To LLC or not to LLC – That is the Question.
Clinicians launching into private practice for the first time are often stopped by this question. There’s lots of advice out there about establishing your business as a Limited Liability Company (LLC), and most private practice providers have an opinion. It’s great to collaborate with others and to seek advice on these practical matters. However, the insights in this article and the opinions clinicians have on this matter – no matter how valuable – should not replace the wisdom of a skilled attorney who specializes in establishing businesses. Hopefully, this article can give you a little guidance as to what becoming an LLC means, and help you to ask the right questions when you begin moving forward with this process.
Legal Protection & Necessity
All businesses will need some sort of identification number when filing taxes or receiving payments. An individual will use their social security number if their business is a sole proprietorship. By establishing your practice as an LLC, you may be able to separate the risk of being in practice from your individual person or your family. The LLC will have a unique identification number that separates the business from your individual entity person, providing some financial protection from litigation. Despite what we learned in college, the actual chance of being sued as a mental health provider is pretty low compared to other healthcare fields. However, if you’re someone who works with the high-risk populations such as custody evaluations or forensic evaluations, you may be more likely than other healthcare professionals to undergo legal action. In the case of being sued, if your practice is listed as an LLC and you maintain required corporate formalities, then your practice will be the one named as the appropriate defendant in the lawsuit, not you personally. This protects the financial stability of your family. For that reason, many providers opt for the establishment of an LLC or a PLLC to give them a layer of protection from legal action.
If you choose to establish your private practice as an LLC, you’ll also may also receive tax benefits. Your LLC business taxes are completely separate from your personal taxes. As an LLC, you have the ability to write off certain expenses as business expenses, and you can make and spend money from your business without paying taxes on it is as income. Providers pay taxes yearly, quarterly, or monthly for their business entity. Before feeling too overwhelmed at this notion, you should know that paying federal and state taxes can often be done online, and it only takes about 15 minutes once you know how much you should be paying. The amount you need to pay as well as payment timelines can be found working with an accountant or using an accounting software, like QuickBooks.
Potential Disadvantages of Becoming an LLC
Having a limited liability company has some drawbacks. It requires that an individual manage the legal entity of the business, which includes setting up articles of incorporation, operating agreements, and more. However, these parts of the LLC are typically completed by an attorney, meaning you won’t need to worry about the paperwork, and you’ll get all of these benefits. So, why do some people opt to not establish an LLC? For the most part, it comes down to time and money. When you’re starting a new private practice, you have a lot to do, and dealing with the hassle of establishing your business as an LLC may seem like just one thing too many. If this is how you’re feeling about establishing your LLC, we can help to put your mind at ease. Once you get started, it’s actually very straightforward. Don’t put it off because you’re worried about the hassle. You don’t have to go through the process alone. The GetTherapy.com team can help. We offer numerous resources to make launching your private practice easier, including establishing your business as an LLC. We know how to streamline the process because we’ve been there!
A Good Rule of Thumb
Do you still feel like you don’t know whether or not to establish your practice as an LLC? We recommend contacting an attorney to help you make the decision. They are the experts, and they will assist you in making the right choice. However, a good role of thumb is that you should form an LLC if you are concerned that your business may accrue debts or undergo legal claims that will significantly impact your personal wellbeing or the stability of your family.
If you do decide you’re interested in establishing an LLC for your practice, there are several attorneys out there who specialize in these business arrangements. In our experience, the price for setting up an LLC runs between $400 and $1,500, depending on the attorney. Some more confident and legal savvy providers even set up their own LLCs using paperwork they find through online resources such as LegalZoom.com. If you would like more information or want to schedule a consultation with our team to discuss whether or not you should establish your practice as an LLC, feel free to reach out to us anytime through our website, GetTherapy.com. We can consult with you to determine whether or not you want to establish an LLC, and we can connect you with an attorney or attorneys who can help.