Creating Own Business - DIY or hire CPA?

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AdamL.
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Location: Oregon, US

Creating Own Business - DIY or hire CPA?

Post by AdamL. »

Hi all,

My wife is thinking on starting her own therapy private practice. What we are trying to decide is if we can do all the small business stuff ourselves. We are thinking on making it an LLC, to ease converting it to a group practice instead of just her in the future.


Is doing everything DIY doable or is professional help needed? And if DIY is doable, do people have recommendations on books or websites that walk through all the steps?

I've been reading stuff from the US Small Business Administration and nothing so far seems like something I/we can't do (register the LLC, set up a website, find a billing/appointment program). The bigger worry for me is taxes and making sure we are doing everything legally.

Small background on us, she is currently a therapist at an agency, and I am an engineer who is kind of techy. I do our taxes using turbotax or credit karma.

Thanks for your help.

Edit: I'm not too worried about the LLC vs Sole Proprietor part. Liability wise I don't think it helps us much, since she could still be sued personally for things related to the actual therapy. Taxes wise I don't see it mattering too much either. Being able to be taxed as an S corp wouldn't seem to help much, since she is only billing for her time. Seems like whatever she earns would be a "reasonable salary".
Last edited by AdamL. on Sun Jul 26, 2020 6:59 pm, edited 1 time in total.
000
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Re: Creating Own Business - DIY or hire CPA?

Post by 000 »

I suggest reading past threads about LLCs. For example, an LLC may not provide much liability protection for the personal services of the owner. Also, an LLC usually cannot represent itself in court. The business owner loses the right of pro se representation with regard to the business.
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neurosphere
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Re: Creating Own Business - DIY or hire CPA?

Post by neurosphere »

Here are some loosy-goosy guidelines, suggestions, information for you to research and chew on. I'm not an expert in these matters.

-- An LLC for a single owner provides liability protection in theory. An LLC designation, it itself does not affect taxes. And single owner LLC is by default a self-employed business for tax purposes (reported on schedule C) and all it add is (in theory) liability protection. But an LLC can elect to be taxed as an S-corp.
-- In general and on average, a services type business does not benefit from the liability protection of an LLC. E.g. a physician is still liable for malpractice despite any LLC.
-- A s-corp rarely benefits a business whose income is mostly derived from services. For example, a single/self employee business where the income comes from services, as opposed to say sales.
-- Liability protection can protect you from creditors (i.e. from a bankruptcy) if you are starting a business with substantial loans for example. However, most lenders would probably require one to personally secure a loan to such a business.
-- Yes, you can likely do the LLC process on your own. There are few downsides to having an LLC you don't "need" other than the initial cost and time. I have an LLC business, which is a personal service business. I don't think the LLC part was necessary, in retrospect. But the time spent "worrying" about whether I needed one turned out to be more than the time/money to create the LLC. :D
-- I suspect that yes, forming an LLC might make it easier to convert the LLC to a partnership at a later date. I have no experience with this however, other that what I skim through on past BH threads. :)
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
mcraepat9
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Re: Creating Own Business - DIY or hire CPA?

Post by mcraepat9 »

My wife started her psychotherapy practice earlier this year. Sole proprietor for now, with a simple DBA. I’m an attorney (Partner at biglaw firm in NYC) and determined that she didn’t need any LLC or PC for the time being. She of course has adequate liability insurance.

She has a bookkeeper, scheduling assistant and web designer/copywriter for her website. All contractors by the hour. All absolute no-brainers. Bookkeeper is a CPA who will put together her Schedule C.

Happy to share any specific advice you may want, as I helped her pick out her practice management software (get this one right!), various other service providers, ensure HIPAA compliance and work with her to ensure good record keeping.

For what it’s worth I am a very DIY person when it comes to taxes etc (used Taxact forever) but once I made partner and had K-1s I got an accountant. Also a no-brainer.
Amateur investors are not cool-headed logicians.
WildBill
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Re: Creating Own Business - DIY or hire CPA?

Post by WildBill »

viewtopic.php?f=2&t=319223

Howdy

All of the topics were covered in this thread. Most information is good, but several people did not understand the extremely limited liability protection of an LLC

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid
Keim
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Re: Creating Own Business - DIY or hire CPA?

Post by Keim »

I had to put together a 501c3 nonprofit last year in a hurry as we were braking from a bad business partnership. The decision to hire a CPA to put together the corporate paperwork/501c3 application and a bookkeeper for the monthly stuff helped greatly. The CPA gave us a break on the business set-up, only charging $1k. Not sure what his full rate would've been. The bookkeeper for payroll, etc. allows me to focus on the many other things I do well.
SpideyIndexer
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Re: Creating Own Business - DIY or hire CPA?

