Starting a Staffing Agency

eddy · Dec 9, 2005

Hello again,
I've been away for a while. Thanks for all of your input. Eye openers I might add. Just to clarify-I am starting a local (hospital) staffing agency, no home healthcare, no travel nursing. I was looking into PRN funding company but I wasn't really sure how the factoring program worked so far as if the accounts became way past due. I know that they take 1% from the total balance and give up to 80% cash advances on your total balance with the hospital. I didn't know that they could make you buy your invoices back if they deem it to be too difficult to collect the money. I guess I understand why though.

Kindredhearted,

You'll want to look very closely at their contract. Generally, the companies that take a very small discount % rack up interest on your DSO's. They also often have a mandatory buy back agreement and likely steep penalties for late paying customers.

I would HIGHLY encourage you to look into a line of credit, probably backed by the SBA. You only use what you need of the line and typically you are looking at about 1.5% over prime. You'll need pretty good credit (700+) and at least SOME assets. You'll also need a sound business plan and solid budgets and forecasts.

If you do not have some previous experience on the management side of the Per Diem staffing agency industry (or something very closely related), you will likely have a problem getting loans, Liability Insurance and work comp insurance. These are all things you must have.

Without a doubt Harry hit it on the head in regard to the high amount of capital (or access to credit) that is required to operate, though he is referring to a different type of entity than you are (including using IC's rather than employees). In your case, you would need significantly more money than he does (actual startup capital). You will have downpayments for a lot of things, especially insurance policies. You will need to begin paying service providers (lawyers, accountants, etc.) and/or software vendors (accounting system, payroll system, staffing/time management software) prior to even billing your first customer (to get setup to service clients, bill them and pay your employees).

You could probably obtain an SBA express loan (pending your financial situation and credit history) to provide the startup capital needed. Then you could get a 7a SBA backed line of credit for ongoing operating expenses. However, you'll want to make sure you have the ability and desire to run this thing. From experience (though a different industry), running a business is a 24/7 job, especially in the beginning (which is often a couple of years or more). You will have to sacrifice family time, leisure time and often even sleep. You'll have to know the industry inside and out. Don't try to compete with the big boys that have the financial and talent resources you lack by winging it. It just won't work. Be prepared for things like price games (which you likely won't be in the position to play) and temporary pay hikes from your competitors (again, you won't be able to play) in their efforts to quickly put you out of business. You instantly become enemy number 1 of the other agencies in your service area. They will be gunning for you from day one. No one likes the threat of someone trying to take a piece of "their" pie.

You're often best having a partner. Preferably one that can bring some money and money management experience (accounting) to the table. It can get quite lonely being the only owner as it's not appropriate to vent to your employees about "owner stuff" or ask advice or input from them about "owner problems".

Samwana · Jun 27, 2007

Hallo,

I would like to know what kind of licences or permits one need to operate a staffing agency.Which State/Federal authorities does one needs to contact in order to start a staffing agency? Will really appreciate anybody's advice.Thanks

jcaracci · Jun 28, 2007

Hallo,
I would like to know what kind of licences or permits one need to operate a staffing agency.Which State/Federal authorities does one needs to contact in order to start a staffing agency? Will really appreciate anybody's advice.Thanks

Hi Samwana,

To get started, you will need to incorporate and also to check with your state to see if a staffing agency license is needed. (i.e. one is required in NY and FL). You will also need General, Professional, and Worker's Comp Insurance.

To find the link for your state go here -> http://www.nursingcorp.com/StateLinks.htm

Joe

HarryHK · Sep 23, 2007

I'm going to have to disagree with both your points. There is no requirement to incorporate (and it is actually easier to staff nationwide without incorporating), and having been a staffing agency for over four years, I have never heard of a staffing license. Perhaps for staffing non licensed personnel? I only know of two states with specific requirements for nurse staffing. WA requires registering your agency with the BON (although I have no idea if agencies actually do or not or how they might enforce it). RI requires a physical presence in the state.

