Should I Incorporate my medical practice?

[strike5858]

For those of you have have your own pain practice or experience with private pain practices, any advice on how I should set up my practice for both tax purposes and to limit personal liability? LLC, S-corp?

I decided to set up my own practice in California, and figured if I was gonna incorporate my practice, I take care of it beforehand so I can set up my insurance credentialing and bank accounts all though that entity.

I honestly don't know what I'm doing. Just trying to figure it out as I go. I will open up after I finish fellowship this fall. Plan on keeping the practice very lean to start. Likely just me, a medical assistant and a front office person.

I've done some research online, talked to a few people including an attorney who recommended I incorporate through them at the low low cost of $2500.

Another person recommended initially just setting up a basic LLC via Legalzoom.

Scheduled to speak with a experienced CPA tomorrow.

Any advice or insight would be appreciated.

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[pastafan]

Tax laws are up in the air, each state varies on how it treats PLLC vs S/C Corp. I am set up as PLLC with election to be treated as S Corp for federal tax purposes. Hopefully a CA doc will have more specific advice.

I recommend finding good lawyer, you will need one down the line, but $2500 to set up a single member LLC is pretty ridiculous. I set mine up using my state's online registration page and the IRS site for tax ID number.

 

[drusso]

The traditional strategy would be to set up as an S-corp. What are you trying to achieve?

 

[Biohazard685]

LLC keeps things simple. S Corp if you plan on expanding. Depending on state law you can switch between two.

State laws vary so legalzoom is good if you're not familiar with Cali laws.

If you can do your own groundwork you can delay getting a lawyer involved.

 

[Cholula]

Are you going to get a big loan to start up your practice or do you have the cash to to fund it by yourself? If you don't need to take out a big loan why not just be a sole proprietor. An SP is = to an LLC for tax purposes. An LLC can protect you from personal bankruptcy only if you take out a big business loan, if not then you don't need an LLC.

 

[strike5858]

The goal is to build up and expand. Hopefully get busy enough to bring in additional pain doctors and also have additional locations. Granted, I have to learn to walk before I run.
But I would like to eventually own the real estate and hopefully have my own single specialty asc if it makes financial sense.

Big goals and aspirations, just wanna make sure the foundation is being laid the right way.

 

[drusso]

The goal is to build up and expand. Hopefully get busy enough to bring in additional pain doctors and also have additional locations. Granted, I have to learn to walk before I run.
But I would like to eventually own the real estate and hopefully have my own single specialty asc if it makes financial sense.

Big goals and aspirations, just wanna make sure the foundation is being laid the right way.

S-corp all the way.

 

[epidural man]

In California, you can't be an LLC. If you AOI say it is for medicine, it has to be an S-Corp or C-Corp.

But this year (talk to your CPA), new tax law gives 20% writeoff on pass-through income so if you are going to pass all the income through, no reason to even be an S-Corp. I also understand that a lot of the write-offs that were allowed before are no longer allowable. I'm not sure there is much advantage to an S-Corp at all. My CPA (when I set up an S-Corp) told me it wasn't worth the headache. Now after a year, he was totally right. With the new tax law, I'm going back to sole proprietor. The s-corp served it's purpose (I wanted to give my wife a W-2, and for another reason I don't want to say publically)...but that reason has passed.

 

[drpainfree]

For those of you have have your own pain practice or experience with private pain practices, any advice on how I should set up my practice for both tax purposes and to limit personal liability? LLC, S-corp?

In CA, medical practice cannot be set up as LLC, has to be corporation, elected to file as s-corp, or not.

I decided to set up my own practice in California, and figured if I was gonna incorporate my practice, I take care of it beforehand so I can set up my insurance credentialing and bank accounts all though that entity.

why in California?

I honestly don't know what I'm doing. Just trying to figure it out as I go. I will open up after I finish fellowship this fall. Plan on keeping the practice very lean to start. Likely just me, a medical assistant and a front office person.

"open up after I finish fellowship"...risky move, doable, not sure in your case. Lean practice is not defined as a MA and front receptionist. If you do indeed get both, they would be sitting around surfing online quite a bit.


I've done some research online, talked to a few people including an attorney who recommended I incorporate through them at the low low cost of $2500.

Another person recommended initially just setting up a basic LLC via Legalzoom.

You need to re-do your research...$2500 for setting a a corporation is way too much...by a lawyer, why?

Scheduled to speak with a experienced CPA tomorrow.

yes, talk to a CPA first.

Any advice or insight would be appreciated.

 

[deleted185747]

In California, you can't be an LLC. If you AOI say it is for medicine, it has to be an S-Corp or C-Corp.

But this year (talk to your CPA), new tax law gives 20% writeoff on pass-through income so if you are going to pass all the income through, no reason to even be an S-Corp. I also understand that a lot of the write-offs that were allowed before are no longer allowable. I'm not sure there is much advantage to an S-Corp at all. My CPA (when I set up an S-Corp) told me it wasn't worth the headache. Now after a year, he was totally right. With the new tax law, I'm going back to sole proprietor. The s-corp served it's purpose (I wanted to give my wife a W-2, and for another reason I don't want to say publically)...but that reason has passed.

I asked my California CPA about changing our medical and dental S-corps to C-corps to save on taxes and said not to because C-corps subject you to double taxation. We remain S-corps.

 

[drusso]

The s-corp served it's purpose (I wanted to give my wife a W-2, and for another reason I don't want to say publically)...but that reason has passed.

Yep. That is the reason. Also, if you think that you're going to be expanding, bringing on partner's, etc then S-Corp is a good idea.