Post by SpideyIndexer »

My spouse receives payments from a nonprofit 501c3 for teaching. This started in this calendar year. Can this be considered self-employment income?
Virginia106
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Re: Creating Own Business - DIY or hire CPA?

Post by Virginia106 »

We have a two person LLC for our contracting business. I also did a lot of research and we ended up hiring out a tax person (whom we already used for our personal taxes prior to starting the LLC), a local attorney, and also a CPA. Each of these provides something different that the others were not familiar with. We pay each on the order of a couple hundred bucks each year. One thing that was a learning to me was the specific requirements around our state. The attorney drew up the (cookie cutter) LLC operating document, and annually renews our state filing for a fee. I keep the books but send an excel spreadsheet to the tax person every Jan 1 and she completes the taxes. She is not a CPA so I had to go elsewhere to get a financial review in order to obtain the necessary contractors licensing (tried first with her submitting info to the state but rejected due to her not being a CPA). Have no idea what the requirements may be in the medical field, but I learned all of this each step of the way in the process. Not sure I ever talked to anyone that had all of the steps and requirements clear for the total process- if you could find someone you trust that has been through what you are trying to do in your state it may be helpful.
bh3fpinv
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Re: Creating Own Business - DIY or hire CPA?

Post by bh3fpinv »

I'm in the process of doing this myself. Right now, I'm working full time as a W2 but will move to full time work as a 1099 at the start of next year.

I spoke with a CPA who focuses primarily on health care 1099 workers/business owners in the health care field, and I am considering using him. One of the things he mentioned in our free hour-long consultation was that for each $100k earned we could save $9,000 in taxes annually if taxed as an S-corp LLC vs LLC or sole proprietor. If that is accurate that alone would more than pay for any fee he would charge me.

I've always done my own taxes and for the most part handled our own investments. I plan to engage this CPA for initial set up and for the first year to get everything right and then determine if I can handle the maintenance on my own.

Good luck in your new business.

BH3
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neurosphere
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Re: Creating Own Business - DIY or hire CPA?

Post by neurosphere »

bh3fpinv wrote: Thu Nov 24, 2022 10:19 am I'm in the process of doing this myself. Right now, I'm working full time as a W2 but will move to full time work as a 1099 at the start of next year.

I spoke with a CPA who focuses primarily on health care 1099 workers/business owners in the health care field, and I am considering using him. One of the things he mentioned in our free hour-long consultation was that for each $100k earned we could save $9,000 in taxes annually if taxed as an S-corp LLC vs LLC or sole proprietor. If that is accurate that alone would more than pay for any fee he would charge me.

I've always done my own taxes and for the most part handled our own investments. I plan to engage this CPA for initial set up and for the first year to get everything right and then determine if I can handle the maintenance on my own.

Good luck in your new business.

BH3
Do you understand where this $9000/$100,000 savings will come from? It doesn't seem right to me but of course I don't know your full situation. Will you have employees and/or manage other providers or are you on your own providing services?

I've been a 1099 worker (physician) in the past and I could find no circumstance where it made sense for me start an s-corp. Most healthcare workers I know who start s-corps end up paying more in startup and ongoing fees than they save in taxes, or alternately they make unjustifiably low W2 payments to themselves in order to massage the tax savings. The example I give is a full time physician who claimed his full time salary was only $75,000, while the other $500,000 in 1099 income was "profit" because $75,000 was some "average" US salary he calculated for something or other.

Also, don't forget things like federal unemployment taxes, payroll services, etc when considering an s-corp. Many accountants "forget" to mention these other ongoing fees/costs at the beginning and focus only on income taxes. And keep in mind that that an accountant has a direct financial incentive to suggest you start an s-corp. It's like asking a barber for a haircut, or an insurance salesperson whether you need insurance. :D
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
bh3fpinv
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Re: Creating Own Business - DIY or hire CPA?

Post by bh3fpinv »

Do you understand where this $9000/$100,000 savings will come from? It doesn't seem right to me but of course I don't know your full situation. Will you have employees and/or manage other providers or are you on your own providing services?

I've been a 1099 worker (physician) in the past and I could find no circumstance where it made sense for me start an s-corp. Most healthcare workers I know who start s-corps end up paying more in startup and ongoing fees than they save in taxes, or alternately they make unjustifiably low W2 payments to themselves in order to massage the tax savings. The example I give is a full time physician who claimed his full time salary was only $75,000, while the other $500,000 in 1099 income was "profit" because $75,000 was some "average" US salary he calculated for something or other.

Also, don't forget things like federal unemployment taxes, payroll services, etc when considering an s-corp. Many accountants "forget" to mention these other ongoing fees/costs at the beginning and focus only on income taxes. And keep in mind that that an accountant has a direct financial incentive to suggest you start an s-corp. It's like asking a barber for a haircut, or an insurance salesperson whether you need insurance. :D
Thanks for your helpful reply!
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