Hi Bogleheads community,
Need some advice on setting up a business structure for a new primary care practice that I want to launch in the near future. Currently, I have income coming in to my name, MD as a 1099 from various hospitals for freelance work. I have setup a solo 401k and contribute to it regularly and max it out. I plan on continuing my freelance work which will be paid to my name as a 'sole proprietor' and will deposit these checks in my checking account as I have been doing for the past 5 years.
I want to launch a primary care practice, and I understand that taxes and business filing requirements can get very tedious/paperwork-heavy with certain setups without much benefit to the practice owner(s). I would like to start the practice with my wife who is also a physician. We are based in New Jersey. Most of the multi-group or partnership practices that I have seen in NJ are setup as P.A.'s. I'm not sure what the benefit is for the owners/physicians.
I was thinking to set it up as a multi-owner LLC (myself and DW). I understand that this can be taxed as an S-corp to save on payroll taxes. Can anybody chime in whether this is a good idea or not? Would a corporation, S or C corp, PC, or other entity a better setup? My goals are to:
1. Minimize paperwork going forward -
2. Maintain my 1099 freelance work separate from this new primary care practice
3. Be able to have tax advantages from the new setup for myself and DW
4. My wife also has 1099 freelance work separately, she also gets paid as a 1099 to her personal checking account currently for that work
Any and all advice is appreciated! Thank you!
Physician Practice Structure Help!
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- Joined: Fri May 14, 2021 12:02 pm
Re: Physician Practice Structure Help!
Some clarification on the post above:
Myself - have a solo 401k setup at fidelity. I currently earn 1099 income sent to myself as a sole proprietor as a freelance physician. DW also has the same setup. What business structure would be most advantageous for a new practice? Multi-member LLC? PC? PA? S-Corp? How would this new structure affect future retirement contributions if the freelance work is continued? Thank you!
Myself - have a solo 401k setup at fidelity. I currently earn 1099 income sent to myself as a sole proprietor as a freelance physician. DW also has the same setup. What business structure would be most advantageous for a new practice? Multi-member LLC? PC? PA? S-Corp? How would this new structure affect future retirement contributions if the freelance work is continued? Thank you!
Re: Physician Practice Structure Help!
Fellow physician with their own practice fwiw...
The term LLC/PA group is just the structure of the company - you can pick a structure and be taxed as an S corp. You should talk to a lawyer who will go over a bunch of this with you. If you have an accountant - they can also help with understanding the differences. When you say “save on payroll taxes” - with an S corp - that means paying yourself a salary and what ever is in excess in the company at the end of the year passes through to you and you pay just income tax on that amount - not payroll tax as well. That is the “tax savings” so to speak. The IRS has a rule that you have to pay yourself a reasonable wage for the work you do so take that fwiw. I take that to mean you cannot pay yourself $0 as a physician and take the total as a distribution - JMO though....
As how it affects the other retirement plans - I am not sure. You want to talk with an accountant first - there is something called controlled companies - iow your spouse and you have 100% ownership of three companies - your freelance, her freelance and your combined new practice. That can affect how much you can put in total between the three (I think). For it to be considered separate - I think the rule is that they have to be separate lines of business (i.e. not doing healthcare work - maybe doing a blog, managing real estate, etc.).
There are a lot of advantages for running your own business - as you are probably aware of. Often times having a good accountant who is able to help you with those decisions is a benefit - that is where I would start. JMO though....
The term LLC/PA group is just the structure of the company - you can pick a structure and be taxed as an S corp. You should talk to a lawyer who will go over a bunch of this with you. If you have an accountant - they can also help with understanding the differences. When you say “save on payroll taxes” - with an S corp - that means paying yourself a salary and what ever is in excess in the company at the end of the year passes through to you and you pay just income tax on that amount - not payroll tax as well. That is the “tax savings” so to speak. The IRS has a rule that you have to pay yourself a reasonable wage for the work you do so take that fwiw. I take that to mean you cannot pay yourself $0 as a physician and take the total as a distribution - JMO though....
As how it affects the other retirement plans - I am not sure. You want to talk with an accountant first - there is something called controlled companies - iow your spouse and you have 100% ownership of three companies - your freelance, her freelance and your combined new practice. That can affect how much you can put in total between the three (I think). For it to be considered separate - I think the rule is that they have to be separate lines of business (i.e. not doing healthcare work - maybe doing a blog, managing real estate, etc.).
There are a lot of advantages for running your own business - as you are probably aware of. Often times having a good accountant who is able to help you with those decisions is a benefit - that is where I would start. JMO though....
- mrpotatoheadsays
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Re: Physician Practice Structure Help!
Contact the White Coat Investor.
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- Joined: Fri May 14, 2021 12:02 pm
Re: Physician Practice Structure Help!
Bump; anybody else with any suggestions?
- climber2020
- Posts: 2709
- Joined: Sun Mar 25, 2012 8:06 pm
Re: Physician Practice Structure Help!
If you haven't done so already, ask this question on Sermo. The people there were very helpful when I had practice related questions in the past.
Re: Physician Practice Structure Help!
I did this, admittedly some years sgo.
This is pretty routine stuff. I concur that an accountant is your guide here, as they get paid to know this stuff, just like you get paid for what you know. As the saying goes, "call a plumber when your drain is stuck, call a surgeon when your innards are stuck".
However, I expect you will soon find you need employee(s). Billing, collecting, and running your books and taxes is not productive use of a doc's time.
This is pretty routine stuff. I concur that an accountant is your guide here, as they get paid to know this stuff, just like you get paid for what you know. As the saying goes, "call a plumber when your drain is stuck, call a surgeon when your innards are stuck".
However, I expect you will soon find you need employee(s). Billing, collecting, and running your books and taxes is not productive use of a doc's time.
Re: Physician Practice Structure Help!
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