Other than that, nothing I know of!

eddy · Sep 26, 2007

I'm going to have to disagree with both your points. There is no requirement to incorporate (and it is actually easier to staff nationwide without incorporating), and having been a staffing agency for over four years, I have never heard of a staffing license. Perhaps for staffing non licensed personnel? I only know of two states with specific requirements for nurse staffing. WA requires registering your agency with the BON (although I have no idea if agencies actually do or not or how they might enforce it). RI requires a physical presence in the state.
Other than that, nothing I know of!

To add to your list of restricted states, off the top of my head:

- Kentucky has a licensing requirement specific to nurse staffing.

- Illinois requires a physical office in the state.

- Florida has a medical staffing license requirement of some sort.

To address incorporating:

If you are going to staff ANYONE but yourself, it is incredibly foolish not to form some sort of limited liability entity. Should that be a corp, an LLC or whatever it SHOULD be something. Without the limited liability of an official entity you expose ALL of your personal assets (your home, your cars, your personal bank account, everything). It absolutely will not be "easier to staff nationwide without incorporating". Hospitals have large legal departments that will disagree with your statement. The issue at hand is simple. If you are not a true business entity with appropriate general and professional Liability Insurance and work comp insurance, you'll get nowhere... unless you get lucky by complete accident, in which case you're probably providing services to a hospital that has terrible risk management and in turn exposes YOU to increased risk.

HarryHK · Oct 1, 2007

It absolutely will not be "easier to staff nationwide without incorporating". Hospitals have large legal departments that will disagree with your statement. The issue at hand is simple. If you are not a true business entity with appropriate general and professional liability insurance and work comp insurance, you'll get nowhere... unless you get lucky by complete accident, in which case you're probably providing services to a hospital that has terrible risk management and in turn exposes YOU to increased risk.

While I don't disagree with you about the benefits of incorporating, an large portion of small businesses do not (it is a rare one with over 50 employees though). A sole proprietorship is a "true" business entity and can get appropriate insurance. I did it, and worked for a number of hospitals without a problem. Theoretically, they prefer to work with corporations if they know the real risks, but I can tell you from personal experience not one hospital has asked and I do not say Inc. on any of my paperwork before or after I incorporated. Nor as far as I know has any of them done any sort of due diligence on me. Hospitals have in the range of several hundred vendors (often 20 of them just staffing agencies). I don't know how they could do due diligence on each one.

It is easier to do business across state lines as a sole proprietor. That is a fact! No need to register your corporation in every state you do business in. That can get not only expensive but incredibly cumbersome for a small business. Granted that many small corporations fly under the radar (as do I) but that is not technically legal. There is certainly no reduction in work load for a corporation so I'm not sure where you are coming with this claim. I have to do 8 tax returns a year now!

BethulieRN · Nov 14, 2007

I think you are right about the local staffing thing. However, I don't think it matters what the APR might be. It is just a fixed five percent cost. Which in the staffing business where you know exactly what your cost of doing business is, is the best way to do it. Not cheap, and in many other sort of business models that are unprofitable for the first couple of years, factoring could easily help push the business into bankruptcy.
Lines of credit seem to be just as expensive, perhaps not APR wise, but not a clean fixed percentage of the cost of doing business either. And I suspect you have to have pretty darn good financials to get one as well, or put a lien on your property. A contract with a guaranteed return in a staffing agency should be easy to factor.
Since I have effectively started a staffing agency with myself as sole employee, I know it can be done with virtually no money other than living expenses before invoices are paid. And I've subcontracted travelers who were willing to wait for their money as well. But a home health agency is scary stuff. I'd want lots of capital and some back office expertise as well.

harryHK, I really liked your posts. I have been preparing to open my own nursing agency and start myself as a sole employee. I have managed to save $50,000. Is this enough to pay for all the fees to start up anf pay my own salary?

ceresk

HarryHK · Nov 14, 2007

Oh yes! Well under a $1,000 is all you need for insurance and possible incorporation costs (optional). Maybe some accounting software as well. And you have more than enough cushion to pay for your living expenses for a couple of months.

eddy · Nov 15, 2007

While I don't disagree with you about the benefits of incorporating, an large portion of small businesses do not (it is a rare one with over 50 employees though).

The choice to form a limited liability entity depends on many factors, and indeed some small business owners are perfectly fine operating as sole props rather than a more "formal" entity. Forming a limited liability entity is a fairly simple thing to do and costs very little, and the benefits associated with it make it a no brainer for many businesses. It is especially wise to do in this HIGH liability and HIGH risk industry. Why expose your personal assets when a couple hundred dollars can provide your shelter from that?

