Jovan Johnson, MBA, CFP®, CPA/PFS

 

Nurses worldwide often face burnout and feel underpaid despite their dedication to the profession. If you’re passionate about nursing but seeking to lower stress and boost your income, becoming a nurse entrepreneur could be the ideal career path for you. As a nurse, you bring unique skills and abilities that are highly valuable and can be channeled into a thriving business—whether part-time or full-time.

Starting your own business can not only increase your earning potential but also offer greater freedom and independence. Imagine working on your own terms and building a career that aligns with your goals and values.

That said, transitioning from employee to entrepreneur requires careful planning and consideration. Let’s explore the essential steps to set you up for success as a nurse entrepreneur.

1.) Determine The Business Entity Type For Your Nurse Business

If you start operating your business without taking specific action, it will automatically be classified as a sole proprietorship by default. However, you can choose to establish a different business entity by registering through your state’s Secretary of State office. For new entrepreneurs without employees, the most common entity types are Sole Proprietorship, LLC (Limited Liability Company), or PLLC (Professional Limited Liability Company). Keep in mind that some states do not offer PLLC as an option.

One key advantage of forming an LLC is the potential to protect your personal assets from business liabilities. An LLC can act as a shield, safeguarding your personal assets from lawsuits or debts related to your business. However, as a nurse entrepreneur, it’s important to note that an LLC does not protect you from professional liability or malpractice claims stemming from your professional services. Despite this limitation, an LLC can still potentially offer solid protection. 

To further enhance personal asset protection, consider other strategies such as obtaining adequate professional liability insurance (discussed in a later section).

Understanding the nuances of business entity types and their limitations is critical. Consulting with a legal professional can help ensure you choose the right structure and have the appropriate protections in place for your unique circumstances.

2.) Apply for an Employer Identification Number (EIN) to Set Up Your Nurse Business

Applying for an Employer Identification Number (EIN) with the IRS is an important step for any business owner. An EIN serves as a unique identifier for your business, similar to how a Social Security Number functions for individuals.

There are several key reasons to obtain an EIN:

  • Open financial accounts: You’ll need an EIN to open a business bank account and a business credit card.
  • Apply for licenses: Many business licenses and permits require an EIN.
  • Protect your personal information: Using your EIN on IRS forms, such as tax returns or Form 1099, allows you to avoid using your Social Security Number, adding a layer of privacy and security.

The EIN is how the IRS recognizes your business entity for tax purposes, making it an essential tool for managing your business finances and complying with tax obligations.

Applying for an EIN is straightforward and can be done directly on the IRS website. Before you apply, ensure you’ve determined your business entity type (e.g., Sole Proprietorship, LLC, etc.), as this information is required during the application process.

3.) Open Business Bank Accounts and Apply for a Business Credit Card

Once you’ve obtained your EIN, you can open a business bank account and apply for a business credit card (subject to credit approval). Properly separating your personal and business finances is a critical step for financial management and legal protection.

At a minimum, consider opening these accounts:

  • Two checking accounts: One for daily operations and one dedicated to taxes.
  • One savings account: A business emergency fund to cover unexpected expenses.
  • One business credit card: Useful for managing cash flow, building business credit, and earning rewards.

Running all business transactions through your business bank accounts is essential for several reasons:

  • LLC Protection: It helps preserve the legal benefits of forming an LLC, such as limited liability protection.
  • Simplified Bookkeeping: It streamlines tracking profits, expenses, and estimated tax payments.

When choosing a business bank account, evaluate key factors like security, accessibility, mobile features, perks, transfer limits, and account-specific benefits.

While waiting for your business bank account to be approved, you can temporarily use your personal accounts for startup expenses. Just ensure you track these transactions—using a spreadsheet or financial software—so you can account for them later as business costs.

4.) Acquire Insurance as a Nurse Entrepreneur

Protecting your personal and business assets as a nurse entrepreneur starts with acquiring the right types of insurance. Adequate coverage ensures that both you and your business are safeguarded against potential risks. The key types of insurance to consider include:

  • Business insurance:
    • Malpractice insurance: Essential for protecting against claims related to professional negligence or errors in care.
    • Errors and Omissions (E&O) insurance: Provides coverage for mistakes or oversights in your professional services.
    • General liability insurance: Protects against third-party claims for property damage or bodily injury related to your business.
  • Health insurance: Ensures you have access to medical care and protects you from the financial burden of unexpected health expenses.
  • Life insurance: Provides financial security for your family or dependents in the event of your death.
  • Disability insurance: Replaces a portion of your income if you are unable to work due to illness or injury.

