4 Legal Considerations for Health and Wellness Businesses in Illinois
Health and wellness businesses, like other businesses, should put legal structures in place to ensure that they are protecting themselves from risk, complying with legal requirements, and running their business as smoothly as possible.
In Illinois, many health and wellness practitioners are licensed by the IDFPR. Businesses that provide IDFPR-licensed services are subject to some extra legal requirements – starting with the requirement to form a PLLC instead of an LLC.
Here are 4 legal considerations health and wellness professionals should be aware of when starting and running their businesses.
1: Form an Entity: PLLC instead of LLC
Like other businesses, we recommend that health and wellness practitioners form an entity for their business – it’s one of the most important steps in starting your business, along with securing malpractice insurance and ensuring you’re complying with your professional requirements.
Illinois law includes specific entity requirements for businesses that provide services licensed by the IDFPR in Illinois – most importantly, the requirement to form a PLLC rather than an LLC.
Why Form an Entity?
The legal reason for forming a business entity is liability protection. Limited liability means there is a separation between the business’s assets and the owners’ personal assets, shielding personal assets from the business risks.
Health and wellness practitioners should be aware that they cannot limit their liability for their own malpractice – that’s why malpractice insurance is so important. However, we still recommend forming an entity to protect from other liability risks, for example: others’ malpractice, intellectual property violations, breach of contract claims, slip and falls, claims from employees, etc.
We recommend making your business official as soon as possible – imagine having such an established business 2, 5, 10, 25 years from now (it goes faster than you think!). Additionally, if you accept insurance from your patients, it can be a pain to recertify after you form your business.
What entity should licensed professionals form in Illinois?
PLLC. Most businesses that provide services licensed by the IDFPR must form a PLLC rather than an LLC. Such businesses that formed as LLCs must now convert to PLLCs. A PLLC has all the attributes and benefits of an LLC, but the purpose must specify the professional services. Like LLCs, PLLCs are easy to set up and maintain, have automatic pass-through taxation (no double-taxation), and you can elect to be taxed as an S-Corp or C-Corp either now or in the future.
Read more about PLLCs here:
Who can partner up to own a PLLC?
If you are setting up a PLLC with others, the law requires that you all hold the same professional license or that your separate licenses are permitted to form a PLLC together. These laws are quite complex. If you are partnering with someone who is not licensed by the IDFPR or someone who has a different IDFPR license than you, we highly recommend reaching out to an attorney.
Other steps: Register your PLLC with the IDFPR
After forming a PLLC, you need to register the PLLC with the IDFPR. We have a handy how-to article:
2: Client and patient forms: Set expectations and protect yourself from risk
Licensed professionals in the health and wellness industry need client forms to comply with professional requirements, reduce risks, and lay out and manage patient expectations.
These forms go beyond the legal requirements – they also set the tone for the relationship between the practitioner and patient. The forms need to correctly represent the processes unique to your practice, and you need to fully understand them. It is important for you to be able to explain the forms to your patients in a way that helps your patients feel comfortable with you and the process and clearly sets the boundaries of working together.
Read more about how we can help you set expectations and reduce risks with clients in your health and wellness practice here:
3: Growing your Practice: Independent Contractors vs. Employees
One of the biggest (most costly) mistakes business owners make is misclassifying workers as independent contractors rather than employees. Before you make the decision to hire someone as an independent contractor, please have a look at our chapter on worker classification (email firstname.lastname@example.org if you’d like us to send it to you) and our webinar on the same topic (available here).
We recommend hiring workers as employees rather than independent contractors, especially if they will be performing work that goes to the core of the services your practice provides. For example, a therapy practice should classify therapists as employees (yes, we know that not all therapy practices adhere to this advice!). However, it would be okay to classify your website developer as an independent contractor.
When hiring, you want to make sure you’re protecting your practice in the following ways:
- Ensure at-will employment (if desired), so that you don’t accidentally create guarantees for employment that make it difficult to end the relationship if needed.
- Prevent common undesired situations, such as having to pay out 2 weeks of vacation time if the employee quits after the first day.
- Protect confidential information and discuss how the client wants to balance non-solicit/non-compete prevention with the enforceability of those provision
- Comply with strict sick leave law, which is applicable to ALL employers in Chicago (other jurisdictions often have their own requirements), regardless of size
- Restrict access to confidential information/materials when an employee leaves
- Ensure you’re complying with minimum wage requirements. (Therapy practices, for example, have questions about paying more for therapy sessions than for administrative or prep work. Questions also come up when there’s a commission structure for payment.)
- Ensure you can continue to use assets created by the employee, such as videos with their image, even after they leave.
This is not an exhaustive list, and customization is key because the processes, risks, and liabilities are different for each business.
When first hiring, the best way to put these protections into place is with strong offer letters and employment agreements.
4: Do you need a trademark for your health and wellness practice?
Usually health and wellness practitioners only apply for trademark registration if they are building a brand identity with a unique business name, phrase, or logo. If you are using your own name as the name of the business or something that is very descriptive, then it is unlikely that another business will send a cease and desist letter demanding that you stop using your business name.
Registering your word or logo trademark with the USPTO can prevent others from using your brand name or logo, prevent others from stopping your use of the brand, make it easier and cheaper to defend yourself if disputes arise, and build assets to increase the value of your business.
However, applying for trademark registration is expensive and there is no guarantee of successfully registering your trademark. Some considerations that go into the cost/benefit analysis of applying for trademark registration:
- Are you building a brand identity with a unique and identifiable name or logo?
- How painful would it be to change the name of your business if you receive a cease and desist letter?
Read more about trademarks here: