MOST NURSES have experienced the realities of working for an employer in the healthcare marketplace, be it a hospital, another type of healthcare institution, or a corporation. I'm quite certain we've all had that inevitable epiphany that we might be happier nurses if we had only ourselves to report to. Being one's own boss can have many advantages, but self-employment in the healthcare universe can also be downright tricky.
If you're thinking about going out on your own, whether with your own staffing agency, travel agency, vitamin or wellness shop, or something else, the next question becomes how to choose a formal business structure that works best for you. A nurse can utilize many avenues to self-employment, ranging from sole proprietorships to partnerships to corporations. I'll provide general descriptions of these legal structures below, but I highly recommend that you consult both a corporate/commercial attorney and an accountant before going any farther. I also caution you to avoid any online incorporation service that says it will incorporate you for $99.00. Starting your own business can involve complicated legal and financial (tax) consequences, so rely on the appropriate experts.
* Sole proprietorship. In states that allow this corporate entity, a sole owner may market him- or herself as a one-person business. A nurse, say Jane Jones, RN, could market her services as Jane Jones Nursing Services. Payments to a sole proprietor (the owner) are taxable to the owner and liabilities are personally attachable to the owner. This format is simply a solo owner facade. A sole proprietor may do business under a business name but must generally file a corporate certificate of entity name with the state and then would be d/b/a or "doing business as" (for example, Joan James, RN d/b/a James Travel Care).
* Partnership. When two or more people get together for a mutual business interest and they'll own this entity, they can form a partnership. In partnerships, the general partners share profits and liabilities usually in proportion to their contribution. The liability isn't limited to a certain amount, it's just shared proportionally. Profits "pass through" or are directly paid to the general partners as are losses. General partners are taxed according to their profit/loss and the partners generally include this information in their tax return on a partners' schedule.
Partnerships have two common variations. A limited partnership (LP) includes general partners who share profits, losses, and liabilities, and limited partners who are shielded from unlimited partnership liability but contribute money to fund the business operation and hold liability only up to the amount they contribute. These limited partners aren't active owners and become, essentially, silent or passive investors.
The second type, a limited liability partnership (LLP), is a popular partnership choice for professionals. Partners in LLPs contribute or capitalize the partnership with money but are liable for partnership debts and liabilities in a split fashion. LLP partners have unlimited liability for their own actions; however, they're generally not liable for partnership debts or for the actions of other LLP partners beyond the amount of their contribution (or interest) in the LLP (a proportionality mechanism).
Partnerships, LPs, and LLPs can have very intricate management, sale, transfer and other ownership rights agreements.
* Corporations. One of the oldest and most traditional business entities is the corporation, a separate, legal structured business entity that has several layers of control. A corporation is owned by its shareholders in the case of stock corporations. Nonstock corporations are generally owned (in terms of voting interest) by their members. Boards of Directors manage a corporation and Corporate Officers (President, CEO, COO, CFO, VPs) operate the corporation. The biggest advantage of a corporation? The liability shield. The liability protection of corporations directly protects corporate owners or shareholders from legal responsibility for corporate wrongs.
The corporate form most attractive to healthcare practitioners may be the Limited Liability Company (LLC) if permitted in your state. An LLC enjoys many of the advantages of a partnership with "pass through" taxation (meaning that profits and losses are taxed only as income to the owner, not doubly to the corporation and then the owner), creating the enviable and virtually unbreakable shield of corporate liability protection. An LLC can elect the tax treatment of its owners and can be managed much like a partnership via its operating agreement.
If I were operating a nursing business and my state law permitted me to form an LLC, this entity would likely be my choice. It has many advantages, can bypass most of the corporate formalities, and is fairly easy to construct.
The corporate liability shield would be the most attractive feature of the LLC for those operating a healthcare business. However, some jurisdictions don't permit licensed professionals to form LLCs as a matter of state public policy.
Starting your own healthcare business can be exciting, fulfilling-and potentially disastrous. So make sure you do your homework, hire a competent lawyer and accountant, and check with your state, county and local (municipal) authority before trying to form a business organization.
Stay safe and, until next time, keep it legal!