Investing in these insurance products is an important step in reducing personal and professional liability. It provides peace of mind, knowing you’re prepared for unforeseen challenges. 

5.) Setup Bookkeeping for Your Nurse Business

Bookkeeping might not be the most exciting part of running a business, but it is essential for understanding your profits and overall financial health. Accurate bookkeeping allows you to track income, manage expenses, and calculate how much you should pay in estimated taxes each quarter.

When starting out, a simple spreadsheet can be an effective way to record your business income and expenses. However, as your business grows, consider upgrading to bookkeeping software like QuickBooks. These tools can automate much of the process, help reconcile your accounts with bank statements to ensure accuracy, and make generating financial reports effortless.

One important financial report is the Profit and Loss Statement, which provides a clear picture of your revenue, expenses, and overall profitability. Regularly reviewing this report can help you make informed business decisions and stay on top of your finances.

By setting up an efficient bookkeeping system early, you’ll save yourself time and stress later.

6.) Familiarize Yourself With Common Tax Deductions for Nurse Business Owners

One of the great benefits of being a nurse entrepreneur is the ability to deduct business-related expenses on your tax return. These deductions can significantly reduce your taxable income. Some common tax deductions include:

  • Home office deduction
  • Travel expenses (lodging, flights, taxis, meals (50%), etc.)
  • Dues and Subscriptions (i.e. American Nurses Association)
  • Work uniform (i.e. scrubs)
  • Transportation (gas and mileage)
  • Insurance (health, dental, malpractice, etc.)
  • Professional memberships and licenses (i.e. RN license renewal)
  • Continuing education
  • Retirement savings

To maximize these deductions, it’s essential to maintain accurate records and utilize good bookkeeping practices. Organized financial records not only support your claims in the event of an audit but also ensure you don’t miss valuable deductions.

A knowledgeable CPA can help ensure your bookkeeping is accurate and that you’re taking full advantage of every deduction available to you as a nurse entrepreneur. To learn more about additional tax deductions you may qualify for, check out one of our blogs here. 

7.) Find a CPA that Specializes in Serving Nurse Entrepreneurs

Starting a nursing business can feel overwhelming, with countless factors to consider as you work to set yourself up for success. Partnering with a CPA or qualified tax professional is a smart move to help you navigate the complexities of running a business and create a clear roadmap to success.

A knowledgeable CPA can assist with:

  • Tax compliance: Ensuring you meet filing deadlines and avoid costly penalties or interest from the IRS.
  • Tax planning: Identifying strategies to minimize your tax liability while staying compliant.
  • Business structure advice: Helping you choose the right entity type for tax and liability benefits.
  • Financial clarity: Providing insights into your business numbers so you can make informed decisions.

By working with the right professional, you can avoid the financial stress of owing back taxes or facing IRS scrutiny. Instead, you’ll gain confidence knowing your finances are in expert hands, allowing you to focus on growing your business and achieving your goals.

Final Thoughts

Starting a business as a nurse entrepreneur is an exciting journey that offers the potential for greater independence, flexibility, and financial reward. By following these seven steps, you’ll be well on your way to establishing a strong foundation for your business. Whether it’s choosing the right entity type, acquiring necessary insurance, or building solid financial practices, each step plays a critical role in your success.

Remember, you don’t have to navigate this journey alone. Surround yourself with trusted professionals, such as a CPA and a legal team, who can guide you through challenges and help you achieve your goals.

As a nurse entrepreneur, you bring unique skills and expertise to the table—skills that can make a meaningful impact on the lives of others. With determination and the right strategies in place, you can build a business that not only meets your financial goals but also aligns with your passion and values.

Now is the perfect time to take the leap and start your entrepreneurial journey. 

Need help starting your nursing business? Schedule a free consultation today!

Disclosures

None of the information provided is intended as investment, tax, accounting, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. The content is provided ‘as is’ and without warranties, either expressed or implied. Piece of Wealth Planning LLC does not promise or guarantee any income or particular result from your use of the information contained herein.