A sole proprietorship is a "true" business entity and can get appropriate insurance. I did it, and worked for a number of hospitals without a problem.

Correct, the moment you engage in a business activity with a profit motive you become a business entity by default. However, a sole proprietor has ZERO personal protection from liability, and that is the most important point here. In regard to insurance, independent contractor insurances and the type of insurances a true agency that employs other people requires are completely different. Don't be fooled into thinking that just because you have IC coverage, you have a company policy. You don't. You must be rated to get coverage when you employ other nurses. You also will be subject to occasional audits as the insurer bases the amount you owe on either your payroll or your total revenue... and of course the amount of coverage you purchase. The difference in cost is SUBSTANTIAL.

Theoretically, they prefer to work with corporations if they know the real risks, but I can tell you from personal experience not one hospital has asked and I do not say Inc. on any of my paperwork before or after I incorporated.

Just because it's "worked" for you so far doesn't mean it will continue. If/when the hospital discovers this shortcoming, the business person could lose their contract with the hospital, and they may end up with issues collecting money on work that has already been performed as the hospital tries to sort through how to deal with the situation. This could cause a serious interruption in the business, the person's income and their ability to pay their other staff. Again, to save a few hundred bucks, why would a person expose themselves to such silly risks? Also, Harry, since you are now incorporated you are legally required to put a corporate abrevation (or spell out corporation or limited liability company, etc.) at the end of your business name on official documents including contracts.

Nor as far as I know has any of them done any sort of due diligence on me. Hospitals have in the range of several hundred vendors (often 20 of them just staffing agencies). I don't know how they could do due diligence on each one.

Hospitals are REQUIRED to perform this due diligence on EVERY single vendor. If they aren't doing so, they expose themselves to serious risks. Namely, they could lose their government reimbursement monies. Without this, almost every single hospital would have to close shop. If they aren't performing their due diligence, they are putting YOU as a vendor at risk. Hospitals and many other business receiving ANY federal money must verify all vendors against the Attorney General OIG list. The people and companies on the list are primarily people who have committed some sort of fraud against the government or owe them a bunch of money for something. The OIG look up is just ONE of many verifications both at the federal and state levels they are legally required to do on each and every single vendor they use. They also have to do this on every single employee in the hospital's organization. The amount of verification they must perform on vendors is far less than what they must perform for employees, but they share most of the verifications in common, meaning they are already QUITE well equipped for performing proper DD on vendors.

It is easier to do business across state lines as a sole proprietor. That is a fact! No need to register your corporation in every state you do business in. That can get not only expensive but incredibly cumbersome for a small business. Granted that many small corporations fly under the radar (as do I) but that is not technically legal.

This is incorrect information Harry (not entirely but mostly). All business entities (even sole proprietors if they use a fictitious name, meaning anything other than the actual name of the business owner) are REQUIRED to register as a business entity. If you are an out of state company, you must also register as a foreign entity in any state your transact in. If you can't afford the small filing fee and the 2 minutes it takes to fill out your annual report, there are far worse problems that need to be addressed. You may consider them expensive and incredibly expensive, but it's the law. Also, in your case Harry, by not filing your foriegn corp status with the state (as you say you don't), you are are potentially at risk of losing the veil of limited liability protection of your corp. In the event you are sued in that state, they could potentially go after all your personal assets, not to mention that at that point you've just been discovered to have commited a crime in that state and have THAT to deal with.

There is certainly no reduction in work load for a corporation so I'm not sure where you are coming with this claim. I have to do 8 tax returns a year now!

I'm not sure where you read this in my post. I never said that, and I honestly don't think I implied it either. With that said, having owned several of my own businesses that posted millions in revenue every year (though not in the nurse agency industry), I can speak from solid experience when I say it's not terribly complicated to deal with the additional requirements of corporate compliance, and I would never want to operate without its protection. It's true, it's a little more work, but worth it.

In closing, folks, It's ALWAYS best to conduct business based on BEST PRACTICES and within the law. Just because someone says they "get away" with something or "fly under the radar" doesn't make it safe, legal, ethical or wise.

