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.
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.
- 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.
- 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:
- 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.
- 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.