1. Make sure you form a legal entity.
As a healthcare business owner, you should never operate as a sole proprietor. A sole proprietorship is an organization that is not registered under state laws and offers business owners no protection. Healthcare business owners may have several options to choose from when considering forming a legal entity.
2. Do more than just form a legal entity.
Just forming a legal entity is not enough. You must adhere to all the business formalities required under state law for each healthcare organization that you form.
To prevent creditors from getting access to your assets, you must keep all personal property separate from your business accounts—no comingling! That means you must not put your personal home or family cars in your business’ name, and you should consider creating a trust for your personal assets. You must also make sure that your state franchise taxes get paid and that you or your attorney keep records of your annual state filings.
3. Write things down!
If you incorporate, laws governing corporations require that you hold regular board meetings, record meeting minutes, and establish written bylaws. If you create a Limited Liability Company (LLC), you should consider creating an operating agreement among its members. An operating agreement is a document that outlines a business’ functional decisions and “operational decisions,” and it is essential to running a successful healthcare business. This document is binding on LLC members and operates like a contract.
Although such agreements are not necessarily required per state regulations, you should check your specific state laws to be sure. Even if you operate your business by yourself, it is essential that you have an experienced attorney help you craft an operational agreement to prove to the court that you are not just operating a sole proprietorship.
4. Consider getting a registered agent.
Even though it costs you no money to use your home address to register your business, do you really want all of your patients to be able to look up your address? What if you really upset one of your patients?
5. Make sure you have the right insurance coverage.
Doctors, dentists, other providers, and healthcare business owners get sued left, right, and center. Protect yourself from personally getting sued by purchasing medical malpractice insurance and commercial liability insurance from a credible carrier. It is also important that you get the right policy limits for your organization.
6. Have your attorney review your contracts.
Are you about to purchase expensive equipment for your providers, or lease or purchase billing software for your electronic health record (EHR) system? Have an experienced attorney review your contracts to ensure your interests are being protected. Make sure you tell your attorney whether you are signing the contract in your name or in the company’s name. Also, if possible, try to limit the terms of the agreement and cap damages wherever necessary.
7. Classify workers appropriately for tax purposes.
You cannot avoid paying payroll taxes by classifying full-time employees as independent contractors. You might get away with it for a while, but eventually you will have to pay taxes and will be held liable for a hefty tax bill.