HarryHK · Nov 15, 2007

Are you a healthcare professional? There is no corporate shield available for professional liability. If you harm a patient, your personal assets are on the line period. Just as they are as a normal employee of a hospital (who is also incorporated). Insurance is needed.

Yes, if you use employees or have business premises, incorporation can shield you from some types of liability. However, that has never been absolute, and post Enron there is much more responsibility on corporate officers on how business is operated and personal liability for corporate practices. For example, if you knowingly send an incompetent nurse out on contract and a patient is harmed, you can be held civilly and even criminally responsible. Insurance is needed.

However, a sole proprietor has ZERO personal protection from liability

True, so what? You still need insurance to manage your risk, just as does a corporation. I've said this to you in the past and I will say it again, most small businesses in this country are sole proprietors, even some mid sized employers. It is a valid business model.

Don't be fooled into thinking that just because you have IC coverage, you have a company policy. You don't. You must be rated to get coverage when you employ other nurses..

I'm not fooled and it is a company policy. But you are right that the rate is adjusted for employees actually working. However, your advice is misplaced. I am talking to someone who will start by only employing himself. No other nurses involved.

If/when the hospital discovers this shortcoming, the business person could lose their contract with the hospital, and they may end up with issues collecting money on work that has already been performed as the hospital tries to sort through how to deal with the situation.

Can you cite a source for this remarkable statement? If a sole proprietor contracts with a hospital and does not state that he is a different entity, how could that fact void the contract or collection?

Also, Harry, since you are now incorporated you are legally required to put a corporate abrevation (or spell out corporation or limited liability company, etc.) at the end of your business name on official documents including contracts.

Technically true, but you are living in a cave if you think that there are not other practices out there. The fact that multinational companies and some of the large travel companies do not identify their corporate status on their documents gives me great confidence that there is little risk in this practice. The real risk would be the other direction, a sole proprietor representing himself as incorporated. However that too would not by itself invalidate contracts made and performed to specification.

Hospitals are REQUIRED to perform this due diligence on EVERY single vendor.

Again, can you cite a source for this remarkable statement? Hospitals have hundreds of vendors and I can promise you that they do not do any sort of due diligence on most. They do validate competencies and credentials of every individual healthcare practitioner they employ or contract, perhaps this is what you are referring to.

Hospitals and many other business receiving ANY federal money must verify all vendors against the Attorney General OIG list.

Yes, some hospitals do OIG. Takes about 10 seconds online. Recently, hospitals have been requiring me to supply them with a report (which would seem to break a chain of custody to me). That goes right along with the insurance credentials I also have to send them. Perhaps this is the due diligence you are referring to, looking at my documents? They certainly do not call my insurance company or the state workers comp board to ensure I'm operating legitimately.

All business entities (even sole proprietors if they use a fictitious name, meaning anything other than the actual name of the business owner) are REQUIRED to register as a business entity. If you are an out of state company, you must also register as a foreign entity in any state your transact in.

Another remarkable statement. No reason to register as a sole proprietor in a state where you don't have a physical presence. If that is true, a company selling widgets would have to file in every state they send an order to or a salesperson. Just not true. But if you care to cite any state site that lists such a rule or a page with a mechanism for filing such a status, I'd be happy to stand corrected. Of course, I must withhold taxes appropriately for the work state, perhaps that is what you are calling registration?

Also, in your case Harry, by not filing your foriegn corp status with the state (as you say you don't), you are are potentially at risk of losing the veil of limited liability protection of your corp. In the event you are sued in that state, they could potentially go after all your personal assets, not to mention that at that point you've just been discovered to have commited a crime in that state and have THAT to deal with.

My risk and that of many thousands of other companies. It would be a civil offense, not criminal though. And I manage my liability with insurance, just like any other responsible person or business. All business decisions carry risk, it is up to the individual owner how to manage that risk.

The experience of very large businesses and very small businesses are very different and require different approaches. Risks are also very different. Large companies can have whole departments related to corporate compliance (especially if publicly held), one person operations cannot afford or need this.

