Consider Your Options: What to Know About Setting Up an LLC

Andi Stamper

November 6, 2022

1099 Business

You’ve finally heard enough about the benefits of working as a “1099” contractor and have decided to take the leap.

Now what?

Everyone that you’ve talked to has an opinion on just about everything you’ve thought of – and things you haven’t thought of. Contracts, rates, hiring a CPA, the right insurance, tax deductions… the list goes on and on.

One of the most frequently asked questions asked when becoming a 1099 contractor is: “Do I need an LLC?”

A Limited Liability Company is a legal status granted to businesses. This designation can protect you from personal liability. In most instances, your personal assets — like your vehicle, house, and savings accounts — would not be at risk if your LLC faces bankruptcy or lawsuits. An LLC lets you take advantage of the benefits of both the corporation and partnership business structures.¹

The following is information we collected to help get you on the right path to creating your own business entity. Just like anesthesia, there is more than one way to do it.

How to set up an LLC – 3 options to consider

Set up an appointment with an expert such as a lawyer or an accountant. This requires. interviewing potential experts thoroughly to make sure they understand what a 1099 contractor does and how to set up the structure appropriately.

Pros: This is what they went to school for and know the state laws

Cons: It can be difficult to find one that understands how 1099 contracting works for a CRNA and it can be costly if you choose the wrong one

Use a legal company such as LegalZoom, ZenBusiness or Incfile, to name a few, to set up your company. These services have an easy set-up process, file all the paperwork for you and have experts on staff to ask questions to or use as references.

Pros: They know all the different state laws and can operate in any state, which saves time both in filing and the research required to figure out how

Cons: It can be costly

Do it yourself. Do your research and head to your state’s business formation website to determine the exact paperwork you need. However, it still may be beneficial to consult an expert to make sure you are choosing the best option for you and your company.

Pros: Less expensive

Cons: Can be costly if not done accurately

Steps to set up a company

1. Pick your business location. Most people locate their business where their home is, but others consider the costs, benefits, and restrictions of different government agencies when choosing a location.^{2, 3}

2. Choose your business structure.⁴Most people doing 1099 contracting work form an LLC, but that can be dependent on state law. If the company is in a business that requires a license or certification, then a professional limited liability company (PLLC) may be the necessary designation. Not every state designates a PLLC, so it’s important to check what your state requires. Each state has very specific rules and regulations about the creation of LLCs and PLLCs for certain services.^{5, 6}

- S-Corp Designation: S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. In order to become an S corporation, the corporation must submit Form 2553.⁷

3. Choose your business name. Most single member contractor companies will not be advertising so pick an easy name or one that is fun to them. Some states prohibit the use of certain words or have different requirements when choosing a name. You can review your state’s LLC naming requirements and find out if the name you want is available by visiting the website of the state agency responsible for business filings. In most states, that’s the Secretary of State.⁸

4. Register your business

- Get a Copy of Your State’s LLC Article of Organization Form
- Prepare the LLC Article of Organization Form – Articles of organization is a simple document that describes the basics of your LLC. It includes business information like the company name, address, member names, and the registered agent.
- File the Articles of Organization
- Create an Operating Agreement – An operating agreement describes the structure of your company’s financial and functional decisions. It defines how key business decisions are made, as well as each member’s duties, powers, and responsibilities. It’s widely recommended to create one to protect yourself and your business, even if your state doesn’t mandate it.

5. Get tax ID Numbers. Your Employer Identification Number (EIN) is your federal tax ID. You need it to pay federal taxes, hire employees, and open a bank account. It’s free to apply for an EIN, and you should do it right after you register your business.⁹

6. Keep Your LLC Active – Setting up your LLC is only the start. Once it’s formed, you’ll need to ensure your business remains in good standing with your state. Again, refer to your state’s business filing website to look up current information on how to do so. You may need to file an annual report that updates information pertaining to your LLC and pay an annual filing fee. These are a few general guidelines of what you can expect during the process; however, the exact requirements for starting an LLC differ greatly by state. Make sure to refer to your state’s Secretary of State website for specifics.

Need help?

Get free business counseling by using the U.S. Small Business Association resources. Connect with a SCORE, Small Business Development Center, Women’s Business Center or Veterans Business Outreach Center adviser.¹⁰

STEPS TO FOLLOW TO BUILD A 1099 BUSINESS:

Protect yourself and your assets by performing your contract work under the umbrella of a business entity. Think about what you’d like your proposed business to be named!
- Visit your Secretary of State website to see if your chosen name is available
- Check with your state’s Board of Nursing for state specific requirements
File applicable business set-up paperwork

The S-Corp Edge: How you structure your 1099 CRNA business will have far-reaching consequences, whether it is a sole proprietorship, a limited liability corporation (LLC), or an S corporation (S-corp).
An S-corp may offer several advantages over other business structures when it comes to taxation. In this structure, a business owner is called a shareholder, and the business owner is recognized by the IRS as an employee of the business. What this means is that the business owner must pay themselves a salary through the corporation. The S-corp pays their payroll taxes, which can in turn be deducted as a business expense. Income tax is paid through its owners’ tax returns based on their percentage of ownership. Moreover, any remaining profits have a lower tax rate than regular income. An S-corp may also allow 1099 CRNAs to avoid a higher tax level that other self-employed contractors pay for Medicare and Social Security.
A CRNA may structure their company as an S-corp serving as the sole owner, with their business income, tax deductions, and losses passing through to the owner, as opposed to being taxed at a corporate level – a potentially smart move for maximizing financial security in the future.

- Register for an EIN
Open a business checking account and credit card
Keep track of all your business expenses as these could save you money come tax time!
- Have an envelope for receipts or a folder on your computer where you scan these into
Be sure not to co-mingle your business and personal finances!
Remember, as a freelance CRNA, if you don’t work, you don’t get paid!
- Do you have at least six months savings should your contract abruptly stop?
Think about replacing your current benefits
- Health Insurance
- Health Savings Account/Dependent Savings Account
- Retirement Savings Account
- Life Insurance
- Disability Insurance
Procure malpractice insurance
Look for jobs!
Apply for state licenses where you want to work
- Each state needs a different CRNA license (and RN if they are not a compact state). Keep this in mind as some BONs can take 3-6 months to license a provider.
Have an employment attorney review your contract
Have your contract written to your business and deposit all earnings into your business checking
Keep A Schedule

As a W-2 employee, your taxable income and amounts taken out for taxes appeared on your W-2 form at the end of every year, without you having to calculate them. But when a firm pays more than $600 for services from an independent contractor, that income must be reported to the IRS.
What many 1099 CRNAs don’t realize is that they must pay taxes on their income as they earn it. Paying your quarterly estimated income taxes will be a new part of running your business successfully.
It doesn’t sound so difficult—keeping track of paying estimated income tax only happens four times a year. But the reality is a late payment can result in penalties and fines from the IRS. Keeping a schedule to help you stay on top of your quarterly estimated tax payments, and paying adequately to avoid underpayment, is imperative in avoiding penalties in the future. Not to mention providing peace of mind!

Make sure you have a trusted team of accounting and/or financial professionals who have experience with freelance CRNAs to guide you through this process!

CPAs
Financial Planners
Bookkeepers

Tags :

Have Any Questions?

Do not hesitate to give us a call. We are an expert team and we are happy to talk to you.