8 Steps to Set Up Your Business as a Contracted Healthcare Provider

Here are the steps I took to set up my business as a contracted psychiatric mental health nurse practitioner

Today’s post is dull, but necessary. It’s not going to be a pleasure to read, but it’s information I want you to have. Today we are going to discuss how I set up my business as a contracted nurse practitioner in Georgia. It took me a lot of digging and research to figure this out. So, I hope laying out these steps will save you a significant amount of time and stress! Please keep in mind I am not a professional in legal or tax matters. These were the steps I took and it has worked for me!

If you are trying to make the decision to be a contracted or salaried employee check out this post: https://nursekierston.com/2019/12/24/my-first-blog-post-contracted-or-salaried/

Why do you need a business as a contracted healthcare provider?

Let’s start by talking about why you need this information. If you are a contracted employee, it’s a great idea to set up a business to employ yourself for two main reasons. First, it can help you save money in taxes (and we all love saving money). Second, it can provide you a legal layer of protection. Now let’s jump into how to do this. It’s grueling, but I promise to make it as concise and easy as possible!

Step 1: Choose a business name

This is fun, but don’t overthink it! It can be your name or a name you come up with. Think about what you plan to do with your business in the future. Will you use this name to start your own practice? Do you just need this name for contracted employment agreements?

Here’s the link you would use to see if your business name is available in Georgia:

https://ecorp.sos.ga.gov/BusinessSearch

Step 2: Register Your Business

Go to this link https://ecorp.sos.ga.gov/Account to create an account with the Georgia Corporations Division. Once logged in go to “Create or Register a Business.” From here just follow the prompts. I created a “domestic limited liability company.” I selected NAICS code “Healthcare and social assistants (62) and NAICS subcode “Office of mental health practitioners (except physicians) (621330).” When entering an address for the business recognize that this address is going to be public record. So, you may want to choose a PO box if possible. Complete the rest of the information, pay $100, and voila! You are now a proud owner of an LLC! Be sure you keep receipts and any emails you receive confirming your registration to provide your CPA during tax season. You can also deduct (or expense??) your start up fees!

Step 3: Apply for an EIN

An EIN is like a social security number for your business. This number is how the IRS will be able to identify your business. You will receive your EIN to write down once you complete your application and you will receive it in the mail a few days later.

Here’s the link to apply for an EIN:

https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

Step 4: Apply for a state tax ID and withholding number

This is not required in all states. In Georgia this is required. You will be making tax payments to your state and to the IRS. Your state tax ID allows you to make your state tax payments. Here is the link for the starting point to get a state tax ID and withholding number:

https://georgia.gov/popular-topic/state-taxpayer-identification-number

Step 5: File form 2553 with the IRS to be taxed as an S Corp (optional)

This step is completely optional. Completing this step allows you to file your taxes as an S Corp instead of a sole proprietorship. I am not a tax professional. If you have read my other posts you know how much I hate taxes. So, in simplest terms, if your business is taxed as sole proprietorship (which is what your LLC will automatically be taxed as if you do not file to be taxed as an S Corp) all your income is subject to all the taxes you pay. If you are taxed as an S Corp, you will pay yourself a reasonable salary which will be fully taxed. All your other income is taxed at a lower rate. Once the IRS has received and approved form 2553, you will receive a letter in the mail stating you will be taxed as an S Corp. This can take several weeks.

Here’s a link to IRS form 2553 and the instructions for the form:

https://www.irs.gov/forms-pubs/about-form-2553

Step 6: Sign up with a payroll service (if you are going to be taxed as an S Corp)

If you are going to be taxed as an S Corp and need to pay yourself a salary, you will need a payroll service to manage your salary and payroll taxes. I use OnPay. They have been super simple to use, very reliable, and have been very responsive when I needed help (and I needed A LOT of help).

Step 7: Sign up with an accounting software

Register with some type of accounting software. I use Quickbooks online. I don’t find it to be the most user friendly and my CPA usually has to fix some things at the end of the year, but it’s cheap and it gets the job done. I just connected my bank and credit card accounts and each month I go in and make sure all income and spending has been categorized. To be totally honest, I really only do this quarterly and sometimes less, but even when I put it off it only takes me about an hour to get all caught up. Quickbooks also allows you to generate all the reports your CPA will need to plan and complete your taxes which has definitely made tax season much easier for me.

Step 8: Get a fantastic CPA

I am a big believer in having people around who are experts at what they do so I can focus on being an expert at what I do. So, find a fantastic CPA so you can just give them the documents they ask for and you can be on your merry way. Filing my taxes as an S Corp typically costs about $800-$1000 per year.

