If you’re considering starting an LLC as a nurse, you might wonder if you’re operating illegally.
Though the practice might seem harmless to many, in the eyes of the law, that would be seen as an illegal action.
Because nurses are not allowed to form LLCs in California. But why? And if not LLC, what type of business can nurses develop in California?
If you want to know all about these questions, you must have an in-depth idea of the topic. And the good news is you can learn everything about the topic from this article. So, keep reading!
What Exactly Is LLC?
Before we talk about whether a nurse can legally operate by starting an LLC, we want to ensure you have a proper idea regarding LLC. So, LLC stands for Limited Liability Company.
Although the naming has “limited” in it, it is one of the most flexible types of business.
At its core, LLC is a combination of corporation and partnerships. In the corporation, shareholders create a separate legal entity.
And the corporation business is structured in such a way that it protects the owners from being personally liable for the debts and legal disputes of the company.
On the other hand, in partnerships, there will be two or more owners. Each partner will be capable of taking full advantage of the flow-through taxation.
That allows the company’s incomes to be shown as the owners’ incomes. For that reason, the partners will need to pay tax only once.
Now, LLCs will retain the tax benefits of partnerships and the limited liability of corporations. In fact, it will have the option to select one tax treatment among many. And as long as the LLC is not treated to be a C Corporation, it can retain the status of flow-through taxation.
Additionally, LLCs can exist as their own legal entity. That protects the owners from being liable for the debts and operations of the business.
So, if anyone likes the idea of partnerships and corporations, LLCs are basically the way to go. It is a mixture between those two, and it has the strength of both.
Can Nurses Start An LLC?
We hate to break this down to you, but nurses are not allowed to start an LLC. The California law has clear prohibitions on nurses forming LLCs. In fact, nurses can not even form a traditional general corporation. Instead, nurses need to register for a Professional Corporation structure.
However, you can not just start any Professional Corporation as a nurse practitioner. Rather, you need to form a Professional S Corporation.
What Is Nursing Professional Corporation?
Firstly, what is an S Corporation? Well, it is pretty similar to C Corporation. However, it can only consist of up to 100 shareholders.
S Corporations also have some similarities with partnership structure. They are pass-through organizations. For that reason, the profits will not be taxed twice.
Instead, you will need to pay the tax once.
That said, there are more factors for S Corporation. Along with the shareholders’ number being limited to less than 100, the corporation can only offer one class of stock.
Also, the shareholders can only be certain estates and trusts or individuals. Furthermore, the corporation should establish a tax year based on the calendar.
Now, Professional Nursing Corporation is basically a professional corporation that will be registered with the California Secretary of the State.
The corporation also needs to register with the California Board of Registered Nursing.
Why? In California, all professional corporations require a corresponding governmental agency registration.
Nonetheless, you need to start your Professional Corporation correctly.
Without doing so, your corporation can get rejected by the Secretary of State.
That will leave you vulnerable to loads of potential fines and lawsuits.The lawsuits and fines will be from the different government agencies. They can even come from the California Board of Registered Nursing.
How to Start A Professional Nursing Corporation?
Starting a Professional Nursing Corporation might sound difficult, but it is not as tricky as you think. First and foremost, you need to file the right articles of Incorporation of a Professional Corporation. You have to file them with the Secretary of State.
After filing the articles, you must notify the state agency managing your profession.
Also, you should hold a Board of Directors Meeting, appoint the directors, and draft the Professional Corporation Bylaws. Furthermore, you need to apply for EIN and file the Statement of Information, Form 2553 for S Corp.
Alongside that, you will need to pay California corporate taxes and register with the EDD. Finally, the last step would be to apply for the local business registration.
So, can you start an LLC as a nurse legally? The answer would be a no for California. Instead of LLC, you will need to form a Professional Nursing S Corporation. However, do ensure to register properly for the corporation. Without that, you will be in big trouble.
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