New 1099 job, how to form LLC?

[NewRad123]

Hey everyone,

New to the forums here. Finishing fellowship soon and going to be working as a 1099 teleradiologist. Before starting I need to form an LLC (likely S-corp from what I've been reading) but not sure how to go about doing this. I'm guessing the rules vary by state, but I don't yet live in the state I will be working from after fellowship. I'm pretty sure I have a CPA in line to help deal with tax filing and maximizing retirement contributions, but before I start working I need to form the LLC. Do I just browse for attorney's in the state or does anyone have any good links on more information on how to do this? Thanks in advance for any advice that's offered!

[jfoxcpacfp]

What state are you moving to?

[NewRad123]

Massachusetts

[GastroMastro]

Hey everyone,

New to the forums here. Finishing fellowship soon and going to be working as a 1099 teleradiologist. Before starting I need to form an LLC (likely S-corp from what I've been reading) but not sure how to go about doing this. I'm guessing the rules vary by state, but I don't yet live in the state I will be working from after fellowship. I'm pretty sure I have a CPA in line to help deal with tax filing and maximizing retirement contributions, but before I start working I need to form the LLC. Do I just browse for attorney's in the state or does anyone have any good links on more information on how to do this? Thanks in advance for any advice that's offered!

The question is, do you “need” to form an LLC? How much are you going to be making

[NewRad123]

Yes, best guess somewhere between $300-500k.

[GastroMastro]

Yes, best guess somewhere between $300-500k.

Not sure it’s worth it. You can get straight 20% qbi deduction plus anything you put into a i401k all without starting an s Corp.

[spiritrider]

Or even an LLC, which provides little to no liability protection for the personal services of an owner. You need the same business, liability and malpractice insurances as a sole proprietor.

At the lower half of that range an S-Corp probably does not make sense. At the upper half it may. This is a facts and circumstances decision that requires modelling.

Keep in mind it is very easy to start as a sole proprietor and change to an S-Corp (even retroactively). If you start as an S-Corp and decide to terminate it. You can not create another S-Corp for five (5) years.

If the client doesn't require an LLC or S-Corp, I would be inclined to do nothing until I get settled and can get competent professional advice. Given facts and circumstances for the local jurisdiction.

[jfoxcpacfp]

Curious what you have been reading that told you “LLC (likely S-corp)...” I agree withspiritrider. MA is already onerous enough in the regulatory area that I’d try to keep things as simple as possible, but have all appropriate protections (umbrella, LTDI, malpractice, life). Agree that you should start with a sole proprietor and then run projections with a CPA experienced in this area (physicians with practices who subscribe to WCI principles) before taking the next step. If you form an s-corp too early and will need one later but not now, you’re either stuck with it or you have to wait 5 yrs before electing again should you revoke the election.

[NewRad123]

Thanks, that helps a lot. I didn't know about the 5 year rule for S-corp. After doing more research it looks like MA imposes an 8% excise tax on S-corp so I think it's probably not worth it in my case. Will likely just create a regular LLC and consult with accountant as I move forward. Thanks everyone!

[DrSam]

Thanks, that helps a lot. I didn't know about the 5 year rule for S-corp. After doing more research it looks like MA imposes an 8% excise tax on S-corp so I think it's probably not worth it in my case. Will likely just create a regular LLC and consult with accountant as I move forward. Thanks everyone!

As another poster mentioned, an LLC won't do a lot to provide additional liability protection related to your professional services as a physician, but there may still be reasons to form one with regard to other liability protections, tax optimization, and even to some extent estate planning. It all sort of depends upon your individual circumstances I think. My recommendation is to consult with an attorney who concentrates on that area of law in your state (Mass). LLC laws vary from state to state and although in most states it's pretty easy for one to form an LLC without assistance from an attorney, having one involved who really knows the ins and outs of LLC law can potentially make a big difference in how you form it with regards to the operating agreement. I personally know a great attorney in this area of law, but she isn't licensed in Mass. She is just across the border in NH. While I'm sure she'd be happy to help, you might be better consulting with somebody more intimately familiar with LLC law in Mass.