 

[promethius]

I did not set mine up in California, but if you are the sole owner, you can consider setting it up as a single-member LLC for now, which is taxed similarly to being a sole proprietor. Correct me if I am wrong, but from what I understand, S-corp and C-corp are just designations of LLC, and you can switch back and forth from LLC to S-corp or C-corp by filing additional forms with the IRS on how you want your company to be taxed. What that means is that as long as you initially filed as a LLC, you can always go back and change it to a S-corp or C-corp.

I would not pay $2500 to set up your organization, as you can do that on your own for 5-25 times less. Everything in California is more expensive as it is. I heard it costs a couple of hundred dollars to file and renew your LLC every year there, which is more expensive than just about every other state. Plus California also requires you to take and pass a computerized test to get licensed as an operator to supervise fluoroscopy (if you use the c-arm) and radiography (if you work with an x-ray tech), and those fees need to be renewed every 2 years I believe. There is a reason why more and more people are leaving California.

 

[Ferrismonk]

There is a reason why more and more people are leaving California.

I refuse even to go to conferences in California. Every dollar I can keep from that state the better.

 

[SSdoc33]

I refuse even to go to conferences in California. Every dollar I can keep from that state the better.

i guess you never eat, watch TV or movies, or enjoy any of the tax revenue that california generates.

before you post some partisan crap like that, at least have some idea what you are talking about. all of us would be up sh$ts creek without california.

 

[Ferrismonk]

i guess you never eat, watch TV or movies, or enjoy any of the tax revenue that california generates.

before you post some partisan crap like that, at least have some idea what you are talking about. all of us would be up sh$ts creek without california.

You're right. All my food, television, movies, and taxes come from California. Sorry about my ignorance. Thank God for California!

 

[SSdoc33]

You're right. All my food, television, movies, and taxes come from California. Sorry about my ignorance. Thank God for California!

What Would We Eat if It Weren’t for California?

Does California really have

and yeah, you would be only be watching univision and karate movies if hollywood wasnt around.

your ignorance is noted. think about that they next time you want to secede

 

[DODOCSS]

chino or bust

 

[bedrock]

In California, you can't be an LLC. If you AOI say it is for medicine, it has to be an S-Corp or C-Corp.

But this year (talk to your CPA), new tax law gives 20% writeoff on pass-through income so if you are going to pass all the income through, no reason to even be an S-Corp. I also understand that a lot of the write-offs that were allowed before are no longer allowable. I'm not sure there is much advantage to an S-Corp at all. My CPA (when I set up an S-Corp) told me it wasn't worth the headache. Now after a year, he was totally right. With the new tax law, I'm going back to sole proprietor. The s-corp served it's purpose (I wanted to give my wife a W-2, and for another reason I don't want to say publically)...but that reason has passed.

I was speaking with an accountant today about setting up the business and he hadn't heard of the new tax law, so he's checking out the link from above. Sounds like we need to go sole proprietor. I don't plan to ever hire a second doc or PA.

He did say there are better legal protections for doing the S-corp. What are your thoughts on that?

What is the AOI?

 

[bedrock]

Are you going to get a big loan to start up your practice or do you have the cash to to fund it by yourself? If you don't need to take out a big loan why not just be a sole proprietor. An SP is = to an LLC for tax purposes. An LLC can protect you from personal bankruptcy only if you take out a big business loan, if not then you don't need an LLC.

Can an S-corp protect you in this way, if you take out a loan for the business??

 

[bedrock]

In California, you can't be an LLC. If you AOI say it is for medicine, it has to be an S-Corp or C-Corp.

But this year (talk to your CPA), new tax law gives 20% writeoff on pass-through income so if you are going to pass all the income through, no reason to even be an S-Corp. I also understand that a lot of the write-offs that were allowed before are no longer allowable. I'm not sure there is much advantage to an S-Corp at all. My CPA (when I set up an S-Corp) told me it wasn't worth the headache. Now after a year, he was totally right. With the new tax law, I'm going back to sole proprietor. The s-corp served it's purpose (I wanted to give my wife a W-2, and for another reason I don't want to say publically)...but that reason has passed.

The business you speak of is just a side business right? Isn’t your main job at a military hospital?

I reread the article and it says sole proprietorship makes sense if PCP, not if specialist, because the tax advantages are just if your business makes less than 207,000 a year in profit.

 

[epidural man]

The business you speak of is just a side business right? Isn’t your main job at a military hospital?

I reread the article and it says sole proprietorship makes sense if PCP, not if specialist, because the tax advantages are just if your business makes less than 207,000 a year in profit.

I work at a military hospital, but it is all 1099.

And I have no idea about your questions - just repeating what my tax guy said.

 

[lonelobo]

I was speaking with an accountant today about setting up the business and he hadn't heard of the new tax law, so he's checking out the link from above. Sounds like we need to go sole proprietor. I don't plan to ever hire a second doc or PA.

He did say there are better legal protections for doing the S-corp. What are your thoughts on that?

What is the AOI?

I would seek a new accountant

 

[deleted185747]

Can an S-corp protect you in this way, if you take out a loan for the business??

I don’t think so. You and your spouse will have to personally guarantee a SBA loan. By the way, loan payments are not a business expense. Your loan payments are paid with after tax income so if you are paying $2000/month for debt service (principal and interest) you will have to take home around $3500 so you can pay $1500 tax and then $2000 for principal and interest. Only interest portion is tax deductible.

If you just pay the $2000/month and forget what I said above then at the end of the year you will have a tax bill of over $15,000 plus penalties for not prepaying as you go.