Dr. Rack makes a good point, but its the application of the law that makes this the tricky question that it can be. While equipment can be a factor, it isn't necessarily a deciding factor, as, for example, a hair salon can rent a chair to an IC stylist and pay them 1099 based on their own work with their own clients. Medical and radiation oncologists may see the same patients in connected offices labelled a "cancer center" but be unnconnected from a business standpoint. Or, they can both be employees of the clinic which may have other specialists as well. Or, they could be IC service providers to a single clinic under contract. As a business, you can choose to hire an employee to work for you or you can choose to outsource, hiring a service from an independent contractor, such as locum tenens, or a nighthawk service. These are not employees, and so long as the IRS is getting its taxes paid, employment taxes, or self-employment taxes, it is not going to matter a lot to them how you operate your business. Where the issues come up are situations in which businesses try to pick and choose the advantages of employees and the advantages of indpendent contractors, and you can't have both. With an employee you retain control and have liability for their actions, but with a contractor you give up a measure of control but also aren't typically held to be as responsible. Since in medicine, your responsibility as a doctor is so extensive, this doesn't tend to matter, since you will, in a case of negligence by one or the other, Ee or IC, be sued anyway, for the acts of each other, since the responsibility for patient care is so important and delegating it is its own responsibility. Also, in this case, a new practice, setting up two doctors together as independent contractors is more sensible than splitting them up after they have practiced as employee/employer, so the best time to do it is before you ever enter the other relationship, as the definition of the relationship can be cleanly set up and followed for both tax and state law purposes. Or, for example, the IRS might care if there is discrimination occurring among employees and they think the arrangement was set up to avoid responsibility for the employees of the doctors in a "related service group," for example. This would be improper from the get-go, however, so isn't an employee/IC problem per se. So, there isn't really any question that two doctors can enter into an agreement to work on an ongoing basis together each on 1099 income from a single employer corporation, which can pay each doctor individually, or better yet each doctor's own practice corporation.
Also, this is a legal question, often confused with an accounting question. Ideally, it should be made in consultation with lawyer and accountant on same page BEFORE you get very far down the road. Accountants are often comfortable assisting with the decision and often know a lot more about tax than GP attorneys who will defer to them, but its an important and often long term decision about the structure of the practice and can get you locked in, so its important to get it right from the outset.
BTW, the AMA has a excellent sample model employment contract (on its website, availabe as PDF download) with lots of things to consider when making an agreement to enter a practice and it could be very helpful as a checklist to make sure you are covering your bases in your new practice setting. Definitely worth a look.
Here's the required disclaimer (see IRS Circular E): I am required to tell you this isn't legal advice and can't be relied on to avoid any IRS penalites, and that you should consult an attorney...make that a tax attorney IMO.
