If you are just starting out, you can wait a bit to see what form of business seems to “call” to you as a private practice International Board Certified Lactation Consultant (IBCLC). One-person shop? Partnership? Find employment with a physician practice? Please do have your professional liability insurance lined up; conduct yourself with excellence every day.
The notion of creating an LLC (some U. S. states call it an S Corporation) is to protect your personal assets from being attached in the unlikely event you are SUED and LOSE. Unpredictable, vindictive folks sue perfectly wonderful, sound, excellent, marvelous, compassionate, family-centered healthcare providers Every. Dang. Day. This has nothing to do with practicing excellently to avoid lawsuits. Of course you already do that. This is about how to handle the one disturbing person that has decided to make your life a misery, by filing a lawsuit against you, alleging all manner of unacceptable conduct.
If you have formed an LLC/S Corp in your state, for your private practice, and you LOSE the lawsuit, the judgment could be in the hundreds of thousands or even millions of dollars. Not unthinkable; we work with minors, and the algorithms for damage assessment until the age of majority are complex. In the unhappy event that the lawsuit came out against you, all they can go after to satisfy the judgment are your BUSINESS assets. Your computer and phone, maybe; perhaps some books, files, teaching tools, a scale, a couple of file cabinets and a nursing chair. Without an LLC/S Corp to shield you, however, they can now ALSO go after your PERSONAL assets once they have taken all the biz stuff. Your car, your house, your family silver, the kids’ college funds being tended in your name.
This is not rocket science to do in the law world, and it is worth it to drop the $1000-ish a small business law-specializing lawyer will charge you to create the LLC/S Corp. You can save a bit on the legal consultation if you do your own self-educating and leg-work ahead of time, surfing the many websites that show you how to create and file this paperwork on your own. But have the lawyer prepare the actual paperwork, and submit it for you. It creates a duty of care in the lawyer to set it up correctly, and they have to fix it if they don’t. Note that you may have to file tax reports in your state, even if you report all the income as a Schedule to your personal federal Form 1040 taxes. That makes sense: you have now created a separate legal entity in the formation of your LLC/S Corp, and there will be some paperwork obligations to let the state know how your biz is chugging along.
Yes, all of this costs money, but guess what? You are a small business person now, and these are the kinds of costs required to do it correctly. I’d recommend finding an accountant, too.
Now, many of you will say, “Pshaw, that Liz Brooks is such a scare monger.” Perhaps I am. But my own one-person IBCLC private practice has been an LLC since its very inception, and I lose no sleep at night, knowing the 4 bedroom house from which it operates cannot be attached in the indeed very unlikely event I get sued, and lose. I also carry fire insurance on that house, and it hasn’t burned down once, but I sure as heck am not gonna stop the fire insurance. Because that is one of the costs of owning a home.
Or others of you might say, “Pshaw, I have $6 million of coverage available to me through my IBCLC professional liability insurance! That’s all the protection I need.” Many have decided to let their professional liability insurance be the bulwark against The Unpredicatable Suing Client. That wasn’t enough for me. I have that much insurance coverage in my own policy, too. But an LLC/S Corp is still wise, as a judgment against you may be for MORE than $6 million (not unthinkable; again, we work with minors and the algorithms for damage assessment are complex). OR your case might be one where the professional liability insurer said they do NOT have to cover you/represent you at ALL. Also not unthinkable; some IBCLCs dabble in brokering informal milk sharing arrangements, and procurement of non-FDA-approved drugs … and insurers could easily say those are exclusions that they do not cover on your insurance. Meaning you now pay for your own lawyer, and any judgment is coming out of your personal assets after they’ve attached and sold all the business property.
All of this, realistically, is not gonna happen. These “what ifs” are very remote. It all comes does to how risky you want to get with your liability risks. And how much the “what ifs” will keep you up at night if you do not form an LLC/S Corp.