If you use a limited liability company (LLC) for locums shifts or other 1099 work, know how to run your LLC properly to get the liability protection you desire. Here’s what to do.
What Protection Does An LLC Offer?
Malpractice liability is always personal. In other words, an LLC or other business entity offers no protection from malpractice. Only malpractice insurance does that.
An LLC can protect you from other types of liability, if you run it properly. This means treating your LLC like a business, distinct from yourself and your personal affairs.
Treat Your LLC Like A Business
Bigger LLCs with multiple owners and employees tend to operate formally. But your LLC for locums or other 1099 work is just you. This makes it easy to get lax if you’re not careful.
If you don’t know how to run your LLC properly, a plaintiff can say the court should set aside your LLC and hold you personally liable.
Here are several ways to treat your LLC like a business.
Maintain Separate Finances
Get a business bank account and credit card, and run all business transactions through there. This also makes it much easier to keep everything straight, especially at tax time!
Never pay business expenses with personal funds, or vice versa. If you want to use money in your business bank account for personal purposes, first transfer from your business bank account into your personal bank account, then spend from the personal account.
Sign Contracts In Name Of LLC
If you don’t have an LLC, contracts will list you as the service provider, and you will sign with your personal name. You are obligating yourself personally to the terms of the contract.
If you have an LLC, do it differently! Contracts should list your LLC as the service provider, and you should sign as a member of the LLC. The signature line should look as shown below. You are representing your LLC, and obligating your LLC to the terms of the contract. Also, the other party knows they are contracting with a business entity with limited liability, not just little old you.
[Your LLC Name Here], LLC
[Your Name], Member
Invoice Clients In Name Of LLC
Invoice clients in the name of your LLC. This is another signal that you are acting as a representative of your LLC, not in your personal capacity. Plus it’s much easier to get payments made payable to your LLC if you invoice as your LLC.
File Taxes Correctly
With a single-member LLC (just you), you are treated for tax purposes as a sole proprietorship. This means your business revenue and expenses go on a Schedule C to your Form 1040. Revenue – expenses = taxable net income.
File Annual Reports With Your State
Most, if not all, states require you to file a simple annual report and pay a modest fee in order to keep your LLC in good standing. Often, you can file online. An annual report may seem trivial, but a plaintiff can argue that the court shouldn’t respect your LLC if it’s not in good standing with the state.
Set a recurring annual reminder in your calendar, or set up a recurring annual email to yourself that contains the link to the state’s website where you file the annual report. Gmail doesn’t support recurring emails, but you can use a third-party provider such as Boomerang for Gmail (we have no financial relationship with Boomerang).
If you’d like to make sure you’re running your LLC properly, schedule a FREE Financial Pulse Assessment™. This is a 3-step process to get clarity on your finances and “test drive” our services.