Should I Start an LLC for My Hospice?

Starting a limited liability company (LLC) for your hospice 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 hospice, lawsuits can arise from things like employment law violations (e.g., hostile work environment claims, retaliation allegations, etc.) and fraudulent behavior (e.g., submitting false claims to Medicare, etc.).

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

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

Hospice nurse giving comfort to another person

Do I Need an LLC for a Hospice?

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 Hospice

By starting an LLC for your hospice, 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.

Hospices will benefit from liability protection because of the risk of injuries to clients, workplace accidents, and financial data breaches.

Example 1: After trying and failing to get an attendant’s attention, a patient uses the restroom on their own and trips over a trash can. Their fall results in multiple injuries that need to be treated, and they demand you pay for their medical bills. Your personal assets can not be used to pay since they are protected with limited liability as an LLC.

Example 2: The family of a patient claims that you mistreated their loved one and is suing you for their emotional turmoil. As an LLC, limited liability protects your personal assets so they could not be taken in the settlement.

Example 3: A family member of a patient has an allergic reaction to the cleaning supplies you use to sanitize the facility. They are considering suing you over the matter. Should this go to court, your personal assets are protected by limited liability, so they could not be considered in any settlement.

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 Hospice

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 hospice 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

Hospices 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 being an LLC protects your personal assets, not your business assets.

As your business works with people often in delicate states of health, legal issues may arise. Having insurance can help protect your business’s assets if you end up in court and can help pay for some of the legal fees.

Common Situations Business Insurance May Cover for a Hospice Business

Example 1: While visiting a resident, a family member slips on some ice in the parking lot and falls. They fracture their wrist and hit their head on the icy pavement. General liability insurance would likely cover the injuries sustained during the fall.

Example 2: A patient uses the restroom on their own and trips. Their fall results in multiple abrasions that need to be treated as well as other injuries. General liability insurance would likely provide protection against lawsuits arising from the incident.

Example 3: An employee carelessly claims your hospice facility is the “top” facility in the area on social media. They have no evidence to back up the statement, and another facility files a lawsuit over the claim. General liability insurance would probably cover the resulting legal fees.

Other Types of Coverage Hospice 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 hospice businesses should obtain.

Professional Liability Insurance

Businesses that provide medical care for patients can face expensive malpractice lawsuits if one of their employees makes a significant mistake in a patient’s care. Professional liability insurance protects against error-related lawsuits like malpractice suits.

Many people provide medical care to patients at hospice facilities. Check to see that your facility’s policy covers everyone who provides care, including all technicians, aides, nurses, and physicians.

Professional liability insurance is included in some package policies and is available by itself.

Commercial Property Insurance

Hospice facilities need commercial property insurance for their buildings and equipment. Property insurance also covers supplies and inventory kept at a facility.

When selecting commercial property coverage, don’t consider only the value of your facility’s building. Make sure you also get enough protection for the full value of the facility’s medical equipment, which is likely tens of thousands of dollars or more.

Workers' Compensation Insurance

Businesses that employ workers are usually required by state law to provide workers’ compensation insurance for their employees. This insurance covers work-related injuries.

Data Breach Insurance

Keeping electronic medical records is required by law, but it leaves businesses exposed to potential online security risks. Data breach insurance protects against system intrusions and non-criminal data breaches.

Data breach insurance is included in some package policies and is available by itself.

Commercial Auto Insurance

If your hospice facility uses a company-owned bus or van to transport patients, the vehicle must be insured with commercial auto insurance. State laws require that all vehicles driven on public roads be insured.

Commercial Umbrella Insurance

Malpractice lawsuits and other liability claims can involve expensive legal fees and settlements. Commercial umbrella insurance offers extra liability protection for expensive lawsuits.

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 Hospices article for more info.

Your startup costs will vary depending upon the type of hospice care you provide and which state you’re located in. For a licensed hospice non-Medicare facility, startup costs are an estimated $60,000–$100,000, while Medicare-certified hospice agencies should budget for $150,000–$350,000.

In addition to the standard operational expenses, you’ll face a number of ongoing costs. Exact numbers vary but expect $375,000 or more.

Visit our How to Start a Hospice guide to learn more about the costs of starting and maintaining this business.

Operating expenses for a hospice business are substantial and can include payroll, rent, utilities, insurance, and licensing fees.

Learn more about running a hospice.

Hospice businesses make money by providing care for terminally ill patients. They are often reimbursed by private insurance, Medicare, or Medicaid.

Learn more about starting a hospice.

Hospices help people and their families through serious, terminal illnesses. With an aging population, there is an increasing demand for the services they provide.

Hospices have pretty high startup costs, but they can potentially be very profitable.

Learn more about starting a hospice.