PLLC or LLC or nothing for moonlighting in USA

[MrChance2]

I’m going to start externally moonlighting soon. I’ve spoken with an accountant and attorney (both informally) and it sounds like PLLC is an option. My PD says I don’t need a corporation. I wanted to see if it’s worth it to form one to work 10-15 extra hours per week. I’m not sure I see tax or liability advantages of a PLLC vs just working as myself as it’s my understanding PLLC doesn’t really shield you from your own potential malpractice and I am not going to have employees or partners or my own place of business until after fellowship

A few facts
-I currently have $XXX,XXX negative money aka student loans to my name
-I’m married (if it matters?)
-God willing I’ll be off to fellowship in under a year but plan to continue moonlighting but may be in a different state.
-will most likely start a practice after that but may work a bit for the first few years.

Does anyone have any personal experience or wisdom they care to share?

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[Merely]

Why the **** did u put a bunch of X instead of numbers for your debt amount loll

 

[MrChance2]

Why the **** did u put a bunch of X instead of numbers for your debt amount loll

...I don’t even know what it is.

 

[Merely]

...I don’t even know what it is.

How about I’m in 200k debt or 250k debt, I mean there’s a big difference between 100k and 450k debt so putting what you put is meaningless

 

[MrChance2]

How about I’m in 200k debt or 250k debt, I mean there’s a big difference between 100k and 450k debt so putting what you put is meaningless

Ok thanks for the feedback.

 

[Sushirolls]

When I was in residency I moonlighted as myself. Seems like a pain to start the PLLC, only to have to shut it down when you move. If you have future private practice aspirations then I would say consider doing it for the practice. Will make it easier for when it really counts. Depending on what you intend to do with the moonlight money, that might also shape your decision. Pay off student loans, then just do it as yourself. Want to maximize retirement money? You could open a SEP-IRA for the moonlighting money, and have your business identity pay for your medical license if your residency doesn't.

Pros-cons for this. Don't get too worked up about it since only temporary.

 

[TexasPhysician]

I don’t see the value in a (p)llc here. It won’t shield malpractice liability. If you are moonlighting at $150k+/year, then I’d reconsider this with an accountant based on which tax benefits you plan to take advantage of. Lower amounts with (p)llc this part of life may actually decrease tax benefits, but again you would need a long talk with an accountant.

 

[Merovinge]

You need a new account and or attorney but your PD sounds great! You also hit the nail on the head with most things, but great idea to check with others.

LLC will not shield you from any liability as a moonlighter, as the only real liability you have is personal malpractice, that comes after you directly regardless of any corporate structure (make sure your job is covering you, most do). Anyone telling you otherwise is simply misinformed (unless you are moonlighting in your own practice, then liability from someone slipping on your floor would technically be something a corporation could shield your assets from).

You also do not need an LLC to deduct your medical expenses from 1099 income, you are able to do that regardless of any corporate structure. Make sure you check with your accountant on what is reasonable to deduct (medical license, medical exams, scrubs (but no suits ) are 100% fair game, other details I'll leave to the CPAs). Having a good accountant will be paramount if you plan to open your own practice down the road, so now is a good time to learn how to find one.

If you have loans definitely dont open a SEP-IRA with your earnings, they stop you from doing back-door Roth (which is a MUCH better use of your money) and the rest can be "invested" into your loans at a tax-free guaranteed rate of return of whatever your interest is. Money is also fungible, so if your residency or fellowship offer any match on 401k like plans, definitely try to contribute the minimum to get the match and then live off the 1099 money.

 

[Sushirolls]

I just noted the title had "... in USA"
I want to add that if the OP is international, you need to be aware of your VISA status and implications that has on working ability. Most work VISAs limit people only to that hospital/organization, and don't permit moonlighting. Sometimes organizations are large enough that there is internal moonlighting which a resident may be elgible for. But with out an EID or Green Card in hand, odds are you can't moonlight - doing so might be a bit of info USICS will use to reject further applications.

 

[BiscoDisco]

When the residents at my program are paid as moonlighters, something like 40% tax is coming out of their hourly rate. Is there any way to affect this? I was assuming moonlighting would be taxed like regular salary is taxed (we're in a no income tax state). What can I do so I'm not losing 40% of my moonlighting hourly rate?

 

[Sushirolls]

Internal moonlighting they are likely being treated as employees, therefore they are probably taking out the usual payroll tax stuff, SS, Medicare, fed tax, etc. Makes it easier for end of your taxes and accountant, so you won't have to pay more, but improve odds of getting a refund.