If you want to advise a one person shop that they need to spend $5,000 a year to cross their t's, that is fine. But until you live in our shoes, your advice on how large companies manage their business is ill advised.

eddy · Nov 16, 2007

Are you a healthcare professional?

Yes I am. I am also a CPA and professional business consultant with nearly 20 years of experience in corporate compliance, accounting and tax law. I have served as an executive for companies both small and large. I've also been a business owner for the greater portion of my life and have served on several boards for small and mid sized companies. I guess you could say nursing came later in life for me, but I still would like to consider myself fairly young, though the kids will be quick to disagree with me on that subject.

There is no corporate shield available for professional liability.

Again Harry, you are incorrect or should I say you're right but on the wrong subject. It's not NEARLY as black and white as you make it out to be. Additionally, you are relating your own position as an IC versus the original poster's questions regarding EMPLOYING PEOPLE (though not initially). From your postings that I have observed, this doesn't seem to be something you do, nor do you seem to have any practical experience in regard to the subject (employing people). Specific to an IC (you), there can be times when there is no personal liability protection for a professional when during the performance of their professional duty they commit a crime, and that's a pretty simple concept for most people to understand (that's where the applicability of your statement ends). The point I have been trying to make is that without the protection of a limited liability business entity, you open yourself to personal liability based on what your EMPLOYEES do.

If you harm a patient, your personal assets are on the line period. Just as they are as a normal employee of a hospital (who is also incorporated). Insurance is needed.

Mostly right. However, again, you are talking about your own IC situation, NOT the business situation the original poster is inquiring about. It's merely YOUR situation as an IC. I have been providing input on what you need to do to protect yourself from your EMPLOYEES creating additional liability issues for you as an EMPLOYER.

Yes, if you use employees or have business premises, incorporation can shield you from some types of liability. However, that has never been absolute, and post Enron there is much more responsibility on corporate officers on how business is operated and personal liability for corporate practices.

If you commit a CRIME as an owner or executive you are not allowed ANY limited liability protections, nor is the company. This has existed since corporate entities have been acknowledged in the US. However, nurses that you employ in the field are not considered to be corporate representatives, so they can not put your personal assets at risk, provided you are operating as a limited liability entity.

True, so what? You still need insurance to manage your risk, just as does a corporation. I've said this to you in the past and I will say it again, most small businesses in this country are sole proprietors, even some mid sized employers. It is a valid business model.

Your CHEAPEST "insurance policy" is obtained by conducting business through a limited liability entity (granted it's not a real insurance policy but it's a protective shell which is better than insurance). Now, beyond that, OF COURSE insurance comes into play, but as a limited liability entity your insurance policies are in place to protect the companies assets (with caps), not personal assets. I'm going to assume that you are aware that professional and general Liability Insurance policies have "per occurance" and "per policy" caps. Any money you owe due to a lawsuit, or worse multiple lawsuits in the same year, should you exceed those caps, the additional balance becomes your company's responsibility (your insurance only has to pay up to their insured limits), and in the event someone takes your advice and conducts business as a sole prop, they are PERSONALLY responsible. This means their personal assets will be used to settle up the remainder of the bill. That could wipe them out. With a limited liability entity, pending the owner(s) acting lawfully and within the reporting and structural requirements of their chosen entity, they are safe from personal liability. Only the company entity's assets are exposed.

I'm not fooled and it is a company policy. But you are right that the rate is adjusted for employees actually working. However, your advice is misplaced. I am talking to someone who will start by only employing himself. No other nurses involved.

According to your previous posts, you don't EMPLOY people. You don't have the same policy as we are talking about. If you do, you in fact have the WRONG policy for YOUR situation. I wouldn't consider the advice I've provided to be misplaced. The most recent poster wishes to start an agency that will ultimately employ others. She/he wishes to be the sole employee at first. This is NOT the same as your situation. She/he will need a rated policy from day one otherwise he/she will have to deal with tail coverage and other issues (and tail coverage will be near impossible to get in this situation if you are honest about your situation) because you'll have to transition from an IC/Individual policy to a business policy. To prevent liability issues the best this person can, they should pay themselves a reasonable salary (with appropriate withholdings taken out) and insure their limited liability company. The umbrella policy will cover the business entity and her/him as the current sole employee in the field. Again as long as he/she does not commit a crime he/she has no personal liability exposure. Any additional profits beyond the "reasonable salary" may be taken via distributions or dividends based on the entity they've chosen. Safe, simple, best practices.

