Business entity for 1099

[DD214_DOC]

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As the title refers, is it really necessary to form a llc/pllc for 1099 work part time? I understand the benefits of aging a llc but it's also very complicated to figure out even with a lawyer. Would getting a simple ein suffice? What have others done?

Also, a dedicated med business forum would probably be useful.

 

[michaelrack]

I don't think it is necessary to form an llc for "contract work" - receiving an hourly fee (locums work, etc). If you have your own private practice, you may want to consider it, especially if you have any W2 employess of your own. My small private practice is a sole proprietorship- I do have a EIN. The main reason to form an LLC would be to shield yourself from risk- unfortunately it's not possible to get rid of malpractice risk, but having employees is risky and would certainly warrant an LLC.

 

[Doctor Bagel]

I don't think it is necessary to form an llc for "contract work" - receiving an hourly fee (locums work, etc). If you have your own private practice, you may want to consider it, especially if you have any W2 employess of your own. My small private practice is a sole proprietorship- I do have a EIN. The main reason to form an LLC would be to shield yourself from risk- unfortunately it's not possible to get rid of malpractice risk, but having employees is risky and would certainly warrant an LLC.

I'm in this same conundrum and am wondering about starting an llc for a small private practice with no employees. I'm definitely getting an EIN, but I'm debating not doing the LLC thing.

 

[heyjack70]

As the title refers, is it really necessary to form a llc/pllc for 1099 work part time? I understand the benefits of aging a llc but it's also very complicated to figure out even with a lawyer. Would getting a simple ein suffice? What have others done?

Also, a dedicated med business forum would probably be useful.

Any decent accountant should be able to set you up with a PLLC/LLC if that's what you want. I think Fonzie said getting a PLLC was the only way to keep his EIN from being his social security number. I could be wrong about that; looking at michaelrack's post, perhaps you can get an EIN that is different so you don't have your SSN on so many documents.

 

[Doctor Bagel]

Any decent accountant should be able to set you up with a PLLC/LLC if that's what you want. I think Fonzie said getting a PLLC was the only way to keep his EIN from being his social security number. I could be wrong about that; looking at michaelrack's post, perhaps you can get an EIN that is different so you don't have your SSN on so many documents.

I think you can get an EIN without forming an LLC -- at least that's what my research to date has told me.

Editing to add a question about an LLC -- it looks like you can set one up through NOLO.com for $100 + registration fee ($100 in my state). Seems simple enough, but I'm wondering if there's a catch. From reading NOLO, it also sounds like filing taxes as an LLC and as a sole proprietorship is pretty darn similar. It seems like if LLC is cheap and easy, it's worthwhile; if it's complicated/expensive, it might not be worth it for a small operation.

 

[heyjack70]

I think you can get an EIN without forming an LLC -- at least that's what my research to date has told me.

Editing to add a question about an LLC -- it looks like you can set one up through NOLO.com for $100 + registration fee ($100 in my state). Seems simple enough, but I'm wondering if there's a catch. From reading NOLO, it also sounds like filing taxes as an LLC and as a sole proprietorship is pretty darn similar. It seems like if LLC is cheap and easy, it's worthwhile; if it's complicated/expensive, it might not be worth it for a small operation.

An accountant told me that as a small business LLC I would file as something called a 'disregarded entity', which basically meant filing like a sole proprietor, even though you're incorporated. I think it was assuming the single psychiatrist was the solitary manager of the corporation and all profits went directly to him, and not one of these salary plus dividend situations.

BTW, I thought one of the advantages of filing takes like a corporation was so you could pay yourself a reasonable salary, e.g. $200k/year, and the additional profit, let's $80k, would come as dividend and be taxed at a lower capital gains tax rate. I'm really not sure about that at all.

 

[Shikima]

Do check your state laws, that you may or may not be able to form a LLC, rather a PC in the form of an S-corp. It would be recommended to form such an entity to help you if you're going to earn 1099. But then you need to have payroll and all the other tax stuff set up too which can be a hassle, but your accountant ought to be able to manage it all for you.

 

[DD214_DOC]

So to update since is what I have learned.

Some states require that physicians form a PLLC or a professional corporation (PC) or professional service corporation (PSC). Some states don't require it which adds more confusion. Pllc and the like have extra requirements and must be approved by the state medical board before submission to the Secretary of state for formation.

Taxes for llc/pllc depend on the number of members. A single member llc is considered a disregarded entity and taxes are reported on an individual's return. You can elect to be taxed as a corporation but I don't know the details of why you would.

My situation is further complicated by living in one state and potentially working in another. My state of residence has no income tax. So I'm facing forming an llc or pllc, having to deal with two state medical boards, and having to register in one state as a foreign business.

I think for now I'll stick with just getting a ein and remaining a Sol prop.

 

[DD214_DOC]

Do check your state laws, that you may or may not be able to form a LLC, rather a PC in the form of an S-corp. It would be recommended to form such an entity to help you if you're going to earn 1099. But then you need to have payroll and all the other tax stuff set up too which can be a hassle, but your accountant ought to be able to manage it all for you.

I don't really see any benefit to forming an llc or corp solely for 1099 work.

 

[Shikima]

I don't really see any benefit to forming an llc or corp solely for 1099 work.

