Should I Start an LLC for My Alternative Health Care Center?

Starting a limited liability company (LLC) for your alternative health care center can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For an alternative health care center, lawsuits can arise from things like medical damages and professional malpractice allegations.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your alternative health care center seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for an Alternative Health Care Center?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for an Alternative Health Care Center

By starting an LLC for your alternative health care center, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Alternative health care centers will benefit from liability protection because of the risk of being sued for malpractice, workplace injuries, libel, and false advertising.

Example 1: After following an alternative health care plan offered by your health center and seeing no results, a client files a professional malpractice lawsuit against your company. Limited liability will ensure that, if the company accrues any debt as a result of the lawsuit, your personal assets will remain safe from the claimant.

Example 2: When one of your clients discovers that you do not have a medical license, they file a wrongful advertising lawsuit against your company, claiming that the word “Health” is misleading. Regardless of the legitimacy of the lawsuit, limited liability will protect your personal assets from any debt that your business accrues.

Example 3: After promising to offer your client free alternative health if they bring in over 10 new customers, you realize that this will not be financially feasible for you. After attempting to back out of your promise, your client sues you for breach of contract. If the lawsuit does not go your way in court, the limited liability offered by an LLC entity will ensure that your personal assets will remain protected.

Example 4: A patient sues your business for malpractice, claiming that your techniques did not improve their health conditions and actually worsened them.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for an Alternative Health Care Center

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if an alternative health care center owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Alternative health care centers rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

Most LLCs do not “legally” need business insurance unless they hire employees.

Having said that, business insurance is needed if you want to protect your business’s assets (e.g., company vehicles, etc.).

Common Situations Business Insurance May Cover for an Alternative Health Care Center

Example 1: While visiting your health care center, a patient slips and falls in your parking lot and then demands your business pay for his medical treatment. General liability insurance would cover his medical bills.

Example 2: An employee rounds a corner in your health care center and runs head-on into a patient, causing the patient to fall backwards and break her tailbone. The patient sues your business for damages. General liability insurance would cover your legal fees, including the cost of any settlement.

Example 3: A competitor claims your logo is too similar to its logo and sues your business. General liability insurance would cover your legal defense fees.

Other Types Of Coverage Alternative Health Care Centers Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all alternative health care centers should obtain:

Workers’ Compensation Insurance

Most states require businesses to carry workers’ compensation insurance for their part-time and full-time employees. This coverage protects your employees if they become injured at work or fall ill after a work-related accident. It not only covers an employee’s medical bills and lost wages if they need time to recover, but also any disability or death benefits stemming from a work-related accident.

Professional Liability Insurance

While you strive to do what’s best for your patients, there’s always a chance one might decide your professional services or advice caused them harm. If a patient files a lawsuit, professional liability insurance would cover your legal fees and, if required, any settlement.

Commercial Property Insurance

You made a major investment in your center’s medical equipment and supplies. If you own the building in which you operate, commercial property insurance would cover the cost of repairing or replacing your business-related property in the event of a fire, burglary, or natural disaster. This includes structural damage to your building or grounds as well as any damaged equipment or supplies you store there.

Commercial Umbrella Insurance

While your general liability insurance policy covers most claims, some accidents or lawsuits may be so catastrophic that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for any legal fees and awarded damages that exceed your primary policy.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, workers’ compensation insurance, professional liability insurance, and commercial property insurance.

Read our Business Insurance article for more info.

This will depend on the type of business you run. If you run a meditation center, for example, you will need to secure a lease on a studio, as well as a business license.

Keep in mind that if your services require malpractice insurance, you will need to pay around $1,500 per year during your first year of operation.

Visit our How to Start an Alternative Health Care Center guide to learn more about the costs of starting and maintaining this business.

Owners will have to pay for rent, equipment, insurance, payroll, and ongoing training.

Learn more about running an alternative health care center.

Centers make money by charging a flat fee for their services or by administering services that will eventually be reimbursed by insurance.

Learn more about starting an alternative health care center.

An alternative health care center provides a more natural, holistic approach to health care. Alternative health care centers often focus on just one type of healing, such as acupuncture or herbal remedies.

An alternative health care center’s profits are affected by patient volume, the services it provides, and what it charges for those services.

Learn more about starting an alternative health care center.