Can you cite a source for this remarkable statement? If a sole proprietor contracts with a hospital and does not state that he is a different entity, how could that fact void the contract or collection?

In a case where you represent yourself as someone or some business you are not it's fraud, but that's the most extremes of extremes. What I was really talking about is that should a hospital have concerns over the legalities of a business entity, they may (and often do) choose to put a hold on paying any current invoices until they conduct their own "investigation". We all know that hospitals can void a contract virtually at will due to the numerous angles they have in any given contract. The most simple thing they could assert is professional misconduct.

I'm not sure I see a need to cite that.

Technically true, but you are living in a cave if you think that there are not other practices out there. The fact that multinational companies and some of the large travel companies do not identify their corporate status on their documents gives me great confidence that there is little risk in this practice. The real risk would be the other direction, a sole proprietor representing himself as incorporated. However that too would not by itself invalidate contracts made and performed to specification.

Seriously Harry... it is a legal REQUIREMENT, and you yourself state it's the case. So why the issue? Every state requires this, as does our federal government. A fact is a fact. A law is a law. Don't worry about what others do or you ASSUME them to do. Do what's right and lawful. The lawyers will worry about the rest. They always do.

Again, can you cite a source for this remarkable statement?

Go to google and type in: oig hospital vendor precluded

You can also type in: oig hospital nurse precluded

You'll find plenty of worthy citations there.

Hospitals have hundreds of vendors and I can promise you that they do not do any sort of due diligence on most. They do validate competencies and credentials of every individual healthcare practitioner they employ or contract, perhaps this is what you are referring to.

Harry, just because you got "lucky" and they missed your issues doesn't mean they aren't LEGALLY REQUIRED to perform due diligence. I've consulted with what I consider to be some of the best regional hospital systems in the US. I can speak from EXPERIENCE rather than assumption. The reputable systems perform thorough due diligence in regard to vendors. Those that don't... I would be cautious of doing business with.

Yes, some hospitals do OIG. Takes about 10 seconds online.

Fast and free. OIG checks are simple indeed. While some MAY not do them, the greater amount in fact do. It's a federal requirement. It's a law. Those who don't are exposing themselves to serious legal and monetary risk. This in turn, as I've already said, exposes their vendors to risk (in terms of possibly not getting their money for services or products already delivered). It's also a legal requirement to run the OIG exclusion check on all employees.

Recently, hospitals have been requiring me to supply them with a report (which would seem to break a chain of custody to me). That goes right along with the insurance credentials I also have to send them. Perhaps this is the due diligence you are referring to, looking at my documents? They certainly do not call my insurance company or the state workers comp board to ensure I'm operating legitimately.

I believe you may be talking about a "certificate of insurance". If so, what you are talking about is possibly one of the biggest issues right now in terms of liability insurance fraud. Less reputable agencies have (for years) paid their down payment (typically 25%) to get their insurance certificate and then never pay the rest of their balance on their policy. Technically, they aren't covered, but no one is the wiser... until a lawsuit surfaces. Most recently, many hospitals have begun requiring NAMED certificates which are sent directly from the carrier. This is a good start to put an end to this unethical practice. Ironically, one of my recent assignments I took through my agency was held back a day because the certificate was delayed (due to a foul up by the carrier). While it was a minor issue for me, I'm honestly glad to see they were doing the right thing.

Another remarkable statement. No reason to register as a sole proprietor in a state where you don't have a physical presence. If that is true, a company selling widgets would have to file in every state they send an order to or a salesperson. Just not true. But if you care to cite any state site that lists such a rule or a page with a mechanism for filing such a status, I'd be happy to stand corrected. Of course, I must withhold taxes appropriately for the work state, perhaps that is what you are calling registration?

It is where you TRANSACT, not where you have a physical presence. If you withhold taxes for that state and bill in that state you are creating a transaction and therefore must be registered with that state. Again, huge numbers of businesses do not obey this rule, but they are breaking state laws.

