Setting up your anesthesia practice as a business can seem like a daunting task. There are a lot of steps to complete and a lot of paperwork to fill out to set everything up successfully. We’ve compiled a short guide to help you get through the overview of what things you will need to license, incorporate, and register your anesthesia practice as a business.
TIN vs. EIN
A TIN (Taxpayer Identification Number), is exactly what the name suggests, a number to identify individual taxable entities used by the IRS. It is issued either by the SSA (Social Security Administration) or the IRS. If you are operating as a sole proprietorship or an LLC with no employees, you will only need a TIN (oftentimes your Social Security Number) to run your business. If you are looking to transition from a sole proprietorship to any other kind of business entity, you will need an EIN to operate day to day, file for taxes, or take advantage of any other benefits offered by the government. A TIN is different from an EIN in that TINs are used to identify people, while EINs are used to identify businesses. An EIN is an employer identification number that you will need if you plan to hire staff and have a payroll. It seems redundant to say you will need this to operate your anesthesia practice, but sometimes it is easy to mix personal and business finances when starting out.
To apply for an EIN, you will file IRS Form SS-4. But to file this form, you will need to decide on your tax entity.
Select Your Tax Entity
Your EIN will be tied to what kind of business you are establishing. Forming an LLC or a corporation can be necessary for your anesthesia practice as it affords you some protection from the business debts and liabilities that a sole proprietorship does not offer, as well as tax benefits for expenses. A Limited Liability Company, or LLC, is basically a business structure that exists as a separate entity from its owners in order to protect the owners from business debts and liabilities and to offer pass-through taxation.
Information you will need to register as a business entity, either LLC, C-Corp, or S-Corp:
- Legal Name (You will need a copy of your Name Reservation Certificate)
- Location (Street Address)
- Contact Information
- Officer/Owner Information
- Federal EIN
- Date of organization
- NAICS Code
- Entity Subtype
In addition, as you are a medical provider, you will need the following:
- Medical or CRNA license for the state in which you work
- Board Certification or CRNA recertification
- National Provider Identification number (NPI)
To set up an LLC, you will file this form with the Alabama Secretary of State. The fee in Alabama to form an LLC is $200.
LLCs are typically easier to set up than a corporation and provide more flexibility and protection for their investors. Alternatively, you can incorporate your practice. A C-Corp business structure has shareholders, directors, and officers. Shareholders own the corporation, but it is the corporation that owns the business (in this case, your anesthesia practice). An S-Corp is similar, just taxed under a different sub-section of the Internal Revenue Code. Incorporation gives you the same liability protection as an LLC in the case of a litigation claim.
To set up a corporation, you will file this form with the Alabama Secretary of State. The fee in Alabama to incorporate a business is $200.
To decide which is best for your anesthesia practice, you must evaluate your priorities and your tolerance for risk. And ultimately, it will all come down to taxes. For S- & C- Corporations, income and expenses pass through to the shareholders, and some income tax is able to be deferred. C Corporations provide stronger owner protections but are more expensive to maintain. An LLC may not pay physical taxes directly to the government, instead profit and loss is reported on the personal tax returns of the owner. Where you are in your business growth will determine which arrangement will give you the best ROI for your anesthesia practice. There are also some instances where you can file as an S-Corporation if you are established as an LLC, splitting your income into earned income as well as a return on equity.
Here is a link to the Alabama Department of Revenue where you can register as a business entity.
Confused about which business entity is right for you? We can help you navigate the process.
Reserve Your Business Name
Names are very powerful, especially when you are considering the branding of your practice. Reserving a unique business name is not just a matter of avoiding copyright infringement, it’s a matter of distinguishing your practice with patients from the first impression. As an anesthesia provider, there are so few opportunities to intangibly establish who you are and what you do, so your name carries a lot of weight.
To reserve a business name, you must legally make sure no one else has your name, file for a name reservation with your formation state, and pay the filing fee of $183 in Alabama. You can file this with your articles of incorporation when establishing your anesthesia practice as a business.
Here is a link to the forms for reserving your business name in the state of Alabama.
File TIN With Probate Court
Probate is the process through which a deceased person’s estate is transferred to their successors and beneficiaries. If you are in a position where your business entity designation (ie, sole proprietor) or business assets are such that you need to designate beneficiaries to the estate, you may need to file your TIN with the probate court. This establishes a separate EIN for the estate, and any assets the owner acquired or debts incurred become part of the estate. Tax returns on estates are completely separate from other taxable entities, including the deceased, and must be filed federally as well as at the state level.
The requirements for filing a TIN with a probate court are the same as filing for a TIN federally and can be done online on the IRS website.
Apply for a Business License
And last, in addition to your medical license, you will need a business license to operate your anesthesia practice. Your business license is separate from your articles of incorporation and is a legal document that a local government provides to permit you to conduct business activities and pay taxes. While your TIN is federal, your business license is local and will vary according to state, county, and city requirements. You may also need multiple licenses to operate your practice. The state of Alabama requires a business privilege license as well as a Board Certified Doctor of Medicine License from the state of Alabama. These cost $175 initially and $300 annually to renew.
Here is a handy master list of forms for incorporation, reserving a business name, and applying for an EIN in the state of Alabama.
It is imperative you go through these steps before providing anesthesia. With the proper legal foundation for your anesthesia practice, you won’t have to worry about IRS compliance and can build your business with peace of mind.
Of course, reading through a set of steps on a blog is a far cry away from actually completing them! If you need help filing for your TIN or incorporating your anesthesia practice, give us a call.