASSets, you should register an LLC in the state of Wyoming or Nevada to be your parent company. These states over 100% anonymous LLC’s. Consequently, if your operating LLC (your practice) is owned by a parent LLC in Wyoming or Nevada, then it would be difficult for anyone to actually find out who owns the practice unless you run your mouth.

I would advise utilizing a service to create this parent LLC in Wyoming or Nevada because often times they provide you an address in that state. It usually only costs $200 a year to maintain. This money is well spent though to protect your identity and to cover your ass.

The benefits of an LLC are numerous but the top two are:

  1. Liability protection. When you operate under an LLC as a nurse practitioner this provides you an additional shield of protection. If the LLC is owned by another parent LLC, this even further increases the layers of protection. I personally have 4 layers. I know some individuals who have elaborate structures and own upwards of 20 different LLC’s and trusts. You worked too hard to get here, protect yourself from frivolous lawsuits.
  2. Tax advantages. You need to learn how to maximize the tax benefits an LLC provides. Every single expense you have that relates to business needs to be run through your LLC. This decreases your personal expenses SIGNIFICANTLY. If you operate at a loss, then the tax advantages are even better! There are business owners out there that generate $700,000 a year in revenue as a single employee business and pay as little as 15% in taxes legally. HUGE savings. Talk with an account or financial planner for more details or shoot me a message. This is not tax evasion, that is illegal.

The thing to remember when you have an LLC is to ensure that it is treated as a business entity. Do not commingle business and personal finances. If you were sued the “corporate veil” could be pierced which means you personally could be liable. The good news is though is that if you base your parent company in Wyoming or Nevada, piercing the “corporate veil” in these states is very difficult. Which is another reason you need to do this.

Do not pay someone to create this for you. It is very easy to do on your own with a little research and due diligence. You will need every dollar when starting your business, do not waste it on things you can do yourself. Remember this. I have wasted thousands of dollars on useless business-related expenses that I could have easily done myself cheaper and often times better.

16 thoughts on “The Limited Liability Company: Creation and Benefits

  1. Hello Justin,

    May I seek your advice on a very controversial topic. I have mobile medical house call in NH. My husband advise me to go as a sole proprietor. I wanted to go LLC but eventually succumb to his decision.

    I am now 3 years operating and joined the entrepeneur group, reading your post. Should I change from SP to LLC. I am just completed my Psych NP. I am thinking of doing most psych with very little primary care. Any words of wisdom. I worried about the change in medicare with all the insurances etc.

  2. Thank you so much for this. So I did everything you said not to do like putting my home address because I was working from home. Is there a way to change my LLC and change my home address to a PO Box and adding the parent company in Nevada?

    1. You should be able to simply go to your secretary of states website and update that information. In terms of adding a parent company, you need to first create the LLC in NV and WY, once you do that you might need to update the owner through the secretary of states website. In your LLC’s operating agreement you need to change the owner to your operating LLC and have you as the “manager.” Pretty simple.

  3. Your blogs are awesome. I already have an LLc, then a DBA in Maryland. Is it too late to open one in Neveda and then make the Neveda LLC the owner of my Maryland LLC?
    Also, is it true it that it doesn’t matter how many layers of LLC you have, people will go for your personality anyways since we’re medical professionals?

    1. Nope, it is simple. Just change the owner in your operating agreement to the Nevada LLC. You need to check though to see if you need to update who the owner is to the Maryland Secretary of State. Ensure that if someone does a LLC lookup on your entity that your name doesn’t come up.

      In terms of the LLC protecting you. It depends. If you are sued personally for medical negligence then it doesn’t really matter who owns the LLC. When it matters is is when your LLC is directly sued. Check out the asset protection post Malpractice? No, Asset Protection. If you really want to cover your ass, put all your assets into separate LLCs and a trust. That way if you are sued, you look poor on paper and the plaintiffs lawyer will just drop the case or you make it a wild goose chase that takes years and years. That is the idea with it.

  4. I definitely need to consult with you. I like your no-BS approach to matters. I have just registered an LLC in Maryland, working on practice location.

  5. I’m just venturing into a new NP position that’s a 1099 salary. I’m in California. I’ve read online that in California, we aren’t allowed to create an LLC, but would have to do an incorporation. Is this true?
    If so, it sounds like creating an LLC in Nevada would be my best bet?

    1. I have no idea what California law is in terms of creating a LLC. With that, you should create your LLC in Nevada or Wyoming anyways for the corporate protections those states provide. Double check with your accountant though to make sure you do not need to file for a foreign LLC in California if you are practicing there.

  6. Justin,

    Thank you for answering my question on SP to LLC.

    I like to chat more with you. So I have now have my company’s name LLC in Wyoming (Parent) but I live and operate in NH. Can I also have same company’s name LLC in NH? or should say company’s name Healthcare LLC?

    Thanks a bunch
    Tai

      1. Electing as an S-corp is only beneficial if you are actually paying yourself a salary through the LLC. You pay yourself, and then you can take the rest out as a dividend. This is only applicable if you are making a significant amount of money. If you follow The Elite NP model, you should have multiple small businesses spinning off handsome incomes, nothing crazy though. It is better to pay yourself as a DRAW from the LLC vs pay yourself a salary. Paying yourself a salary incurs employment taxes, which really eats into your profits. Check out this article here.

  7. Hi There,
    I just opened my PLLC, have the bank account and federal ID TAX (ARIZONA) already completed. You mentioned that it would be advisable to create a parent company and that we should pay someone to do plus paying the annual fees, how/where do I find this person/organization to help me create the parent company. Also, I used my personal home address for everything, I am assuming I could change it to PO box, correct?
    Lastly, where could I find business help as to guide me how to obtain scripts and the DO and DON’Ts of a business.

    1. Clara,

      Check out the step by step guide to start a business, it includes the link to the service I use in WY for the parent company.

      Yes, never use your home address. Change that to a PO box or your actual business location.

      Obtaining prescription pads is simple (if that is what you are asking), check out rxpads.com.

      In terms of “dos” and “don’ts” of a business, just read this blog, go through every article, I cover everything I have went through with business. The “dos” and “don’ts” is a very subjective request, every single business is different.

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