You are all set! Hopefully I made this process easy-ish for you! If you have questions or thoughts, please comment below. Do you hate taxes as much as I do? Let me know in the comments! Also, go to the home page and subscribe to be notified each time I make a new post.

My First Blog Post! Contracted or Salaried????

Welcome! I am so excited to make this very first blog post on my very first blog! Today I want to jump right in. I promised to talk about the things you REALLY want to know and that we will do. Let’s start by talking about one of the very first things you will have to decide when you begin your career as a nurse practitioner (NP)…

Should you work as a salaried or contracted employee? BIG DECISION! And both have pros and cons. I am going to tell you EVERYTHING you need to know to make the best decision for you.

Let’s start with working as a contracted employee. Contracted NPs own their own business and through the business provide a service (patient care) to a facility in return for a certain amount of money. Pros: You are your own boss. You set your hours (to a certain extent), you get paid based off your production, and typically you make more money than a salaried employee. I know what you are thinking… “Freedom? Flexibility? More money? Sign me up! I see no cons!” HOLD ON THERE! Let’s talk cons because there are plenty. Cons: You ONLY get paid based off production. This means your pay may vary greatly month to month. You think often about how much you bill and hope insurance is paying on time. You are concerned with patients paying their bills. Your income will eventually hit a semi-reliable amount if you work at a good office and maintain a steady patient flow, but it will still probably vary a couple thousand month to month. That brings up another con: Concerns over patient flow. What happens when another provider gets hired at your practice or for whatever reason your patient flow slows down? It happens. Just like any other industry you have good months and slow months. Also, you are responsible for building your practice. So, the first several months your pay may be very low until you build up a good patient base (this took me about 6-9 months). Another con: You pay for your own insurance, continuing education, license renewal, malpractice insurance, AND you have to manage your own taxes. TAXES???? Doing my taxes gives me SERIOUS anxiety every year AND it’s expensive to pay someone to do your taxes. So, yes you are free, flexible, and can make more money as a contracted NP BUUUUT you worry about your billing, pay for all your own licensing things, and the worst part… TAXES… *shivers*

Now let’s talk about being salaried. Salaried is like hitting the easy button. Everything is set up in a nice little package and wrapped with a beautiful bow. Pros: You know exactly what you will make, you will be offered insurance, you have paid time off, the facility will likely contribute to the cost of your continuing education, pay for license renewal, credential you with insurance companies, AND BEST OF ALL your taxes will be super easy because you are an employee. You hand a tax guy your W-2 and VOILA – taxes done. Now let’s talk cons… You will likely be a full time employee (Monday through Friday 9-5), you have to request time off and you are only allowed a specific amount, you will likely be offered MUCH LESS per hour (like 50% less… eeeek), and you are not getting paid off production (meaning your employer can ask you to do as much or as little as they want and you see no difference in your pay). So, less freedom, lower pay, less flexibility… BUT SILVER LINING – you don’t have to worry about the business side of the NP world.

Let’s talk about the compensation piece of this in more detail. Contracted employees are usually paid a percentage of what is COLLECTED (not billed, COLLECTED). A typical percentage split in my area is 60/40. 60% of collections go to the NP and 40% goes to the collaborating physician for overhead and supervision fees. I have heard rumors of places offering 70/30 and even 80/20 but I have not met anyone personally who received this offer. Another common arrangement is getting paid a set amount per patient seen. I have never heard an amount offered that was anywhere near fair in this type of arrangement. It is usually an offer of less than 50% of what you would actually collect per patient you see. Commercial insurance companies reimburse $75-$100 for a follow up psychiatry visit roughly. You can calculate what compensation would look like hourly/daily based on how many patients you plan to see ([$ collected per visit x # patients seen per day] – 40% to overhead and collaboration fees = daily compensation). Salaried psychiatric NPs in my area are typically offered around $100,000-$130,000. This averages out to about $48-$62 per hour. Once you add in PTO and an allowance for CEs, malpractice insurance, and license renewals it would raise the value of your hourly rate by a few dollars.

So, which option is better? It depends on what matters most to you. My biggest piece of advice: KNOW YOUR VALUE! Research what insurance is reimbursing for services you provide and be sure you are getting appropriately compensated for the work you do. Many, many facilities and physicians are offering crazy low ball numbers to NPs and they keep doing this because WE KEEP ACCEPTING IT! Stand your ground. Recognize what you have to offer. Recognize the monetary value you bring to a practice. Don’t be afraid to negotiate. Yes, we are nurses because we love taking care of patients, we love educating, we love seeing our patients thrive, but those values do not conflict with being business savvy. YOU CAN BE BOTH!

Let me know in the comments how your negotiation went to get your NP job. Are you contracted or salaried? What do you like or dislike about the compensation structure of your current position? If you have any questions or suggestions for a future post please let me know! Thanks for joining!