Transitioning from an IC to having my own travel agency

NedRN · Jan 2, 2017

Zero!

Jeremy419 · Jan 2, 2017

Awesome! However, given I choose a self proprietary business entity while it is just myself as an IC, do you feel it would be wise to incorporate once other nurses come in to the picture?

NedRN · Jan 2, 2017

I would recommend reading the entity selection discussion of any business book for your choices. The primary legal reason of any corporate structure is to limit owner's personal liability and their assets. Without an office or in-house employees you are responsible for, limited liability has no value. You will be personally responsible for any direct professional malpractice, but would only exceptionally be held responsible (either personally or company) for the actions of your professionally licensed employees whose work, competence, and credentials are the direct responsibility of the hospital they are under contract to. The type of possible exception might include proof that you falsified a drug screen after an impaired nurse injured a patient.

Either way, it is insurance that covers your butt, not the entity type. Non legal/liability rationale for entity choice boils down to financial advantage for taxation, and that is personal preference after crunching the numbers and the pluses and minuses of each. I'm repeating myself here.

Totally different story if you have premises or business partners. A slip and fall lawsuit or a malpractice lawsuit (common in partnerships such as legal practices) against a partner could devastate your personal assets without limited liability.

Jeremy419 · Feb 13, 2017

Hey NedRN,

I believe I am getting quite close to opening my agency but one question I do have, is how is the hospital's bill rate taxed? I know my unit is paying say $70/hr for me. I am making roughly 61% of that hourly now as a traditional travel nurse. My question is as an agency owner, does that initial $70/hr from the hospital get taxed then taxed again as it is paid out via pay checks?

NedRN · Feb 14, 2017

Ah, the myth of double taxation is hard to shake! From a federal tax perspective: if you have a pass-through or are a sole proprietor, double taxation is simply impossible. If you are a sole owner of a regular status taxed entity, you would be a fool to not zero balance your company annually. Only if a regular taxed company retains earnings will they be taxed on those earnings, and you will have to pay income taxes on those retained earnings again when you later pay yourself. Large companies may nee a cash stockpile to handle cash flow, growth and acquisitions, certain investments which work better inside a corporate structure, or to pay stockholders a fair share. None of those possibilities are likely to apply to you from what you have told me.

You might well have a cash flow problem when you actually grow your agency as opposed to only working yourself. But deal with that when the time comes. Often a good way to handle that is with a line of credit if you own property that is not fully leveraged already. While I've never used it, I have a line of credit at well under 4% (if I ever use it) and a $50 annual fee (which I charge to my corp) for keeping it active. Security blanket for me for I had some startup plans some years ago.

From a state perspective: some states tax revenue (versus profits). That is not exactly double taxation as the myth goes, but perhaps will feel similar (in fact you may owe the state taxes and none to the IRS). Such state taxes usually do not apply to pass through businesses although some states may have a minimum franchise fee (a tax by another name).

Jeremy419 · Feb 15, 2017

Ok that makes a ton of sense. Thank you! The company is in the process of getting my LLC. It is moving along! I have on last question (tentatively haha). To your knowledge, is there any language in the contracts between the agency and the hospital not allowing the agency to disclose the hospital's bill rate to the RN?

NedRN · Feb 16, 2017

Nope. You might hear that from a recruiter if you ask, but they are either ignorant of the actual contract or lying. Sharing such information with other agencies in an attempt to control, fix, or maximize bill rates is illegal, but sharing it with your employees?

Jeremy419 · Feb 16, 2017

I only ask because an ex-recruiter, whom I spoke with today to get their perspective of the business, was unsure if it was typically written within the contract that agency was not to disclose that info. The example he gave was the fact that many hospitals work with just a handful of agencies. If agency A had a contract with the hospital for a particular unit for a nurse at $70/hr and agency B had a contract with the hospital for $72/hr for a nurse on the same unit that if through the agency B telling their nurse the bill rate was $72/hr and they were in turn getting paid more than the nurse working for agency A, that if word got back to agency A about the bill rate that could stir the pot so to speak and hinder the relationship between the hospital and agency A. However, he was unsure if there were legal ramifications of this disclosure of info or not. That is why I asked. But that is great info for my company!

NedRN · Feb 16, 2017

I have no qualms discussing bill rates with hospitals. That includes information I might have about other agency bill rates or other agency traveler compensation packages from which you can derive the bill required to support it.

But it that is a tiny part of the big picture. For starters, most hospitals that use a lot of travelers have their own uniform contract with fixed bill rates or use a vendor manager that has their own uniform contract.

Next, if that is not the case, do you really want to be the highest bill rate of all vendors? Other agencies will fill at a lower rate. Now if your travelers outperform those from other agencies consistently or you are a single traveler agency, then perhaps.

Jeremy419 · Feb 20, 2017

That was what I thought but, like I said, I wanted the opinion of the business veterans to ensure that was the case.

My business now now has its LLC in Ohio. However, I want to contract myself and a couple people I know are interested in traveling around NC for my business as well. Yet, short of talking to a lawyer for $200/hr, I am unsure of handling the issue of a foreign LLC in North Carolina. Based on their Secretary of State website, I need to have a manager with an address in North Carolina. Do y'all have any recommendations on how to best go about finding an eligible entity to act as said manager/address?

NedRN · Feb 20, 2017

Forget about it and fly beneath the radar. Every state has rules about foreign business entities having to register if they do business in their state. What is doing business? A salesman flying in for the day? Amazon shipping goods to a state? In real life, the bottom line requirement is a physical presence, which usually means an office or even storage (a warehouse in the case of Amazon). I looked at these issues when I started, but finding out straight answers was difficult and I decided it was better not to know. From what you said, it sounds like you need both a physical presence in NC and a full time employee to register your corporation.

A small agency cannot afford to cross every tee and pay a franchise fee (and tax filing) every year in perpetuity to a state for having a traveler there once. If you become a large enough agency, well then you have to protect yourself. That is one reason why larger agencies pay less than smaller ones, they are keeping up with the bureaucracy in many states.

In the meantime, don't worry. Hospitals are not going to investigate such a status and report you to their state. If somehow you get caught (if in fact you are not doing something that you should), then deal with it. The cost will be far less than hiring a lawyer for every state.

Less regulation means lower cost. In fact, you could drop your LLC and operate as a sole proprietor. Then it is clear you won't have to register in every state. Or worry about it.