How to Set Up an LLC to Launch Your Private Practice
When you’re ready to take the leap and start your own private practice, one of the most critical foundational tasks you’ll face is setting up the right legal structure for your practice. For many physicians, a Limited Liability Company (LLC) is the way to go.
Why an LLC? In short, it offers flexibility, liability protection, and tax benefits. Plus, it’s generally easier to set up and maintain than other structures like corporations.
But the process of forming an LLC can vary by state, and there are specific considerations for medical practices. Let’s walk through the steps, breaking it down so you can focus on building your dream practice.
Step 1: Check State Regulations for Medical Practices
Before diving in, you need to know whether your state allows physicians to form an LLC. Some states, like California, prohibit medical professionals from forming a traditional LLC and require a Professional LLC (PLLC) or other specific structure. Others may have restrictions on ownership (only physicians are allowed to be owners in a medical practice) or require additional filings for medical entities (like proof of licensure).
Pro tip: Check your state’s Secretary of State website- it has everything you need to know. Of course, you could always consult a healthcare attorney to help you out.
This is Florida’s Department of State website header. Spells out clearly what are all the things it handles, including corporations.
The subdivision that deals with corporations is called Sunbiz.org, appropriately for the sunshine state. Your state will have analogous organizations.
Step 2: Choose a Name for Your Practice
Your baby’s gotta have a name! A name that resonates with your brand and your vision for your future practice. And, a name that complies with state naming requirements. Mostly, that means the name you pick should be available for use. Use your state’s business name search tool to verify availability.
This is from Sunbiz.org which has a search records section, where you can put in a name and see if someone’s already using it. If yes, that’s a no go- pick a different one.
Most states also require that the name includes “LLC” or “Limited Liability Company”. For medical practices, some states have additional requirements, like including a reference to your medical profession (e.g., “John Doe, MD LLC”).
Step 3: Designate a Registered Agent
Every LLC must have a registered agent—a person or entity responsible for receiving legal and tax documents on behalf of your business. You can serve as your own registered agent, or designate your spouse as the agent. The downside is, your address will be public record linked with the entity. To go around that, you can use an attorney for the LLC creation, and they will often serve as the registered agent on file. This does mean that all notices to file annual reports, etc goes to them- so they need to be a reliable team. Most likely, you will end up paying an annual fee to them for this service- and they may file your annual reports as well for you.
I have always formed my own LLCs. It costs about $125 (and about 20 minutes) in Florida to create an LLC on Sunbiz.org- the Division of Corporations website for FL. So, I have always been my own registered agent.
Step 4: File Articles of Organization
The Articles of Organization (or Certificate of Formation) is the official document you file with the state to form your LLC. It typically includes:
- Your LLC’s name
- Registered agent information
- Address of your practice
- Names of the LLC owners (also called members)
For medical practices, some states may require additional information, like proof of licensure or documentation of compliance with state medical board rules.
It is easiest to file online through your state’s business registration portal. There are third party companies who will do this for you but it is so simple to do by oneself- that I would not outsource this. Plus, once you open your practice, you will deal with so many new things- things outside your comfort zone- things that they did not teach you in medical school or residency, that you might as well start getting used to it with this first step!
Once you complete the filing process and pay the fee, you will have in your hands (or in your inbox), proof that you are now the proud owner of an LLC!
As per the new rules starting in 2024, you also need to file Beneficial Ownership Information for your LLC. Here’s the how-to that.
Once the LLC is formed, you have a few more things to do:
Step 5: Obtain an EIN (Employer Identification Number)
The EIN is like a Social Security number for your business. It’s required for everything- credentialing with insurance companies, hiring employees, opening a business bank account, and filing taxes. You can apply for an EIN directly through the IRS website—it’s quick, easy, and free.
Even if you’re a solo practitioner, you’ll need an EIN. If not, you will be using your social security number- and that is NOT recommended. It’s not just for taxes- every time you call an insurance company about a claim, they will ask for your practice EIN, for verification. You don’t want your social security number floating around everywhere.
Step 6: Draft an Operating Agreement
While not always required by law, an Operating Agreement is a must-have document for your LLC. It outlines how your business will be run, including details about ownership, decision-making, profit distribution, and succession planning.
For multi-owner practices, this is especially critical to avoid disputes down the road. Even if you’re a solo practitioner, having an Operating Agreement reinforces your LLC’s legitimacy.
Step 7: Apply for State Licenses and Permits
Outside of what you need as a medical professional, your LLC may need:
- A state/county/city business license
- Zoning permits if you’re setting up a physical office
- Some states require a Certificate of Need (CON) for medical practices offering specific services, like imaging or surgery. Check your state’s requirements.
Step 8: Open a Business Bank Account
Keep your personal and business finances separate—this is non-negotiable. A dedicated business bank account not only simplifies bookkeeping but also protects the liability shield your LLC provides.
Before you open the bank account, you will need a phone number, fax number, email address for your LLC. If you are months away from opening, get a free Google voice for your phone number and Doximity for a free fax number. You can then transfer these numbers to the paid service of your choice when you are closer to opening your doors. Similarly for email, start with a free gmail account and when you have your domain name for your practice website, you can get emails with the domain name.
While you’re at it, you will want a business credit card. You can get it at the time of opening the account or a little bit later when you anticipate making a bunch of purchases for the practice- that may help you reach the spend limit on the card to get a signup bonus.
Step 9: Understand Your Tax Obligations
LLCs offer flexibility in how they’re taxed. By default, single-member LLCs are treated as sole proprietorships, and multi-member LLCs are treated as partnerships. You can also elect to have your LLC taxed as an S-corporation, which may offer tax savings depending on your income. However, it is best to save this for when your income is high enough so you can take distributions, outside of paying yourself a reasonable salary. Feel free to go over this stuff in this article.
Step 10: Stay Compliant
Once your LLC is up and running, you’ll need to maintain compliance with state requirements. In my state, with regard to the LLC, it just means filing an Annual Report before May 1st, each year. I was so nervous about it the very first year I had to do it- turns out they just wanted my money. It took less than 10 minutes to accomplish.
If you would you like a checklist to help you track your LLC formation process, let me know and I’ll send one your way!
