Do I Need an LLC for My Assisted Living Facility?

Starting a limited liability company (LLC) for your assisted living facility 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 assisted living facility, lawsuits most commonly arise as a result of resident injuries or deaths as a result of inadequate or negligent care from staff.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your assisted living facility seem more credible.

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

Should I Start an LLC for an Assisted Living Facility?

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 Assisted Living Facility

By starting an LLC for your assisted living facility, 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.

Assisted living facilities will benefit from liability protection because of the risk of property damage, workplace accidents, and financial data breaches.

Example 1: The failure of a carer at your assisted living facility to summon emergency medical care resulted in the suffering and death of a resident. If the family were to bring a claim against your business for this negligence, the limited liability of your LLC would limit potential compensation to the businesses assets.

Example 2: An anesthesiologist is unable to keep a resident’s blood pressure under control during a routine surgery, causing the resident to suffer irreversible brain damage and paralysis of their left arm. Lawsuits brought against your assisted living facility for this medical malpractice will not threaten your personal assets - only those belonging to your business.

Example 3: One of the residents of your assisted living facility has been left unattended in the bathroom by staff despite being identified by her care plan as a fall risk. As a consequence of this, the resident fell over and fractured her neck. In this instance, depending on the outcome of the lawsuit, only your business’s assets will be at risk to compensate the plaintiff.

Example 4: During the night, a resident calls for help while inside the bathroom. No one responds, and she slips and falls on her way out, breaking her hip. Her family asks you to pay for her medical expenses.

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 Assisted Living Facility

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 assisted living facility 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

Assisted living facilities 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?

Business insurance is a necessity for all LLCs. While the LLC’s structure protects your personal assets through its limited liability protection, without insurance your business assets are exposed.

If you want the business assets of your assisted living facility to be protected as well, you will have to buy the appropriate insurance.

Common Situations Business Insurance May Cover for an Assisted Living Facility

Example 1: During the night, a resident calls for help to use the bathroom. No one hears her, and she slips and falls on her way to the bathroom, breaking her hip. If found liable, general liability insurance would likely help to cover damages owed by your business, including court-mandated payments and settlements.

Example 2: A resident receives some food he should not be eating due to a menu mix-up. He goes into diabetic shock, leading to serious medical complications. If found liable, your business would probably be covered by general liability insurance for resulting damages, medical payments, or settlements.

Example 3: A visiting family member asks one of your employees to park her car as she hurries toward her father's room. The employee obliges her, but it is a stick shift and he drives it into a pillar supporting your building's resident pickup/dropoff area. General liability insurance would probably help in covering any damage to the customer’s car.

Other Types of Coverage Assisted Living Facilities 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 assisted living facilities should obtain.

Professional Liability Insurance

Businesses that are responsible for completing complex or sensitive work often benefit from professional liability insurance. This policy is particularly important for an assisted living business that performs the valuable care work of helping the elderly live dignified lives. In the event that your business undertakes careful medical assistance that ultimately goes wrong, a professional liability policy can protect you from serious losses.

Commercial Umbrella Insurance

Commercial umbrella policies are a great idea for any business that performs sensitive work in general. While ineffective alone, an umbrella policy is purchased atop other maximized policies, allowing for additional coverage normally ignored by standard insurance. For an assisted living business with so many complex variables in play, this policy can keep you covered in the event of unanticipated damages.

Workers' Compensation Insurance

If your business expands beyond a point where you can reliably manage your clients independently, you'll need a workers’ compensation policy to cover your employees. Part-time and full-time employees must be covered by compensation insurance as a matter of law. This policy will provide coverage for employees who are injured on the job, including disability and death benefits resulting from work incidents.

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, and commercial property insurance.

Read our Business Insurance for Assisted Living Facilities article for more info.

The costs of getting an assisted living facility up and running are quite high. You will need to either purchase or construct most of the facilities you will be using.

Other costs include employee salaries, specialized equipment, medical supplies, internet, and food and drinks for patients.

Visit our How to Start an Assisted Living Facility guide to learn more about the costs of starting and maintaining this business.

Some of the main operating expenses for an assisted living facility are payroll, mortgage payments, utilities, and medical supplies.

Learn more about running an assisted living facility.

Assisted living facilities make money by charging customers to live in their facilities.

Learn more about starting an assisted living facility.

A professional assisted living facility helps individuals with day-to-day living due to age, illness, or other reasons.

While the startup costs for an assisted living facility are substantial, there is the potential for big profits. With a growing elderly population, the market for assisted living facilities continues to grow.

Successful assisted living facilities can bring in hundreds of thousands or even millions of dollars each year.

Learn more about starting an assisted living facility.