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

Starting a limited liability company (LLC) for your home health care business 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 a home health care business, lawsuits can arise from things like negligence claims, medical malpractice, or patient-related injuries.

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

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

A lady showing a customer a health care product

Should I Start an LLC for My Home Health Care Business?

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

You should start 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 a 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.

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?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets. Due to the nature of the services that home health care businesses offer, they face unique liabilities from which they need to safeguard their assets.

Common Situations Business Insurance May Cover for a Home Health Care Business

Example 1: While simultaneously cooking dinner and attending to a client’s personal needs, an employee forgets about a pan on the stove. A grease fire eventually erupts, quickly spreading to other parts of the house. General liability insurance would likely cover the property damage and any related legal costs.

Example 2: 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. General liability insurance would likely cover the client’s injuries.

Example 3: An advertising campaign claims that your home care business is the “best” in the region, but this claim isn’t backed by any empirical data. A competitor files a defamation lawsuit. Regardless of the outcome of the suit, general liability insurance would typically cover corresponding legal costs.

Other Types of Coverage Home Health Care Businesses 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 home health care businesses should obtain.

Commercial Auto Insurance

Your business needs to insure any vehicles that it uses to drive to and from clients’ sites. Commercial auto insurance is required, as personal auto policies aren’t designed to protect against the increased risk that comes with work-related driving.

Commercial auto insurance can be acquired as part of a package policy or by itself.

Professional Liability Insurance

Professional liability insurance is used to protect skilled workers from potential liability lawsuits that might be filed if they make a mistake while working. The insurance usually covers legal fees, settlements, and judgments associated with error-related lawsuits.

While providing in-home care is often routine, a mistake can potentially have devastating consequences. For example, a dropped patient may suffer severe injuries.

Home-Based Business Insurance

If you manage the logistics of your home care business from a home office, getting home-based business insurance is appropriate. Business activities conducted at home are not normally covered by standard homeowner’s insurance policies, but they are usually covered by this insurance.

Home-based business insurance might be included in a business owner’s policy (BOP) or procured through a standalone policy.

Workers’ Compensation Insurance

If your business employs home care providers, plan on getting workers’ compensation insurance. The coverage protects workers in the event that they’re injured on the job, which can happen easily when employees are lifting and otherwise assisting patients. Additionally, state law generally requires employers to carry the coverage.

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 and workers' compensation insurance.

Read our Home Care Business Insurance article for more info.

You can expect to require $900 or less in order to get your home health care business started. The reason for this is that, apart from licensing, the only two other essential costs are extremely low.

The only two items you will need in order to get started are a reliable phone and a car. Many businesses decide to further lower their startup costs by only offering non-medical assistance.

Visit our How to Start a Home Health Care Business guide to learn more about the costs of starting and maintaining this business.

Ongoing expenses will depend on how you structure your business. You will primarily have travel expenses for your home visits, any medical equipment, office supplies to appropriately track visits, possible ongoing certifications, and other utility expenses. If you have a brick-and-mortar location, you will have additional overhead for the building

Learn more about running a home health care business.

Home health care businesses charge an hourly rate to visit their clients in their homes.

Learn more about starting a home health care business.

A home health care business helps people who need living assistance. Often, these businesses are a very important part of the individuals being able to stay in their homes as opposed to going to a nursing home.

Home health care businesses are reported to be among the most profitable franchises, with some locations grossing over $1 million with gross margins between 30% and 40%.

Learn more about starting a home health care business.