How Do I Choose the Legal Structure for My Practice? – Nurse Practitioners in Business

Nurse practitioners have many job opportunities available. They can work in hospitals, clinics, universities, and private practices.

As you advance in your career, you might decide that creating your healthcare tele health practice and being in charge is the right path for you.

If you’re a nurse practitioner considering starting your own business, you may need guidance on beginning.

Here are some valuable tips on how do I choose the legal structure for my practice.

What is a Legal Structure?

You’ll hear different words for legal structure in new business. They all mean the same thing and include business form, structure, business entity, and legal entity.

The legal structure of a business is separate from the people running it.

Just like people have legal rights and duties, so do businesses. A business has its rights through choosing a legal structure.

Here are some rights and duties businesses can have:

• Make agreements or contracts
• Take on debt and repay it
• Sue or be sued
• Be responsible for their actions

What are the Types of Legal Structure?

Every type of business setup has advantages and disadvantages, and it’s often difficult to know which would work best for your situation.

Professional Corporation: Scope of Practice

Certain professionals or business owners (like doctors, lawyers, accountants, and dentists) can only form professional corporations in some states.

Some states allow both regular corporations and professional corporations.

There’s also the professional limited liability corporation (PLLC). In most states, all members of a PLLC must be licensed in the same specialty and have malpractice insurance.

These legal structures can be complicated and vary by state and profession. Contacting a professional for help setting up a PC, PSC, or PLLC is best.

You can also contact your state’s Secretary of State office for more information.

It can seem overwhelming but don’t worry. There isn’t a one-size-fits-all solution; different situations need different answers.

Here are some helpful resources:

• The Small Business Start-Up Kit: A Step-by-Step Legal Guide by Pei Pakroo
• Tax Savvy for Small Business: A Complete Tax Strategy Guide by Frederick W. Daily and Jeffrey A. Quinn
• Legal Guide for Starting & Running A Small Business by Fred S. Steingold

Even though you’re busy, knowing some information is vital to run your business well.

Here are a few tips to help you choose the best structure for your business:

Make a list of your top priorities…

• Is limiting your liability most important?
• Do you need to protect the assets you and your partner have built over the last twenty years?
• Are you concerned about taxes? Do you own another business or income-producing assets that could affect taxes on profits from the practice?

Limited Liability Company / Corporation (LLC) for Private Practice

The LLC is a separate legal entity from those who own or manage it.

Protection & Liability:

• No personal liability for owners
• Personal assets are protected

Taxation:

• Taxes pass through to individual tax rates unless corporate taxation is chosen

Raising capital:

• The LLC can raise money, but the owner might need to give a personal guarantee

Management and control:

• Members or managers can make decisions for the business
• Decisions are made by members or managers
• Continuation after a member’s death depends on state laws

Required paperwork:

• Articles of formation must be filed with the state

Corporations

A corporation is a separate legal entity from those who own or manage it.

An S corporation is a type of corporation that has chosen Sub S status with the IRS. This means that corporate income and losses go to individual shareholder tax rates.

Protection & Liability:

• No personal liability for shareholders
• Personal assets are protected

Taxation:

• Taxes at the corporate level and on distributions to shareholders
• S corporation is taxed at individual shareholder tax rates

Raising capital:

• The corporation can raise money

Management and control:

• Officers and directors can make decisions for the business
• Decisions are made by the board of directors
• The corporation continues even if a shareholder dies or leaves

Required paperwork:

• Articles of incorporation must be filed with the state
• Bylaws and yearly meetings are required

Partnerships (General & Limited)

A general partnership is as easy as a sole proprietorship; most states don’t need formal paperwork. The partners share profits and obligations equally.

A limited partnership needs formal filing with the state.

Protection & Liability:

• General partners have personal liability
• Limited partners are not personally liable

Taxation:

• General and limited partners are taxed at individual rates

Raising capital:

• Limited, as individuals

Management and control:

• Only general partners can make decisions for the business
• All partners must agree to sell or transfer the business
• The partnership automatically ends if a partner dies unless the partnership agreement says otherwise

Required paperwork:

• No filing is needed for a general partnership
• State filing needed for a limited partnership

Legal Requirements for Sole Proprietorship

It is the simplest business structure. It’s free to start and doesn’t need formal paperwork. The business and the owner are the same.

Even though this structure is simple, you should avoid it when starting a practice. You’ll soon understand why.

Protection & Liability:

• No protection for personal assets
• The owner is personally liable for all business debts

Taxation:

• Taxes flow through to the owner, who is taxed at their rate

Raising capital:

• Limited, as it’s just the individual

Management and control:

• Sole proprietor only

Required paperwork:

• None

How Do I Choose the Legal Structure for My Practice? Starting a Nurse Practitioner

Choosing the proper legal structure for your practice is a big decision. The main options include sole proprietorship, general partnership, corporation, and limited liability company (LLC). Each has its pros and cons. Here’s a guide to help you decide.

Review Your Business Plan for Business Structure

Start by looking at your business plan. This will help you understand your goals and needs. Think about these critical factors when deciding on a structure:

Type of Services for Creating a Business Plan

Consider the type of services you offer. Some services may have higher risks of lawsuits, which could affect your choice.

Size of Your NP Practice

The size of your practice matters. A sole proprietorship or general partnership might work for a small practice. Larger practices might benefit from a corporation or LLC.

Starting a New NP Business by Controlling Over Operations

Think about how much control you want. Sole proprietorships and general partnerships offer more control. Corporations and LLCs have more rules and shared power.

Organizational Structure

Decide how much structure you’re comfortable with. Sole proprietorships are simple and informal. Corporations and LLCs have more formal structures and paperwork.

Risk of Lawsuits in Healthcare Business

Consider the likelihood of being involved in a lawsuit. Sole proprietorships and general partnerships offer no personal protection from business debts and lawsuits. Corporations and LLCs provide personal liability protection.

Profit and Loss for Practice Growth

Think about your practice’s expected profit or loss. Different structures have different tax implications and ways of handling profits and losses.

Need Capital for New Nurse Practitioner 

Consider your need to raise money. Corporations and LLCs can raise money more easily than sole proprietorships and partnerships.

Tax Implications

Look at the tax implications of each structure. Sole proprietorships and partnerships have pass-through taxation, meaning the business income is taxed at your rate. Corporations are taxed at the corporate level and again on dividends, but an S corporation can avoid this double taxation.

Future Plans

Think about your plans. A corporation or LLC might be better if you plan to expand or bring in new partners.

How to Ensure Your Nurse Practitioner Business Will be Successful

To succeed in your business, you need strategies to thrive in the changing healthcare field. Here are some tips to help you succeed:

• Keep learning through classes and training in your field.
• Base your care on research that proves it works.
• Build your network in person and online to be seen as an expert. Reviews and referrals from patients are essential, so ask for feedback and use social media.
• Use technology like electronic health records to make your practice more efficient and improve patient care.

Starting your own NP business might feel overwhelming, but you can achieve your career goals with a clear plan, determination, and hard work.

Wrap Up

Your final decision on a business structure will have many legal and financial effects. So, it would help if you talked with your lawyer to make the best choice.

Discuss Sam Mollaei before starting your Professional Corporation. Visit website.