Should you be a Sole Proprietor or LLC? The Pros and Cons you Need to Know
ฝัง
- เผยแพร่เมื่อ 15 พ.ย. 2018
- Should you be a Sole Proprietor or LLC? The Pros and Cons you Need to Know
FREE Guide: Start a Private Practice in Counseling:
tinyurl.com/y9ek9en8
What is a “business entity” and how do you know which to choose? When I started in private practice I had no idea what sole proprietorships or LLCs were, and chances are you might be in a similar place! Don’t worry, in this video I’m going to break down these entities to help you understand how to move forward in private practice.
LINKS
*Some links are affiliate links. A percentage of purchases come back to me and help my channel immensely!
👉 How to DIY a Therapist Website that Fills your Practice: privatepracticeskills.teachab...
👉 Private Practice Skills Merch: teespring.com/stores/private-...
👉 All my filming gear: kit.co/privatepracticeskills/...
👉 Music I use: www.epidemicsound.com/referra...
This video is geared for therapists of all kinds, including psychologists, MFTs, LPCCs, social workers, and others in the clinical counseling field.
Welcome to Private Practice Skills! I’m Dr. Marie Fang, psychologist in private practice. I post videos offering tools I learned the hard way about starting and growing private practice so that you don’t have to.
Facebook: PrivatePracticeSkills/
Insta: PrivatePracticeSkills
Music Credit:
"Galaxy" by Ikson
/ ikson
This video is not intended as professional or legal advice. Be sure to seek the services of a professional if you are in need of them.
What is a business entity? It’s a legal categorization that helps define what type of business you run for tax and liability services. The business entity you file for helps the IRS know what kind of relationship you have with your business.
The main factors to take into consideration when selecting a business entity is how it will impact your liability and your taxes.
There are an array of possible business entities to enter into. However, there are two that are most common in solo private practice: Sole Proprietorships and Limited Liability Companies.
To cut to the chase: I personally believe filing as an LLC is the best option, which will make sense as we get into it.
Okay, let’s explain the differences as well as pros and cons of each of these.
Sole proprietorship:
-this is kind of the default business entity. If you’re licensed to practice as a therapist in your state, and you have a city business license, BOOM, you’re a sole proprietor. There’s no extra paperwork to fill out. You simply have to keep track of your income and file taxes appropriately.
-If you are a sole proprietor, you and your business are legally considered to be the same entity. That means that when your therapy business makes income, it’s the same as you making income. You and your business are the same unit.
-Pros: The pros of being a sole proprietor are that it’s easy to manage, there aren’t additional costs to file, and no additional taxes to pay above and beyond your typical income tax.
-Cons: You are held liable for all of your business dealings! This is a HUGE con. What this means is that if you get sued for something that happens related to your professional practice, someone can go after your personal assets like your house or car, because you and your business are the same entity.
-Liability insurance doesn’t resolve this issue as it only covers your professional assets and also doesn’t apply in an array of situations, particularly if you lose a law suit.
Limited Liability Company (LLC):
-There is a little bit of application process to become an LLC, but it could be reasonably completed in a day or two.
-If you file as an LLC, you and your business are considered separate entities.
-Pros: Limited liability! This means that if someone sues your business, your personal assets are protected! People cannot go after your house or car. Similarly, If someone sues you personally, they can’t go after your business assets either.
-Taxes! Unlike some of the other business entities that offer limited liability, filing as an LLC does not require that you pay double on certain taxes. If you file as an LLC, you can opt to file taxes as a “pass through entity,” which allows profit and loss to go straight to the business owner and only pay taxes on those profits once.
Cons: There’s a bit more upkeep here. It’s imperative that in addition to the initial application process, you are diligent about keeping your business and personal bookkeeping separate. You need separate bank accounts in order to make clear that your business and personal money are separate entities. If you don’t do so and aren’t diligent about keeping a paper trail of your costs, it can be easy for someone to claim in a lawsuit that you are effectively not running like an LLC.
I hope you found this video helpful to give you an idea of where to go next in choosing a business entity.
A note for my CA therapist friends: Just because you can't establish an LLC in California doesn't mean you can't simply register your LLC in another state and practice in CA. Some states like Nevada, South Dakota, and Delaware are VERY friendly to LLC. For example, if you incorporate in Deleware but serve clients exclusively in CA, all you have to do is pay $75 to apply, and $300 once a year. In return you don't even have to pay personal income or corporate income taxes since your business is incorporated in a state with more favorable tax codes. It can be a bit more work connecting with an agent in another state, but with Nevada being so close I imagine it is an option a lot of Californians choose to go for. I remember looking up where Katie Morton was incorporated like 5 years ago because I know she lives and operates out of LA. Sure enough, she has an LLC registered in Delaware. Seeing what other successful people are doing can be another way to find the best options for you.
I would love a video on how to file an LLC, or PLLC on your own.
I just found your videos a week ago and they have been SO helpful. Thank you so much for sharing your time and experience!