With regard to sole props, I was stating simply that you must register as a business entity in your HOME STATE if you use a "dba" name (any trade name your business goes by besides your own personal name). States want people to be able to reasonably track down who they are actually doing business with. Unrelated but worth mentioning: Unfortunately, by using numerous corporate shells, businesses are able to make it pretty difficult to actually pin their identities and whereabouts.

My risk and that of many thousands of other companies. It would be a civil offense, not criminal though. And I manage my liability with insurance, just like any other responsible person or business. All business decisions carry risk, it is up to the individual owner how to manage that risk.

Fraud against a government entity is a crime. In the event you get caught, your insurance company will actually fight YOU to make sure they don't have to pay the fines or carry the expense of defending you because of your choices. In most cases they will have no responsibility to represent you in criminal cases. They will work hard to find a way to put the liability back on you. Sadly, you may have to hire an attorney to fight your own carrier's attorneys, and they are much better paid and way more equipped.

The experience of very large businesses and very small businesses are very different and require different approaches. Risks are also very different. Large companies can have whole departments related to corporate compliance (especially if publicly held), one person operations cannot afford or need this.

There are definately aspects with regard to small and large business that differ. However, they all must play by the same rules (laws and regulations, SEC aside), and that's what we are talking about here.

If you want to advise a one person shop that they need to spend $5,000 a year to cross their t's, that is fine. But until you live in our shoes, your advice on how large companies manage their business is ill advised.

If it takes $5000 to do it right, then yes I'd advise them to spend the money. If they can do it right for less... well I'd advise them to do so. I started my first "real" business on $500 as a one person shop. I grew it to the point that I didn't wish at that time to carry the debt that was required to run it (huge inventory carrying costs). I sold it for a large sum of money. My next venture required about $100k. I grew that one into a $3 mil+ yearly revenue company. Sold it too (to a local competitor). Made out like a bandit. Later, I started a third business following years of working in executive level (CFO and COO) positions. I started an accounting, financial and business consulting firm. I sold that one too. That one provided me a hefty retirement fund (it also provided my employees a large sum of money too, due to my desire to reward them for THEIR part in making the company what it was). This allowed me to pursue a new interest without much worry, so I chose nursing because I was always interested in the medical industry but didn't want to go through the schooling required to be a doc. So, the point being, I conducted myself ethically and always in a legal manner, and as a result, I got everything I ever dreamed of.

HarryHK · Nov 17, 2007

We agree on many things apparently but some of what you are saying is just wrong. I'm not sure who you are giving advice to, but the post I most recently replied to wishes to start off contracting personally. Large business advice is inappropriate, particularly when incorrect.

There is no corporate shield available for your own professional liability. This is indisputable. If that was so, it would be easy to set up corporations with no equity and not bother with insurance at all. That is not the case. I meet many locum docs who operate as sole proprietors. They have insurance because they know it is needed regardless of the type of entity. The major reason that sole practitioners incorporate at all is for benefits. Which is why I did it.

I'm not sure why it matters, but I do have employees. 1099 employees. I do not have W-2 employees because the risk is much higher in regards to workers comp and unemployment. The liability risk is negligible. Not sure you understand that.

Do you know any nurses who have been held civilly liable for their actions? It would be remarkable if you did. There is a reason why nursing Liability Insurance is so cheap, there are no claims. Go one step farther, have you ever heard of an agency being held liable for a contract nurse? I never have. The insurance that I do carry is only to satisfy hospital vendor requirements, I know that otherwise it is just money down the drain.

Sole proprietors can operate across state borders much more readily than corporations. That is a major advantage of a sole proprietorship for travelers. Many business books mention just this about choosing a business form.

Incidentally, corporations are state creations. There are no federal laws controlling use of names. It is state law that primarily governs corporate actions. That is the reason so many large corporations choose to incorporate in Delaware, corporate case law is more complete there than perhaps any other state and it is easy to settle corporate issues in their courts than any others.

Finally, as a matter of fact, I know many nurses who contract themselves out to hospitals. Many are sole proprietors. I hate to just say I know better than you, but you've never done this and do not understand small business issues and practices. I've been doing this for four years as both a sole proprietor and a corporation and I understand the laws and the risks, and when I talk to other agency owners (some quite large) they seem to be on the same page as I do.