Birthing a Business
When does it make sense to become Naturopathic Doctor, Inc?
Written by Emily Telfair, ND, VP of the Maryland Association of Naturopathic Physicians
My LLC was born under the sign of Cancer in 2008. My accountant acted as the birthing assistant by organizing the paperwork, keeping me in check with what to sign, when to breathe, and what form to mail next. The federal government stepped in for the delivery of good news that my request to become an LLC as well as an S Corporation was granted. Thus began my new life as Business Owner - President and CEO of Emily Telfair, ND, LLC.
How did I arrive here? Everything seemed a bit easier when I was first starting out as a “sole proprietor” and working for several years as an independent contractor at a local wellness center. At that time I had one banking account, one major credit card and meticulously kept track of my miles and receipts to write off what ever I could on my taxes. And despite many new ND graduates complaining that they do not receive enough tools or guidance about how to start a business, I remember using several resources from Dr. Kasra Pournadeali's Practice Management II class during those first couple of years to get myself organized. What I wasn't quite prepared for was how much money the government wanted from me in comparison to how little I actually made as income at the time. FICA - or self-empolyment tax - was a rude awakening for a burgeoning young doctor just trying to pay rent and dreading the end of her loan deferment period.
One day, after much hard work in building up my practice, my accountant announced to me that I had reached a tipping point in regard to my FICA and income tax where the next logical step meant becoming an LLC. The thought of adding “LLC” after my name felt so official and established - like I was joining the club of starry-eyed Main Street business owners with big dreams and small payrolls. The reality of now being an LLC is that not too much has changed on my end - aside from keeping separate bank accounts and credit cards for personal and business use and paying my accountant more for my annual tax preparations.
My first piece of advice when trying to decide when and how to set up your business is to consult with both a good accountant and if necessary, a good lawyer. Ask colleagues or other local business owners in the area for referrals. There are a number of costs involved in setting up an LLC, but the advantage of being able to protect personal assets and keep them separate from any losses or damages that the business may encounter could be well worth the investment. If you are a new ND graduate without any assets to protect, there may not be a need to establish an LLC right away.
I have learned to accept FICA taxes as the trade off for not having to answer to a boss and being able to take a vacation or long lunch whenever I choose. Becoming an S Corporation in addition to being an LLC offers the opportunity to pay lower FICA taxes by reporting a moderate to low owner's salary while still being able to access additional profits from the business as needed.
The Small Business Administration has an extremely helpful website which outlines the various types of business models - from corporations and partnerships to LLCs and cooperatives - along with advantages and disadvantages of each. Consulting this site may be a helpful first step in determining which business model fits best with a new physician's practice. The IRS also has a site which clearly explains the tax obligations for self-employed individuals with a link to the “Business Structures” page that outlines the tax forms applicable to each business model.
Last week I received a call from a solicitor in search of my Human Resources Department. I had to laugh at the realization that I am the Human Resources Department, as well as the head of Billing, Dispensary Management, Scheduling, etc. This is the day-to-day life of a corporation with population: 1. We already wear many hats as naturopathic doctors. When it comes to the business aspect of our practices, out-sourcing to good accountants and lawyers can be well worth the investment.
Here's wishing all new graduates about to birth their new businesses into the world a safe and prosperous delivery.