Should You Form an LLC Before Going Locums as a CRNA?

It comes up in every CRNA Facebook group the moment someone mentions going 1099. Do you need an LLC? Should you set one up before your first assignment? The short answer is: probably not immediately, and the reasons most people give for forming one right away are often wrong. Here is what an LLC actually does, what it does not do, and when it makes sense.

What an LLC Actually Is

A Limited Liability Company is a legal business structure that sits between you as an individual and the world. It creates a separate legal entity that can enter into contracts, hold assets, and conduct business. The key word is separate. That separation is the whole point of forming one.

By default, a single-member LLC is taxed exactly the same as a sole proprietor. The IRS ignores the LLC for tax purposes and taxes the income directly on your personal return. The LLC itself pays no federal income tax. This means forming an LLC does not automatically save you money on taxes. That distinction matters because tax savings is the most common reason CRNAs cite for forming an LLC, and it is not accurate without additional steps.

What an LLC Does and Does Not Protect You From

The liability protection an LLC provides is real but narrower than most people assume, especially for healthcare providers.

That second column is the important one for CRNAs. Malpractice is a professional liability. Courts in almost every state hold that you cannot shield yourself from the consequences of your own professional negligence by placing a corporate entity between yourself and a patient. The LLC does not absorb your clinical liability. Your malpractice insurance does. These are two completely separate things.

The Real Reason to Form an LLC: Tax Structure

The legitimate financial reason to form an LLC has nothing to do with liability and everything to do with what comes next. An LLC is the prerequisite for electing S-Corporation tax treatment.

When a single-member LLC elects to be taxed as an S-Corp, it changes how your income is classified for self-employment tax purposes. Instead of paying 15.3% SE tax on your entire net income, you pay yourself a reasonable W-2 salary and take the remainder as distributions. Those distributions are not subject to SE tax. At higher income levels, the savings are significant -- often $8,000 to $20,000 per year depending on net income and how the salary is structured.

But here is the thing: you do not elect S-Corp status by simply forming an LLC. That is a separate election filed with the IRS on Form 2553, and it needs to happen within 75 days of the tax year you want it to take effect (or by March 15 of the following year in some circumstances). The LLC is just the vehicle. The S-Corp election is the actual tax move.

So When Should You Actually Form One?

The answer depends on where you are financially and what you plan to do with the business structure.

You probably do not need an LLC yet if:

• You are taking your first locums assignment and want to see how you like it before committing to business infrastructure
• Your net 1099 income will be under $80,000 to $100,000 in the first year. The S-Corp benefit at that income level is small enough that the $2,500 to $4,000 in annual CPA and payroll costs eats most of it
• You are still working primarily as a W-2 employee and doing occasional 1099 work on the side
• You have not yet found a CPA who works with independent healthcare contractors. Setting up the structure before finding the right professional means doing it twice

An LLC makes sense now if:

• You are going full-time locums and expect net 1099 income above $120,000 in your first year
• You want to open a business bank account and a business credit card to keep finances clean from day one. Most banks require an LLC or sole proprietor DBA to open a business account, though some will open one for a sole proprietor using their legal name and EIN
• You have a CPA in place who can advise on the S-Corp election timing and set up the payroll structure correctly
• You are doing locums in a state that has specific filing requirements or tax advantages for LLCs

How to Actually Form One

If you decide the timing is right, forming an LLC is straightforward. The process varies slightly by state but follows the same basic steps everywhere.

1. Choose a state. Most CRNAs form their LLC in the state where they do most of their work. If you work across multiple states, your home state is usually the right answer unless a CPA advises otherwise.
2. File Articles of Organization. This is the formation document filed with your state's Secretary of State office. Most states allow online filing. Cost ranges from $50 to $500 depending on the state.
3. Get an EIN. Apply for an Employer Identification Number through the IRS website. Free, takes five minutes, available immediately.
4. Open a business bank account. Use the EIN and LLC formation documents. This is the step that makes the rest of your financial life cleaner.
5. Draft an operating agreement. For a single-member LLC this is simple but worth having. Some states require it. Your CPA or a basic legal template covers this.
6. File Form 2553 if pursuing S-Corp treatment. This is the IRS election that changes your tax treatment. Do this with your CPA, not on your own.

The whole process outside of the S-Corp election can be done in an afternoon. Services like Northwest Registered Agent or Stripe Atlas can handle the paperwork for you for $100 to $300 all-in, which is reasonable if you want someone else to manage the filing details.

The One Thing That Actually Protects You Clinically

Malpractice insurance. Not the LLC. Not the business structure. The policy.

Before you worry about forming a legal entity, make sure your malpractice coverage is right for locums work. Confirm whether it is occurrence-based or claims-made. Confirm who carries the policy and whether tail coverage is included when a contract ends. Confirm the per-occurrence and aggregate limits are appropriate for your case mix.

A CRNA with no LLC and strong malpractice coverage is in a better position than a CRNA with an LLC and inadequate coverage. The insurance is the protection. The LLC is the tax vehicle.

The Bottom Line

You do not need to form an LLC before your first locums assignment. You need malpractice insurance, a business bank account, and a plan for quarterly estimated taxes. Those three things cover the most immediate risks and obligations of going 1099.

The LLC becomes worth setting up when your net 1099 income reaches a level where the S-Corp election generates meaningful savings after costs, when you have a CPA in place to manage the structure, and when you are committed enough to locums work that the administrative overhead makes sense long-term.

Do it in the right order. Get the insurance right first. Get the bank account open. Find a CPA who has done this before with healthcare contractors. Then form the LLC and elect S-Corp status at the right time, not out of anxiety or because a Facebook group told you to do it before your first shift.