Forming an LLC for a 1099 job, advice please

[BIGphysician]

Hey everyone.

I'm moving on from residency in afew months and I'm getting job offers for either W2 or 1099. At first, I figured it was a no brainer to go with the W2 because it included all the benefits. I figured a massive company would have more bargaining power and be able to provide me with a better benefits package for the price. Then I started looking into options and I'm not sure if this is even possible but it seems like if you opened an LLC (lets say SodaDrinkers, LLC) and the hospital paid that via a 1099 instead of to you personally, would could save about 5% in federal income tax (by filing under a corporate tax bracket). This would also give you the ability to write off your leased car, office expenses, etc etc. It started to become more appealing at this juncture. Also the idea of having an LLC and being more in control also started sounding good. I'm not sure if anyone has had experience with this? I know I would have to bring my own insurance (health, dental, malpractice) to the table for myself and my family. Is this much more expensive? Can someone recommend some companies? Some residents from my program who graduated last year said the 1099 route is more lucrative but they really dont know anything about it and it sounds like they're just talking from hearsay. I'd really like some advice with this.

thanks a ton, DDP.

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[deleted162650]

Well, not sure what kind of jobs you're looking at - PP v. hospital employee v. AMC, but a properly structured PP will pay you W-2 and allow you to make all those deductions (car lease, office, etc.) through the practice. This is nice because it keeps your personal return very simple. When you go LLC or S-corp, your personal taxes get an order of magnitude more complicated which results in higher accounting fees and a much higher likelihood of getting audited. At my first gig, I was given the option to be w-2 with expenses going through the company, or 1099 and form my own S-corp. After a long conversation with my CPA, it became obvious that the small amount of taxes I could save by going 1099 would be cancelled out by the accounting and payroll fees I would have to incur and then add in the headache factor on top of it.

 

[aneftp]

I have been self employed and w2.

Frankly. Health care costs are getting outrageous as a family now. If you are single it won't cost u much. But my health care premiums alone are $1350/month (plus $7200 deductible with nothing paid till $7200).

That's $16200 in health care premiums alone plus a potential for another $7200 out of pocket.

Plus paying my own malpractice ($17k)

Remember u are responsible for paying half the employer 15.6% self employment taxes. BasiclLy that's another $9k expenses.

So being self employed I'm in the hole $43k alone

When i was faculty my health care was paid for. My malpractice was paid for. And obviously my employer portion of the fica/Medicare taxes were paid for.

So to make up that $43k in expenses. U better than $100k plus in deductions

 

[Ezekiel2517]

There are a lot of past threads on this topic but, based on your post, I think you need to educate yourself a lot more regarding these personal finance topics. White Coat Investor's site has the answers to all the questions you ask. In short, no, the 1099 route is not more lucrative simply because it's 1099. You have to compare 1099 vs. W2 on an individual basis. And if you do go 1099 and want to incorporate, you would most likely want to form an S-corp, not an LLC. You do this via a CPA. But you do not need to incorporate at all to make all those deductions you stated. Simply being an independent contractor will allow you make all the same deductions. The biggest advantage of 1099 is the ability to put away much larger amounts of money into retirement accounts, thus decreasing your tax hit (though some W-2's can do this as well if set up properly). However, as mentioned in previous post, as a 1099 you're responsible for self-employment taxes which can be significant. In very general terms, you have to add at least 30k to the 1099 job to make it equivalent to the W2.

 

[CommonMan]

Imagine going to an accounting forum and posting you are having a surgery and want your accountant partner to do the anesthesia. Then the accountants post you should use probably use propofol. Then the dosing amounts are discussed.
There is so much to consider and this is a big decision. Yon need to get a crow bar, pry open the wallet and hire a professional who will get to know you.

 

[Ezekiel2517]

Imagine going to an accounting forum and posting you are having a surgery and want your accountant partner to do the anesthesia. Then the accountants post you should use probably use propofol. Then the dosing amounts are discussed.
There is so much to consider and this is a big decision. Yon need to get a crow bar, pry open the wallet and hire a professional who will get to know you.

This isn't quantum physics. There are tons of docs who are IC's and corps. OP needs to get some knowledge before meeting with an accountant. I know many docs who've been given bad info and guidance because they've just blindly trusted "experts". This is pretty simple stuff once you've done your due diligence

 

[epidural man]

I am starting a new job 1099 in Jan. I will form a corp - but I didn't have a w2 choice.

In California, we have todo an SCorp....LLC not allowed.

One benefit(according to my CPA) is you can do a defined benefit plan. In addition, I will employ my wife to do payroll, etc. She was not working so this wil keep her social security counter going as well as increase our ability to increase tax deferred savings.

By doing these things it can lower my income and prevent increase requests from ex spouse.