Imagine you’re Dr. Max Goodwin from the popular series New Amsterdam. For those who haven’t watched the series yet, here’s a quick snippet: Dr. Goodwin is a highly driven and idealistic medical director who takes over a struggling public hospital to reform its practices and prioritize patient care over everything else.

His journey, though fictional, mirrors the challenges and aspirations of many real-life doctors and dentists. 

And now, you’ve got the same Dr. Goodwin-level motivation buzzing inside you. So, one fine day, after a particular chaotic shift at the hospital, you decide it’s time to create your own little slice of healthcare heaven.

A place where every patient, regardless of their background, feels truly cared for. So, you start looking at options to make this dream a reality. You begin exploring options and stumble upon the idea of forming an LLC (Limited Liability Company).

But wait — what’s the drill here? What steps are involved? Can you do it all by yourself? And, what are the tax implications of forming an LLC?

Your head is probably spinning with all these questions. We totally get it. At some point, we’ve all felt those jitters, the uncertainty, the feeling of standing at the edge of something big and wondering if you’ll be able to pull it off.

But don’t worry! Seriously, don’t. We’ve done the heavy lifting and homework for you. This blog will answer all your questions, one at a time. 

By the end of this blog, you’ll feel more confident about taking that BIG step toward your dream clinic 🙌

Let’s get started then.

Why Should Doctors and Dentists Consider Forming an LLC?

Here are a few core advantages of forming an LLC as a doctor or dentist, all laid out nicely for you.

Limited Liability Protection

With an LLC, if something goes wrong with your clinic like a lawsuit or debt — your personal assets ( like your house, car and savings) remain safe. These assets cannot be used to pay off business debts.

This security blanket is a relief, right? It’s like having a safety net under your professional journey, allowing you to focus on what you do best — providing quality healthcare.

Tax Flexibility

Now, LLCs can save you a lot of money on taxes. You can choose how you want to be taxed, whether as a sole proprietorship, partnership, S Corporation or C Corporation.

This flexibility puts you in the driver’s seat, allowing you to choose the tax treatment that best suits your financial situation, potentially saving you a significant amount of money. However, consult with a tax professional to determine which option is the most beneficial for your specific circumstances. 

Credibility and Professionalism

Having “LLC” at the end of your clinic’s name boosts your credibility in the medical field. Moreover, the “LLC” badge signals to patients and partners that your clinic is a legally recognized entity.

It suggests that you’ve taken the necessary steps to establish a formal business structure, which can make your practice appear more stable and professional. At times, patients may wonder if your clinic is a small, solo operation or if it lacks the formal backing of a registered business if you don’t have an LLC registration. 

Less Paperwork

Compared to corporations, LLCs are easier to manage. There’s less paperwork and fewer administrative headaches. More time for you to focus on your patients! Consider Dr. Smith, who runs a small clinic, as an example.

If Dr. Smith forms an LLC, she only needs to:

👉 File the Articles of Organization.

👉 Draft an Operating Agreement.

👉 File a simple annual report with the state.

If Dr. Smith forms a corporation instead, she must:

👉 File the Articles of Incorporation.

👉 Create corporate bylaws.

👉 Issue stock certificates.

👉 Hold and document annual meetings.

👉 Maintain detailed corporate records.

👉 File separate corporate tax returns.

Clearly, the LLC route allows Dr. Smith to spend less time on administrative tasks and focus more on her patients.

Oh, btw, if you’re still thinking the corporation route might be your jam, don’t sweat it. Go ahead and grab a free consultation with us. You’ll feel much more sorted after just one chat with us.

You can also have multiple owners (called members) in an LLC. Don’t you think that’s great if you’re thinking about partnering with other doctors or dentists? With more members, you can distribute the workload, share responsibilities and pool resources. This can make managing the clinic more efficient and less stressful.

Now that You Know the Advantages, Let’s Talk About How to Form an LLC

As promised, we’re here to clear your doubts one at a time. Those tense nerves starting to ease up slightly? Great! Now, let’s dive into the next section, where we lay out the process of forming an LLC. 

We’ll cover everything you need — what to gather for paperwork, who to seek advice from and a fair idea of the costs involved. So, grab a cup of coffee, get comfortable, and let’s get started! 

Step 1: Choose a Unique Name for Your Clinic

The name distinguishes your business and is required for legal purposes. A unique name also adds professionalism and boosts brand identity of your clinic. Check your state’s business name database to ensure the name isn’t already taken. Make sure the name includes “LLC” or “Limited Liability Company” in the signboard.

