Do I Need an LLC for My Home Health Care Business?

By starting an LLC for your home health care business, 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.

Home health care businesses will benefit from liability protection because of the risk of bodily injury, property damage, medical payments, and legal defense and judgment, to name a few. 

Example 1: After an employee of your home health care business became distracted while supervising a patient, the patient injured themself after attempting to climb out of bed. As such, the patient’s family decided to bring a negligence lawsuit against your business. Limited liability prevents the court from going after your personal assets in order to satisfy any damages owed to the plaintiff.

Example 2: You receive notice of a lawsuit being brought against your home health care business for breach of contract. The family of a patient is alleging that they were charged more for the care of their relative than was contractually agreed upon. In the ensuing lawsuit, only your business’s assets can be pursued in order to satisfy any damages the court awards the plaintiff.

Example 3: The family of a patient decided to sue your business for discrimination, believing that their relative had been refused essential care by an employee of your home health care business due to their religion. You are protected from being held personally responsible for any legal judgements the court imposes against your business.

Example 4: A caregiver leaves their bag at the top of the stairs, and a client trips over it while trying to go downstairs. The client sustains multiple injuries that require medical attention.

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 a Home Health Care Business

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 a home health care business 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

Home health care businesses 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.