You must create a separate legal entity before operating your own practice. Most individuals go with the limited liability company (LLC) for this purpose due to its simplicity. 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.
An LLC is a pass-through entity. That simply means that your practices profits are passed 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, it completely throws your privacy out the window. Either use your practice locations address or get a P.O. box or UPS box. It doesn’t matter either way.
So how does a business inspiring nurse practitioner create an 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 of going with 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 have done this multiple times.
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 and a simple Google search can provide you this.
There are so many templates online where you can 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.
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 to do! 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 FREE!
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 on if you have employees or not, you might need to register with your state’s respective employment/revenue department as well. Your accountant can assist you with this.
The above steps are 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 offer 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 tell people. Having a Wyoming LLC is just another way to maintain your privacy and cover your ass.
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 $100-200 a year to maintain as well. I like the “Wyoming LLC Attorney” for this.
The benefits of an LLC are numerous but the top two are:
- Liability protection. When you operate under an LLC as a nurse practitioner, it 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, so protect yourself from frivolous lawsuits. USE AN LLC!
- 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 and tax obligations 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. Those are HUGE savings. Talk with an accountant or financial planner for more details or shoot me a message. Remember, this is LEGAL tax reduction, not tax evasion.
The main 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 new though, is that if you base your parent company in Wyoming or Nevada, piercing the “corporate veil” is practically impossible to do. Which is another reason you should have a parent LLC in WY. I discuss this in all of the Elite Nurse Practitioner Courses in more detail in the business creation section of all the courses.
Listen, do not pay a lawyer to create an LLC for you. They are SHARKS and will rip you off. It is very easy to do on your own with a little research and due diligence. You will need every dollar you have when starting your business. For this reason, do not waste it on things you can do yourself. Remember this... I have wasted thousands of dollars on useless business-related services that I could have easily done myself; cheaper and often times done better!
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.