I can't explain it, but I would talk with someone who knows these details for the pro's and con's in forming such an entity.

 

[mgdsh]

As an S-Corp (or say LLC) you can deduct more, which can be a huge advantage as compared to straight personal income.

 

[keifernny2]

I looked into this same issue for a part-time moonlighting job that I do out of state (via telemed) last year.

Ran into some of the same issues - if I form an LLC in my home state, I would need it to be a PC and it gets complicated.

I would also need to register with the state where the patient is.

In the end, The tax situation is much less complicated for part-time work just to call yourself a sole-proprieter and use your own name (which is how your patients know you anyway).

If it was a full-time job I'd be more interested in incorporating to save $$ on taxes, but for part time it's just not worth the hassle.
Also, I was able to do my own taxes with turbotax, which I may have had to pay an accountant to do if I was a corp.

EIN is easy to get (at least in my state). I just went to the IRS website, filled out the form, and had a number within like 5 minutes.

 

[Shikima]

Keifernny, what was your tax burden using turbotax? I always imagined that the Feds & State sent you some kind of welcome package complete with a bottle of wine, a disc with soft music......

 

[keifernny2]

It takes me about a day to do them, though I save the wine until after (less mistakes that way).

I have 2 tools that I use throughout the course of the year that help with the business expenses - I have a 99cent iphone app that takes photos of receipts and organizes into expense reports & pdfs, and I have a multifunction printer/scanner in my home office that will scan directly to PDF files.

It's a lot easier to take a pic of a gas or taxi receipt at the moment you get it (or at the end of each day of traveling), than it is to try to remember what a receipt was 9 months later.

My scanner names things generically (epson1/2/3/4.pdf) and saves them onto a thumb drive that connects to it. I just leave everything there until I have time to sort (usually when I'm working from home office doing telepsych and my patient no-shows).

I create a computer folder for each business trip/CME and dump the receipts for each trip into its own folder (e.g.: Business Travel APA 2015 Toronto) and rename the file by how much it is and the date. E.g.: $24 taxi airport 5-5-15.pdf.

At the end of the year it's just a matter of summing up each folder, and I don't have to look at the actual pdfs again because I put the dollar amount in the file name.

I shred almost all non-essential paperwork that comes into my office to prevent being buried in it and back everything up frequently.

It cost me $120 total for turbotax, and that is what my accountant used to charge me every hour.

Also, the good multifunction printers scan directly to email now so I no longer have to fax things back and forth to my nurses.

 

[DD214_DOC]

One caveat to not forming a LLC/PLLC/PC/whatever for part-time work, especially with a plan to eventually do it full-time: if you do it now for part-time, despite the hassle, when you start doing your own thing full-time you will already have a corporation/LLC with several years of history and revenue. This would make it easier to obtain things like business lines of credit and such for future growth or whatever you intend to do.

 

[michaelrack]

One caveat to not forming a LLC/PLLC/PC/whatever for part-time work, especially with a plan to eventually do it full-time: if you do it now for part-time, despite the hassle, when you start doing your own thing full-time you will already have a corporation/LLC with several years of history and revenue. This would make it easier to obtain things like business lines of credit and such for future growth or whatever you intend to do.

I don't think it makes a difference to most banks/vendors whether you are a sole proprietorship/LLC/PC etc. I have extensive experience getting loans/lines of credit/vendor lines as both a sole proprietor and as an officer/part-owner of a now defunct healthcare company (parent LLC with several subsidary LLC's). All that banks care about is your revenue/income hx and balance sheet.

 

[Still Kickin]

I'm a sole prop. And yes, I have an EIN. (I don't take insurance but I give patients superbills to submit to their insurers. You need to include a tax ID on those. [Which, without an EIN would be your SSN!]) Here's the IRS page about small businesses, EINs, etc.: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Starting-a-Business

I went the sole prop route as I don't have any employees (otherwise I'd have started an LLC). I never looked into this for sure (maybe someone here could confirm for me?) but I had the impression if I were an LLC I'd have to put LLC everywhere (business cards, signage, etc.) I really didn't like the "vibe" that I felt "Dr. Still Kickin, MD, LLC" would convey. (Too business-ey / money-focused, rather than relationship / patient-care focused...)

(Addendum: I did a contract job and some locums work prior to starting my practice. I did not have an EIN at that point.)

 

[michaelrack]

I'm a sole prop. And yes, I have an EIN. (I don't take insurance but I give patients superbills to submit to their insurers. You need to include a tax ID on those. [Which, without an EIN would be your SSN!]) Here's the IRS page about small businesses, EINs, etc.: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Starting-a-Business

I went the sole prop route as I don't have any employees (otherwise I'd have started an LLC). I never looked into this for sure (maybe someone here could confirm for me?) but I had the impression if I were an LLC I'd have to put LLC everywhere (business cards, signage, etc.) I really didn't like the "vibe" that I felt "Dr. Still Kickin, MD, LLC" would convey. (Too business-ey / money-focused, rather than relationship / patient-care focused...)

The LLC name would need to be on signage and anything billing-related. Not necessarily a business card - for example, if you anticipate being involved in several areas in the future (maybe do some locums work that would be separate from your medical practice and you would perhaps do this under your ss#) you could certainly get a business card to promote YOU personally, and not the LLC.