Step 2: File the Articles of Organization

Submit the Articles of Organization to your state’s business filing office. You need to take this step very cautiously as it officially registers your LLC with the state, which means you are legally recognized by the government.

Though you can do this by yourself on your state’s business filing website, it’s always advisable to seek an expert’s help so there’s no scope for any mistakes. 

Step 3: Get an EIN (Employer Identification Number)

“EIN” might be a familiar and buzzing term in the community of startups and entrepreneurs. We can all agree on that. But while the term is well-known, the process to obtain an EIN can be quite tricky. Why, you ask? The EIN application might initially seem relatively straightforward, but any errors or omissions can cause frustrating delays.

In addition, the IRS form for EIN requires specific information about your business, and it’s easy to get tripped up by unfamiliar terms or requirements. In fact, how you fill out the form can affect your business’s tax status and compliance.

For instance, if you select the wrong entity type, you could be looking at some unexpected tax obligations. And honestly, who would want that?

The only guide you’ll ever need on EIN: How to Apply for an EIN

Step 4: Create an Operating Agreement

Next up, you’ll need to draft a document called an Operating Agreement. Think of this as the rulebook for your LLC. It outlines how your LLC will be run, sets the rules and roles within your business, and helps prevent future conflicts and disputes.

In addition, it provides a structured framework for your business operations, ensuring everyone is on the same page.

Step 5: Stay Complaint

When someone says you need to stay compliant, what comes to mind? Sure, keeping your LLC in good legal standing is the obvious answer. But there’s more to it. Let’s dive into what else you shouldn’t overlook when it comes to compliance.

✅ Filing Annual Reports and Fees

Obvious, but important. Filing your annual report and paying the associated fees are mandatory.

These reports update the state on your business’s basic information. And missing these filings can result in penalties or even the dissolution of your LLC.

✅ Updating Business Information

You must inform the state of any changes to your business, such as a new address, changes in ownership, or updates to your registered agent. 

✅ Compliance with Employment Laws

If you have employees, make sure you comply with employment laws, which include payroll taxes, workers’ compensation and adherence to labor standards at any cost.

Non-compliance here can lead to hefty fines and complicated legal troubles. You can also avail bookkeeping services if you want to keep track of all finance related documents of your employees. 

✅ Renewing Licenses and Permits

Don’t let your licenses and permits lapse. Keep track of renewal dates for any professional licenses and permits required to operate your business.

4 Critical Mistakes to Avoid When Forming an LLC

We’ve gathered some first-hand experiences and stories from doctors and dentists who have ventured into forming an LLC and encountered a few bumps along the way. Here are the common mistakes they made, which you should definitely keep in mind:

Skipping the Operating Agreement

Some single-member LLC owners might think they don’t need an Operating Agreement. So don’t make that mistake. Without an operating agreement, you could be personally liable if your LLC is sued, as the lack of formal separation might lead to a court treating your LLC as a sole proprietorship.

Mixing Personal and Business Finances

It’s a BIG no-no. Using the same bank account for both leads to financial confusion, can make it harder for you to track your business expenses accurately. More importantly, it puts your personal assets at risk if your business gets sued for some reason.

Keep separate accounts, use a business credit card, maintain detailed records and consult a professional to ensure your LLC remains protected and well-managed.

Want to open a bank account for your LLC?  Here’s your Step-by-Step Guide to Opening a Mercury Bank Account

Not Getting Professional Help When Needed

Trying to handle everything yourself without consulting a lawyer or accountant? That’s a recipe for disaster. Professionals can help you dodge legal landmines, set things up right from the get-go and make sure you’re not leaving money on the table during tax time. So don’t try to be a lone ranger in this complex legal landscape. 

Choosing the Wrong Business Structure

Not researching if an LLC is the best structure for your specific situation. Depending on your circumstances, another business structure might offer better benefits.

Always evaluate your options or consult a professional.

Ready to Take the Plunge? Let doola Assist You

And that’s a wrap! We hope this guide has given you the assurance that starting an LLC isn’t as intimidating as it might seem. Sure, there are a few intricacies, fast-changing trends and rules and regulations along the way.

But think about all the hard work you’ve put in — the sleepless nights of brainstorming and the many many hours of research. You deserve to see all that effort pay off.

With the right advisors by your side, those jitters will fade away eventually. Remember, every great journey starts with a tiny step, and and you’ve already taken yours. That’s real progress!

And if you have any questions, whether they’re small, big, or what you might think are silly, feel free to reach out to us for a free consultation. Our team of experts is here to assist you and make the process of starting an LLC less daunting and more doable

Happy planning, and here’s to your successful, thriving practice 🥂