If moonlighting at an external facility you'll like get the 1099 where you are then responsible for those elements yourself, and potentially have to pay more at end of the year in taxes. So, best to play it safe, and stash away 30-40% in your account anyways, until you finish your taxes at the end of year.

 

[BiscoDisco]

Internal moonlighting they are likely being treated as employees, therefore they are probably taking out the usual payroll tax stuff, SS, Medicare, fed tax, etc. Makes it easier for end of your taxes and accountant, so you won't have to pay more, but improve odds of getting a refund.

If moonlighting at an external facility you'll like get the 1099 where you are then responsible for those elements yourself, and potentially have to pay more at end of the year in taxes. So, best to play it safe, and stash away 30-40% in your account anyways, until you finish your taxes at the end of year.

So they're considered 1099 at internal site. Unsure why that 40% is being taken out to begin with though...any ideas? If they were treated as an employee, shouldn't they be taxed at roughly the same rate as their regular pay? They all complain that 40ish % of their moonlighting goes towards taxes.

 

[Sushirolls]

If they are 1099, no taxes should be getting deducted, that's odd.

 

[BiscoDisco]

If they are 1099, no taxes should be getting deducted, that's odd.

Fair point. And if they were employees...they still shouldnt be getting more taken out than usual, right?

 

[Sushirolls]

I don't see why they would.

 

[downwithDTB]

The higher tax rate on internal moonlighting is because your biweekly salary is much much higher so your extra income is having estimated taxes withheld at a much higher marginal rate.

If your biweekly (or whatever) paycheck including the moonlighting is roughly steady... welcome to the world of paying high marginal rates on your income. Congratulations and welcome to the local fiscal conservatives club. If you have a small number of significantly increased pay checks, you can do the math to estimate what your yearly taxes will be and increase your deductions to account for that and keep more money in your pocket during the yeah... Just be careful not to under-withold.

 

[dl2dp2]

LLC is cleaner for a variety of reasons. If I were to do it over again I may start with LLC taxed as a S-Corp, and just do payroll from day one. Some newer software online makes doing payroll infinitely easier now.

The main problem I see with a lot of people who don't create an entity is not that sole proprietorship is particular "bad" per se as a form of organizing, it's that when they don't think about this they don't do the leg work to actually start a sole proprietorship (i.e. get an EIN, get bank accounts, etc). All their 1099s go to their personal account, and they don't file schedule C. At the same time they randomly deduct "business" expenses because their accountant told him they can. It's hella messy and if/when you get audited you are screwed. It's also a mess to do this IF in the very unlikely event you get a business liability (i.e. slip and fall, rental dispute, etc), because then all your personal assets are much more liable. It's also really confusing to start other business-oriented financial activities (Solo 401ks, take out a business loan, etc) using a personal SSN.

 

[Merovinge]

LLC is cleaner for a variety of reasons. If I were to do it over again I may start with LLC taxed as a S-Corp, and just do payroll from day one. Some newer software online makes doing payroll infinitely easier now.

The main problem I see with a lot of people who don't create an entity is not that sole proprietorship is particular "bad" per se as a form of organizing, it's that when they don't think about this they don't do the leg work to actually start a sole proprietorship (i.e. get an EIN, get bank accounts, etc). All their 1099s go to their personal account, and they don't file schedule C. At the same time they randomly deduct "business" expenses because their accountant told him they can. It's hella messy and if/when you get audited you are screwed. It's also a mess to do this IF in the very unlikely event you get a business liability (i.e. slip and fall, rental dispute, etc), because then all your personal assets are much more liable. It's also really confusing to start other business-oriented financial activities (Solo 401ks, take out a business loan, etc) using a personal SSN.

This makes complete sense if you are opening your own private practice. You clearly do not want to be putting your income into your own checking account and mixing all the finances. OP is just a resident moonlighting for another company where none of those things are relevant or a benefit and actually have a cost both in terms of time and money.

 

[Merovinge]

When the residents at my program are paid as moonlighters, something like 40% tax is coming out of their hourly rate. Is there any way to affect this? I was assuming moonlighting would be taxed like regular salary is taxed (we're in a no income tax state). What can I do so I'm not losing 40% of my moonlighting hourly rate?

If they are over withholding it's not a big deal unless you need every cent of your money. Your taxes at year end will be calculated the same and any extra money will get kicked back out to you. Certain things like overtime or bonuses sometimes get taxed initially at higher rates, but you will get all this money back when you file the taxes. I would be shocked as a resident that's moonlighting if your effective tax rate is more than around 23%+state income tax.

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(e.g. with a TON of moonlighting to get to 200k, your effective federal tax is right around 25%, would be dropped lower by 401k contributions etc)