Should I Start an LLC for My Veterinary Practice?

Starting a limited liability company (LLC) for your veterinary practice can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a veterinary practice, lawsuits can arise from things like medical malpractice (i.e., negligently injuring a customer’s pet, etc.), as well as from employee injuries that are caused by customers’ pets.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your veterinary practice business seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Veterinary Practice?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Veterinary Practice

By starting an LLC for your veterinary practice, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Veterinary practices will benefit from liability protection because of the risk of injuries to customers on business property, damage to customers’ personal property, and allegations of poor veterinary care.

Example 1: One of your vets recommends a certain brand of cat food to a customer, which causes the cat to become even sicker, and the customer files a lawsuit against your veterinary practice. Assuming that you didn’t personally act negligently, the claimant will not be able to sue you in order to get compensated, regardless of how the claim progresses in court.

Example 2: While performing a routine procedure, one of your hired vets accidentally injures a bulldog, causing it to lash out and bite a nearby customer. As a result, a medical malpractice lawsuit is filed against your veterinary practice, claiming that you breached your duty of care by employing reckless staff members. Here, limited liability will ensure that your personal assets will remain protected from the claimant.

Example 3: After successfully applying for a large business loan, you decide to purchase new waiting-room furniture, as well as hire a fully-trained vet to help you run your veterinary practice. Several months later, you experience a significant drop in revenue and begin being unable to sustainably pay the loan back. Since your business is registered as an LLC, the creditor will not be able to access your personal assets in order to get reimbursed, even if your veterinary practice is unable to adequately pay them.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Veterinary Practice

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a veterinary practice owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Veterinary practices rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

As the owner of a veterinary practice, getting business insurance can shield your business’s assets from lawsuits that arise as a result of medical malpractice claims, as well as from employee-related accidents.

A solid commercial property insurance policy can also help you maintain and replace your veterinary equipment.

Common Situations Business Insurance May Cover for a Veterinary Practice

Example 1: During a rainstorm, a customer tracks mud into your veterinary facility. Your staff doesn’t notice it until another customer walks in and falls on the slippery surface. General liability insurance would cover the costs of the resulting injury.

Example 2: One of your customers believes your practice provided poor care to their pet even though you followed all guidelines and veterinary standards. The customer is spreading their version of the story and even attempts to go to the media. General liability insurance would cover the costs of fighting their claims in court and in the public eye.

Example 3: When carrying in a new piece of equipment, one of your staff members damages a customer’s car in the parking lot. General liability insurance would pay for the costs of the damage.

Other Types of Coverage Veterinary Practices Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all veterinary practices should obtain:

Commercial Property Insurance

Commercial property insurance covers everything on your property, including surgical tools, flower beds, and the structural integrity of the building. If you own your office and facilities, this insurance covers it against damage from everything inclement weather, theft, and fires.

Professional Liability Insurance

Professional liability insurance is available to vets in case they make a mistake while on the job. If a customer tells you that their pet has an allergy and you treat them with a medication or other product that causes a reaction, they may sue for any resulting medical costs or other damages. This insurance also covers you for any harm done by an omission of information.

Workers’ Compensation Insurance

All vet owners need workers’ compensation insurance for their employees, whether they work full-time or part-time. Because animals can be unpredictable in a vet’s office, this insurance is particularly crucial for employees to get the coverage they need. It also covers chronic injuries, such as long-term shoulder pain, after years of lifting heavy dogs.

Business Interruption Insurance

If your business has to close for a covered reason, this insurance will provide vets with a steady income until the practice can be reopened. For example, if the practice has a fire, you’ll still receive cash flow while the building undergoes renovations.

Commercial Auto Insurance

Commercial auto insurance covers vets in case they need to transport pets from one location to the next. It’s also highly recommended if you need to move equipment in a vehicle, since standard policies will typically not cover damages to work-related items.

Commercial Umbrella Liability Insurance

This insurance extends the coverage of your general liability policy in the case of serious lawsuits that exceed the general liability limits. Most vets will get commercial umbrella insurance due to the emotional nature of treating people’s beloved animals. If a customer chooses to draw out a lawsuit, it can cost far more than what a general liability policy will cover.

Data Breach Insurance

Hackers and virtual criminals of all kinds will target small businesses for any number of reasons. Because you keep so much personal and financial data about your customers on file, this insurance will cover the financial repercussions of a successful hack.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, professional liability insurance, workers’ compensation insurance, and commercial property insurance.

Read our Veterinary Practice Business Insurance article for more info.

In order to start a veterinary practice, you will need to purchase:

Medical and surgical equipment ($40,000)
Lab equipment ($30,000)
Kennel equipment ($5,000)
Practice management software ($3,500)

You will also need to find a lease that’s in a good location, as this can significantly affect how well your practice performs.

Visit our How to Start a Veterinary Practice guide to learn more about the costs of starting and maintaining this business.

Ongoing expenses include insurance, payroll, prescription medications, specialty pet food, and marketing.

Learn more about running a veterinary practice.

Veterinary practices charge a standard fee for an office visit. Lab tests, X-rays, medications, and some basic grooming services like nail trims are charged separately.

Learn more about starting a veterinary practice.

A veterinary practice treats animals for illness and injury and helps with maintaining their well-being. Some veterinary practices focus solely on small domestic pets like cats and dogs, while others may treat larger or more exotic animals like horses and reptiles.

The average profit margin for a veterinary practice is typically in the range of 7% to 12%.

Learn more about starting a veterinary practice.