Becoming incorporated?

[Joejitsu]

Any EM attendings on here done it? I have heard some things about it and saying it can make a difference as far as writeoffs, etc, but not so much in CA. Just wanted to get some input.

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[The White Coat Investor]

Any EM attendings on here done it? I have heard some things about it and saying it can make a difference as far as writeoffs, etc, but not so much in CA. Just wanted to get some input.

Some people have this idea that incorporating saves you taxes. That is not necessarily true. In fact, incorporating RAISES taxes for a lot of people. A C corporation pays taxes twice, once for the business, and again for the business owners when profits are distributed to them.

Most individual EPs would not benefit from incorporation IMHO.

 

[LanceArmstrong]

If you make yourself into an LLC - would that mean they can only sue you for as much as you put into your business, protecting your personal assets?

 

[docB]

There are a lot of things you can do to try to reduse your liability exposure and tax load. Eg. Incorporating, forming an LLC., revocable trusts, irrevocable trusts, exploiting situations in different states and so on. All of these devices have pros and cons. They all can get very complicated vary quickly and can really screw you if you don't know what you are doing. They also tend to work (when/if they work) for a specific set of circumstances. For example if you are paid primarily via W2 wages you are in a very different boat than the guy who makes all his money as an independent contractor.

I suggest that you get whatever job you want then ask your partners what they they do and who they use for accountants and lawyers. Meet with a CPA and/or a lawyer and decide how "aggressive" you want to be (ie. how much you are willing to risk getting audited) and go from there. Know that some of these things can be hard to undo such as an irrevocable trust. You also shouldn't assume that if you incorporate in one place and job situation it will transfer elsewhere.

 

[Arctic Char]

excellent inquiry. in this light, i'm also curious about fees paid to hospitals. EP's, as i have known them, are clients of the hospital. that being said, what is the trade-off for the hospital? just services? no way . . . there has to be more than an honor system. anyone feel like elaborating?

 

[GeneralVeers]

A crusty old OB/GYN attending at Riverside swears by the irrevocable trust. Apparently the trust will protect any assets from malpractice suits, or divorce.

If what he says is true, it sounds like a great option for most EM physicians who are in one of the highest liability professions. You appoint someone other than yourself to control the trust, and then you can put all, or a portion of your wages into the trust. Since the trust is its own entity, and you are not solely responsible for managing it, malpractice lawyers supposedly can't get at it. The only downside to the trust is that every time you want to withdraw funds or make a purchase you have to have written authorization from the trustee manager.

 

[Tiger26]

Check out this site. It has lots of articles on asset protection regarding trusts, llc, offshore holdings, etc.

http://www.rjmintz.com/

 

[docB]

excellent inquiry. in this light, i'm also curious about fees paid to hospitals. EP's, as i have known them, are clients of the hospital. that being said, what is the trade-off for the hospital? just services? no way . . . there has to be more than an honor system. anyone feel like elaborating?

I don't know what you mean by "clients of the hospital." There are various relationships between hospitals and EPs.

I'll try to make this a little more clear but beware, massive generalizations ahead.

Hospital relationship:
Majority= EPs are contracted (usually in a group) to provide services.
Minority= EPs are employees of the hospital. This arrangement is seen more often in municiple hospitals and in academic centers.

Financial relationship:
Majority= EPs make thier money by billing the patients they treat.
Minority= EPs make their money by billing patients and are subsidized by the hospital (this is usually in areas with poor payor mixes, the hospital has to pay the docs to work there over and above what the market will support).
Minority= EPs are paid by the hospital.

 

[docB]

A crusty old OB/GYN attending at Riverside swears by the irrevocable trust. Apparently the trust will protect any assets from malpractice suits, or divorce.

If what he says is true, it sounds like a great option for most EM physicians who are in one of the highest liability professions. You appoint someone other than yourself to control the trust, and then you can put all, or a portion of your wages into the trust. Since the trust is its own entity, and you are not solely responsible for managing it, malpractice lawyers supposedly can't get at it. The only downside to the trust is that every time you want to withdraw funds or make a purchase you have to have written authorization from the trustee manager.

I know one EP who really believes in his irrevocable trust. Another EP in my group wishes he never did it because it has been expensive and turned into a complicated tax nightmare. I have talked to several lawyers who sell irrevocable trusts and they all admit that they are not iron clad shields from liability. If someone gets the big verdict against you they may be able to pierce the trust and get your anyway. I've heard more than once that if it is obvious to the court (no one can define "obvious" but that's why lawyers are lawyers) that the trust exists primarily as a device for asset protection they'll break the trust for the plaintiff.

 

[The White Coat Investor]

A crusty old OB/GYN attending at Riverside swears by the irrevocable trust...... The only downside to the trust is that every time you want to withdraw funds or make a purchase .

Um...no. Irrevocable means just that. You can't withdraw funds or make a purchase with that money. There is such a thing as a revocable trust, but I'm not sure you get quite as much legal protection for it.

 

[GeneralVeers]

Um...no. Irrevocable means just that. You can't withdraw funds or make a purchase with that money. There is such a thing as a revocable trust, but I'm not sure you get quite as much legal protection for it.

If you can't withdraw money, then what's the point? Surely the person managing the trust (someone other than the physician) must be able to use the funds.

 

[Jeff698]

If you can't withdraw money, then what's the point? Surely the person managing the trust (someone other than the physician) must be able to use the funds.

I have an irrevocable trust set up in my kids' names. That way, the drunk who manages to get my life's savings won't be able to get my kids' college money. Granted, I can't use that money to buy that new Corvette, but that's not really the point of the funds so it isn't a problem.

Take care,
Jeff

 

[The White Coat Investor]

I have an irrevocable trust set up in my kids' names. That way, the drunk who manages to get my life's savings won't be able to get my kids' college money. Granted, I can't use that money to buy that new Corvette, but that's not really the point of the funds so it isn't a problem.

Take care,
Jeff

Exactly. It is irrevocably given to your children, the beneficiaries of the trust. Unfortunately, one cannot be the contributor, the trustee, and the beneficiary of an irrevocable trust. My children and grandchildren will be beneficiaries of an irrevocable trust set up by my wife's elderly grandparents. It is a great vehicle for money you do not plan to spend in your lifetime.