Oh yay! That makes me so happy! It's a pleasure to share :)
The most helpful channel on TH-cam (for me at least, lol). I appreciate you and this content so much!! Thank you!
Aw, shucks 😅You're too kind. Glad you find the content helpful!
Thank you so much for all your videos and insight, greatly appreciated!
Another great video. Two thumbs up!!!! I don’t comment on every one of your videos that I’ve been binging on, lol, but this is just one of the more terrific ones. With such useful information! Sorry about your situation in California. 😏
You make great videos. Informative, funny, and engaging. Thanks!
Thank you! I enjoy the whole process of making videos. Glad you find them useful!
I would love a video on sole proprietorship and the ins/ outs of having employees.
I just found your videos today. They're so helpful .thx
One more thing, I can’t believe you only have 25,000 subscribers. Your content is so informative and entertaining. You’re very engaging, credible and professional. I wish more people would discover your channel. I’m just saying. I hope you’re at least getting some financial reward from your TH-cam presence. Regards
Thanks so much for the info!
As an LMFT in Oklahoma I've been told, by several attorneys that "single member LLC's" do not enjoy personal asset protection. Some states, however, have statues that cover this.
Thanks for sharing! God bless!
Great video.
Do you happen to have any advice on how to handle issues with confidence? I'm very grateful for your videos and I'm feeling much more inspired to get started with my practice but find myself continuously doubting my abilities despite having 5 years of experience. I'm looking to specialize in grief, bereavement, and addiction, and find myself constantly loading myself with books, trainings and continuing ed so i feel more confident. Thank you for everything you do!
I think most of us have been there (and I still feel that way at times too!). My best tip is to still dive in despite lack of confidence, and assume that some level of imposter syndrome will go with you all the time :)
Is there a reason why you didn’t do Inc/S Corp route instead of sole proprietor? Can you do a video on comparing the two? 😊
I was hoping but this as well
Hi there! Great video. Doing research for my wife right now and so much out there! Do you have any thoughts/updates for 2022? We are based in California, so no LLC. We're having a hard time picking between Sole Proprietorship or Professional Corp. She won't be owning her own private practice, she will be working through a group practice on a 1099. Do you have any advice or thoughts? Know we need to talk to an attorney and will via. Legal Zoom, but since you're in CA too I figured I'd ask! Thanks.
Hello, thank you for sharing valuable information! I'm a Registered Dietitian looking into private practice. The info you share also relates to Dietitians in private practice, correct?
What if you are in California? Would you recommend an S-corp or a PC? Also, thanks for the videos! So helpful!
Great Question! I think the best option depends on each individual's situation, so I'd consult with a professional who can help guide you given your personal situation. If only we could all operate as an LLC!
Looking for some information about Doxy.me and the first video I see is from Dr. Marie! Sooooo helpful!
♥️
Is it possible to start as a sole proprietor and then switch to an LLC after you get established?
Hi All!! Anybody know what business license I need to file in California? Or how do I file? These videos are AMAZING!! They have eased my anxiety about near future private practice. Thank you!
What about if I am residing out of state (Idaho), but I intend on practicing under my LMFT in CA with CA clients via telehealth?
LLC forsure. Better pay a little to be safe than loose everything.
I totally agree! I'm so bummed that psychologists cannot file as an LLC in CA. :(
@@PrivatePracticeSkills What is the rationale for that law?
@@PK-hg6gl I have no idea..I imagine a Lawyer would have more info on that
You are heaven sent
Dr. Marie, is it possible to still file jointly with a spouse if there is a private practice (sole proprietorship)? Thanks for the videos!
Since you’re a therapist in CA how do you protect yourself if you can’t register as an LLC ???
Just wondering if you have to sign up for sole proprietorship for each business i.e. if you have a counselling private practice and also have another business I.e selling a product like candles or in your case private practice skills, can one sole proprietorship cover both businesses or do you have to file sole proprietorship for each one? I hope my question makes sense, just trying to understand the business side of things more.
2:34 aight ima head out
Thank you!! Looking to file to become an LLC.
I'm jealous!
Them, I should file as a LLC instead as an Sole Proprietor right?
My old supervisor opened her private practice with LLC. Did things change since this video. She's an lcsw
As not having a citizenship of usa ...but having an own practice do I still
Have to apply for such stuff?
In NY it is a PLLC
Can I have an LLC as a pre-licensed therapist / intern ?
What about PLLC?
Is this still accurate? I just got licensed as a LCSW in California and I can’t open my private practice with an LLC?
Unfortunately, it's still accurate :/ You can form an S Corp! Just get yourself some good liability coverage ;)
As a licensed psychologist how does an LLC relate to malpractice insurance?
Given that I'm not an accountant or lawyer, I'm not qualified to get too far into the weeds on this one. I would consult with a professional to ensure you have the proper information. However, the loose way I've come to understand it is that in the instances that malpractice insurance doesn't cover you (e.g., in the case that you lose a lawsuit), then the LLC protects your personal assets and you can only pay from your business assets (as opposed to someone going after your house and your car). I hope this helps!
@@PrivatePracticeSkills Hi there!! I wanted to try to help out on this one -- business insurance actually COVERS you, aka pays, for your legal bills and attorney if you ever get sued (for something covered by your business insurance policy). Your business insurance, if and when it kicks in, will pay your attorneys' bill and a judgment/settlement amount, minus your deductible. Having an LLC, on the other hand, is what separates you personally from your business. So to use an example, if you got sued and had an LLC (and set it up and used it properly) your BUSINESS would get sued, but you personally wouldn't be sued or be liable for the outcome. Your business insurance, which would be setup in the name of your LLC, would kick in and pay like I described above. So they're 2 separate things with 2 separate and really important functions -- but together they holistically work to legally protect you and your business. Hope that's helpful!
Sam Vander Wielen Thanks for this, Sam! Can you speak to the Californian MFTs? We cannot do an LLC so what are the pros and cons of the different kinds of corporations?
You can be sued both professionally and personally as a single employee LLC.
Lesson #1 - Get the hell out of California
😆It is a wild place to live on many levels!!
True vs Lie!!
I would like to start off by saying that I've watched several of your videos as it pertains to private practice and starting a successful counseling business. There were alot of helpful tools and resources provided.
But as I looked deeper into your methodology and belief system I was truly alarmed. How can someone call themselves a Christian and deny God's very word related to gender identity, confusion and homosexuality. True, everyone deserves to be loved and treated with respect but as Born Again believers we are not to condone or accept sin which is direct disobedience to God. Your platform has brought you notoriety, financial gain, and a voice... why would you use that to lead people in error. There is no such thing as a Progressive or Affirming Christian. God said be in the world and not of the world. Be **transformed** by the renewing of our mines not Conform to societal norms. Understand there will come a day you will have to answer to every idle word and false message that is spread.
I share this in love and respect so that you will repent and come back to the truth. God Bless....
1 Timothy 4:1-2
Now the Spirit speaketh expressly, that in the latter times some shall depart from the faith, giving heed to seducing spirits, and doctrines of devils; speaking lies in hypocrisy; having their conscience seared with a hot iron.
2 Timothy 4:1-4 KJV
I charge thee therefore before God, and the Lord Jesus Christ, who shall judge the quick and the dead at his appearing and his kingdom; preach the word; be instant in season, out of season; reprove, rebuke, exhort with all longsuffering and doctrine. For the time will come when they will not endure sound doctrine; but after their own lusts shall they heap to themselves teachers, having itching ears; and they shall turn away their ears from the truth, and shall be turned unto fables.
Shame, shame. Jesus would tell you to end your hatred toward others.
I would like to start off by saying that I've watched several of your videos as it pertains to private practice and starting a successful counseling business. There were alot of helpful tools and resources provided.
But as I looked deeper into your methodology and belief system I was truly alarmed. How can someone call themselves a Christian and deny God's very word related to gender identity, confusion and homosexuality. True, everyone deserves to be loved and treated with respect but as Born Again believers we are not to condone or accept sin which is direct disobedience to God. Your platform has brought you notoriety, financial gain, and a voice... why would you use that to lead people in error. There is no such thing as a Progressive or Affirming Christian. God said be in the world and not of the world. Be **transformed** by the renewing of our mines not Conform to societal norms. Understand there will come a day you will have to answer to every idle word and false message that is spread.
I share this in love and respect so that you will repent and come back to the truth. God Bless....
1 Timothy 4:1-2
Now the Spirit speaketh expressly, that in the latter times some shall depart from the faith, giving heed to seducing spirits, and doctrines of devils; speaking lies in hypocrisy; having their conscience seared with a hot iron.
2 Timothy 4:1-4 KJV
I charge thee therefore before God, and the Lord Jesus Christ, who shall judge the quick and the dead at his appearing and his kingdom; preach the word; be instant in season, out of season; reprove, rebuke, exhort with all longsuffering and doctrine. For the time will come when they will not endure sound doctrine; but after their own lusts shall they heap to themselves teachers, having itching ears; and they shall turn away their ears from the truth, and shall be turned unto fables.
What are your thoughts on Dr Philip Batterham? He’s an internationally recognized genetic scientist (also a Christian who speaks highly of Jesus and the Bible) who has done research, showing that in some cases (certainly not all) there is a genetic biological measurable link that affects gender versus birth sex….
@@lisaschooler9992 I'm sure there are alot of intelligent men and woman in field who has done extensive research in the area. But in everything we do as Christians we must measure it against the Word of God(its our reference point to prove or disapprove what others say, think, or believe. Christ is very clear on this topic and leaves no room for interpretation. He is Omnipotent(all powerful) Omnipresence(transcends time) Omniscient(all knowing) to put anything above that is to say we are smarter than God, which is impossible...
What about PLLC?