Many healthcare providers contact Jackson LLP for help opening a new healthcare practice. Our attorneys guide clients through the process of identifying the best business structure for their practice, evaluating the liability protections available within each business form, and planning for corporate compliance and governance.
Healthcare providers’ options for creating an LLC or corporation.
State law governs corporate formations – that is, your creation of an LLC or a corporation. Creating a business is far more complex an inquiry than automated online services may suggest, especially for healthcare providers (special rules and restrictions apply). Some of the laws that come into play include the Illinois Business Corporations Act, Limited Liability Company Act, Professional Services Corporations Act, Medical Services Corporations Act. Healthcare professionals’ practice acts must also be considered, as they often limit the corporate entity options available to each profession.
One of the most important considerations when starting a new business is the tax implication of your corporate form. In most situations, an LLC or a corporation can elect S-Corp status. For a single-member LLC, the default tax designation is that the IRS will treat you as a disregarded entity. This means that you typically are not required to file a separate tax return for your single-member LLC, thus allowing it to function largely like a sole proprietorship for tax purposes. In contrast, a multiple-member LLC that makes no affirmative election with the IRS will be treated as a partnership. An LLC may also typically elect to be taxed as an S-Corp or a C-Corp.
Jackson LLP’s healthcare lawyers also guide clients through the process of forming a corporation, which functions differently than an LLC. For starters, single-owner corporations are usually treated by the IRS as a C-Corp, unless they elect S-Corp status. A C-Corp’s corporation and owner will each have tax liability, typically resulting in a higher tax bill than if the owner had elected S-Corp status. Not all corporations have a choice between electing C-Corp and S-Corp status; for example, a corporation with multiple types of shares may only be allowed to operate as a C-Corp. C-Corp status can also be preferable when a corporation’s management and ownership are bifurcated. Because of these complexities, we always recommend that our healthcare entity and provider clients work closely with an accounting professional.
The proposed business’s leadership, owners, tax concerns, and liability risks will impact the choice of corporate entity. Our attorneys will explain the “corporate veil” to you, evaluate and provide you with liability guidance, and direct you to an accounting professional (or coordinate with your current one) to ensure that tax concerns have been addressed.
Common questions we hear include:
- Should I create an S-Corp or an LLC?
- Can I have a PLLC (professional limited liability company) in Illinois? What is the distinction between a PLLC and a PC?
- If I’m a healthcare provider, can I form a regular corporation, or only a professional corporation (PC)?
- Can I establish a multi-disciplinary healthcare practice (physician-owned medical spa, integrative health center, or chiropractor-physical therapy clinic)? Does this implicate Stark Law or Anti-Kickback Statute issues?
- What is the difference between a disregarded entity, a pass-through entity, a sole proprietorship, and an S-Corp?
- If I do business in multiple states, do I need multiple LLCs or corporations? What are the foreign registration requirements?
- What suffix or business name can I use? (Inc., LLC, PC, PLLC, Corp., etc.)
- What does it cost to form a business in Illinois? Are there ongoing fees?
Practicing without a corporate entity: establishing a sole proprietorship.
A healthcare provider’s license, their brick-and-mortar clinic’s zoning requirements, and their municipality’s business license requirements dictate their ability to establish the practice they envision. Providers’ licenses grant them the authority to practice – not an LLC or corporation. Many single-member practices elect to operate their business as a sole proprietorship (also called a “DBA”), which provides them no liability protections but alleviates them of the responsibility for maintaining corporate formalities. These providers may opt to spend the money they would otherwise divert towards state filing fees, attorney’s fees, and corporate governance to purchasing higher-dollar liability insurance coverage. While this decision isn’t right for everyone, it can be a good option for small, part-time, or concierge practices.
If you’re considering opening your own healthcare practice, Jackson LLP’s attorneys will begin with a free phone consultation. Call our office to schedule, or click the button below.