My Foray Into Private Practice

Please excuse that cheesy photo of the Private Practice casting crew. I couldn’t help myself.

I began private practice just a little past my 6 month mark (summer of 2015) as a new grad CRNA. I had sought the counsel of a couple of lawyers and accountants to get an idea on how I might best protect myself while pursuing private practice.

I initially started out as a sole proprietor and according to an accountant and lawyer I had talked to, I was informed that given I was only working 2-3 times a month and doing cases that were deemed “low risk,” their suggestion was to register myself as a sole proprietor for two reasons:

  1. For the tax deductions
  2. My liability as a provider was covered under my malpractice insurance

Tax Deductions/Implications

One thing to remember and I’ve noticed this thought process from many CRNAs who go into private practice. Just because you’re getting $1000 to work a day at a clinic does not mean you will be pocketing that entire $1000. A good rule of thumb to think about is saving ~30% of what you bring home so that you will have enough to pay taxes in the end. What taxes will you be responsible for?

Federal: 28% (if you make less $190K annually) or 33% (if you make more than $190K)
State: ~9%, varies with each state
Self-Employment Tax (Social Security + Medicare): 15.3%, does not vary

All said and told, that’s over 50% in taxes! However, fret not, because your tax deductions from your business expenses will substantially reduce your tax liability.

The tax deductions one gets to claim as a sole proprietor are simply amazing. This is where your book keeping skills come into play. Whatever you can reasonably deduct as a business expense, DO IT! Take advantage of this great benefit now that you’re registered as a business. Food, clothes, car expenses, mileage, anything that is related to the running of your business, you can write off as an expense, so be sure to keep an Excel spreadsheet with a brief note summarizing why it should be deemed a business expense. This latter part is due to the off chance you get audited, you’ll make your life much easier if you can explain why you’re listing a charge as an expense to the business.

Second, if you can, keep a copy of all of your receipts or use your phone to take a picture of them and store them in an organized way. You can either do that or make sure you save your credit card/banking statements that you made your business expenses on. Those records will also suffice so as long as you’re able to account for the expenses and explain why/how they’re related to the running of your business. The way an audit works is a tax auditor will randomly select a few months out of the year that you’re being audited. This individual will then look at your statements and correlate them with your records, which is why it’s imperative that you possess great book keeping skills. If everything is copacetic, then you’re free. If not, you pay taxes on the expenses that the IRS deems invalid. So, if you’re going to go through the hassle of writing off business expenses, take that extra minute to make sure you’ve adequately documented it.

Conclusion

  1. Keep an Excel spreadsheet of your expenses and write a brief note as to why it’s a business expense.
  2. Keep your receipts or keep a copy of your credit card/bank statements.

Malpractice Insurance

I went through Nationwide Anesthesia Services, Inc. for my malpractice coverage. I will go over malpractice insurance in a later post, but for the time being, I went with occurrence coverage. Payment for this coverage was $150 for the year and $50 for whatever day I work in private practice. The coverage was $1 million/$3 million, meaning $1 million max coverage per occurrence at a $3 million aggregate sum. In other words, I am covered up to $1 million in damages PER occurrence, but at a maximum aggregate coverage of $3 million.

Since I started as a new CRNA with basically no assets, my accountant and lawyer advised that I could practice as sole proprietor and that my malpractice coverage would be sufficient enough to protect me. For reasons that I will cover in a later post, I was informed that unless I planned to make ~$40,000 from private practice, there was no need for me to incorporate myself due to the costs of maintaining a corporation as well as the self-employment tax benefit (more on that later). It was on their recommendation that I work as a sole proprietor, which is what I did for a year.


Single-Member LLC

Fast forward to summer 2016, about a year of working in private practice, I went to a different accountant and lawyer to see if their advice was any different from what I was receiving from the my previous accountant and lawyer. They basically said the same thing, but instead of being a sole proprietor, they recommended that I register myself as a single-member LLC as a way to shield my personal assets from the liabilities of business because as a sole proprietor, there is no distinction between your business and personal assets, so in the event you are sued, there is the potential that your personal assets will be sought after. So, that’s what I did. I registered myself as a single-member LLC.

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