Starting Solo Corporation

[robin082006]

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Hi all,

I am a full time hospitalist and realized that my income is too low in compared with my peers in same specialty (internal medicine).

I got W2 each year and paid too much for tax. As recommended by other hospitalists in the same group, I am opening a solo corporation and will change my current job to independent contractor (Will get 1099 for tax). My corporation will get approved in the next 2 weeks.

I have no idea about the process to start a solo corporation , I list the steps I will do below, if I miss anything, please help.

1. Open solo corporation.
2. If corporation approved, open business bank account.
3. Get new NPI for the corporation.
4. Buy own malpractice insurance (I am doing hospitalists and locum tenens).
5. Apply for new Medicare/Medicaid ID.
6. Apply to join in-network with other health insurance companies.

If you have experience, please share.

 

[DIce3]

All of the following points are easy to accomplish. Going solo is great and I highly recommend it.

But what do you mean you are paying too much tax? If you are thinking of making an S corporation and paying yourself in part with dividends from the corporation I would be very careful. I would recommend against it, in fact.

 

[robin082006]

All of the following points are easy to accomplish. Going solo is great and I highly recommend it.

But what do you mean you are paying too much tax? If you are thinking of making an S corporation and paying yourself in part with dividends from the corporation I would be very careful. I would recommend against it, in fact.

All of private doctors I saw have their own corporation to provide medical services. They told me it is a must if I want to do solo practice.

They claim any thing like computer, cell phone, staff salary, internet, phone, restaurant bills, office related expenses, car, gas, insurance even life insurance...as deduction. So that's why they pay less tax.

 

[Weinberg Angle]

...

 

[DIce3]

Solo means you work for yourself or are employed by the practice that you own.

If you are employed by a group of doctors, you would not be solo, by definition.

You can be a solo practitioner under your own social security number and file a schedule C or you can form a C or S corporation and practice solo under your corporate entity.

You can be solo with or without an office. Hospital/nursing home/LTAC/rehab/home visit based doctors may not have an office. You would need an address and a registered caretaker for your corporation, but this could be you at your home address.

 

[robin082006]

Hi,

I am currently an employed hospitalist. I am interested in going solo as well.
1. Can you be employed and be solo, or do you have to be locums?
2. Do you have an office?

Thanks in advance

I am a full time employed hospitalist, and plan to do extra because I notice that when anyone in my group discharged a patient to SNF, sub acute rehab, there is no assigned doctor and when patient was re-admitted, the patient was take care by another doctor not in my group.

So at the beginning, I will ask them to put my name as the attending doctor, and when patient is admitted, the patient will be under my group's service. When my solo practice becomes busy, I will quit the FTE job.

I put a hospital as my address and do not have a outpatient office.

 

[Weinberg Angle]

...

 

[DIce3]

If you do locums jobs where you work as an independent contractor and are not temporarily employed by a locums company, you can work under your own corporation. You would have the locums work pay your corporation for your services. There is no free lunch here.

Opening a corporation under C status would allow for legitimate deductions for professional expenses. You would have to not only initially file but send quarterly tax forms, file annual reports, and upkeep the corporation for likely similar deductions you could take under Schedule C of your 1040. Moreover, under C, but not S, status you must zero out your corporation at the end of each business year or will be taxed double. Also, don't consider forming an S corporation to pay yourself dividends to escape from Medicare and Social Security taxes, as the IRS is aggressively going after this loop hole for personal service corporations.

 

[michaelrack]

If you do locums jobs where you work as an independent contractor and are not temporarily employed by a locums company, you can work under your own corporation. You would have the locums work pay your corporation for your services. There is no free lunch here.

Opening a corporation under C status would allow for legitimate deductions for professional expenses. You would have to not only initially file but send quarterly tax forms, file annual reports, and upkeep the corporation for likely similar deductions you could take under Schedule C of your 1040. Moreover, under C, but not S, status you must zero out your corporation at the end of each business year or will be taxed double. Also, don't consider forming an S corporation to pay yourself dividends to escape from Medicare and Social Security taxes, as the IRS is aggressively going after this loop hole for personal service corporations.

Previously it didn't make much sense for a doctor to form a corporation (S corp for the reasons you outline, and C corp because the tax deductions are similar to sched C as you note). However, now that the top marginal income tax rate is over 40% (counting in the Obamacare surcharge) might it make sense for a high-earning doc to form a C corp if he was willing to keep some of the profits in the corp and pay on that portion at the lower C corp tax rates (highest 35%)?

I am just asking out of curiousity, I am not at that level.

 

[robin082006]

Previously it didn't make much sense for a doctor to form a corporation (S corp for the reasons you outline, and C corp because the tax deductions are similar to sched C as you note). However, now that the top marginal income tax rate is over 40% (counting in the Obamacare surcharge) might it make sense for a high-earning doc to form a C corp if he was willing to keep some of the profits in the corp and pay on that portion at the lower C corp tax rates (highest 35%)?

I am just asking out of curiousity, I am not at that level.

I asked lots of doctors and all of them have S corporation, and they advise me to open my own. and it is a must for primary care doctors.

 

[goprisko]

I recommend you form a regular corp, then have it registered under 503(c) as a non-profit.
You will need to file only an annual report.
You will be a director of the corp, paid directors fees and expenses.
Your patients should be paying membership fees in return for a basket of services
The corp can fund a benefits package for the directors, including disability, life, medical etc
The corp can claim rent, uniforms, business travel, business meals, consumables, wages, salaries, and other items as expenses.
You can open and organize all this within a day, online.

Not mentioned above, you will need a TIN, possibly a retail sales tax number too.

INDY

 

[robin082006]

I recommend you form a regular corp, then have it registered under 503(c) as a non-profit.
You will need to file only an annual report.
You will be a director of the corp, paid directors fees and expenses.
Your patients should be paying membership fees in return for a basket of services
The corp can fund a benefits package for the directors, including disability, life, medical etc
The corp can claim rent, uniforms, business travel, business meals, consumables, wages, salaries, and other items as expenses.
You can open and organize all this within a day, online.

Not mentioned above, you will need a TIN, possibly a retail sales tax number too.

INDY

Good to know, thank you.

But then you will be get W2 again at the end of the year. Please correct me if I am wrong.

 

[goprisko]

Corporations are not given W-2s. Individuals who are traditional employees get those.

Individuals and Businesses who are paid under contract either get 1099s or nothing.

If your corp is in good standing, and properly organized, which means it incorporated in a
recognized jurisdiction, registered with the IRS and has a TIN, registered with the state in which it operates, and perhaps with the Dept of Revenue of said state, then it is quite likely
your corp will not be issued a 1099 either.

There are several advantages to being a regular corp vs a Sub S.

a. Regular corps can hold dividends as long as they wish
b. Regular non-profit corps are not considered personal service corps
c. Regular corps can apportion revenues to expenses, directors fees, and salaries with much wider latitude than Sub S corps and Personal Service Corps.

Of course, the advantages of being a corp vs an individual cover the following:

a. Expensing off costs of doing business is more straightforward
b. the marginal tax rate is lower
c. Expensing off pension plans, medical and disability insurances etc is more straightforward
d. Apportioning funds to directors can be to both salary and to director's fees and to their expense account as desired.

It sounds like you, like most MDs, spent all your time on medicine and very little on business, a not unusual thing, so now is the time to make a relationship with a CPA, one you will find yourself keeping for the long term.

INDY

INDY