[jfoxcpacfp]

As another poster mentioned, an LLC won't do a lot to provide additional liability protection related to your professional services as a physician, but there may still be reasons to form one with regard to other liability protections, tax optimization, and even to some extent estate planning. It all sort of depends upon your individual circumstances I think. My recommendation is to consult with an attorney who concentrates on that area of law in your state (Mass). LLC laws vary from state to state and although in most states it's pretty easy for one to form an LLC without assistance from an attorney, having one involved who really knows the ins and outs of LLC law can potentially make a big difference in how you form it with regards to the operating agreement. I personally know a great attorney in this area of law, but she isn't licensed in Mass. She is just across the border in NH. While I'm sure she'd be happy to help, you might be better consulting with somebody more intimately familiar with LLC law in Mass.

I agree with what you say except the tax optimization. There is no tax optimization available for an LLC that is not available to a SP. Ok, I also disagree with your statement about add’l liability protections - don’t know of any. Since your attorney is located so close to MA, I would be a dollar that she would have a recommendation to another great atty licensed in MA. Perhaps NewRad123 would be willing to pm you to get her contact info.

[DrSam]

I agree with what you say except the tax optimization. There is no tax optimization available for an LLC that is not available to a SP. Ok, I also disagree with your statement about add’l liability protections - don’t know of any. Since your attorney is located so close to MA, I would be a dollar that she would have a recommendation to another great atty licensed in MA. Perhaps NewRad123 would be willing to pm you to get her contact info.

Respectfully, I disagree. Again, I think things are very dependent upon individual circumstances, but at least in the state of New Hampshire, where there is no state income tax, but there are other taxes on business profits, taxes on distributions, etc., how you structure the LLC (or several LLCs that divide your business up into separate entities) can potentially have an effect on how much you end up forking over to the state. In similar fashion, separating aspects of the business into different LLCs has the potential to "silo" these different entities to protect the others from liability risk. As an example, having a separate LLC that owns the clinic real estate and leases it to the physician's LLC could potentially help protect the physician's personal assets as well as the assets of the medical practice from a lawsuit in the event somebody slips in the parking lot and cracks their skull open.

For somebody doing pure teleradiology, perhaps none of the above will have any application. That said, I don't know the intimate details of his/her particular situation, nor am I an attorney in any way shape or form, nor am I at all familiar with LLC law in the state of Massachusetts. Personally, I'm of the opinion that it may be worth his/her time, and perhaps a bit of money, to speak with somebody who is.

[jfoxcpacfp]

Respectfully, I disagree. Again, I think things are very dependent upon individual circumstances, but at least in the state of New Hampshire, where there is no state income tax, but there are other taxes on business profits, taxes on distributions, etc., how you structure the LLC (or several LLCs that divide your business up into separate entities) can potentially have an effect on how much you end up forking over to the state. In similar fashion, separating aspects of the business into different LLCs has the potential to "silo" these different entities to protect the others from liability risk. As an example, having a separate LLC that owns the clinic real estate and leases it to the physician's LLC could potentially help protect the physician's personal assets as well as the assets of the medical practice from a lawsuit in the event somebody slips in the parking lot and cracks their skull open.

For somebody doing pure teleradiology, perhaps none of the above will have any application. That said, I don't know the intimate details of his/her particular situation, nor am I an attorney in any way shape or form, nor am I at all familiar with LLC law in the state of Massachusetts. Personally, I'm of the opinion that it may be worth his/her time, and perhaps a bit of money, to speak with somebody who is.

Slipping in the parking lot and cracking of one's skull would/should be covered by a PUP. An LLC is most helpful for real estate, but we were talking about a SMLLC for a physician providing medical advice. Siloing and having partners and owning RE is a totally different convo. Are you saying you would save taxes in NH by operating a one-physician, no-employee practice as a SMLLC rather than a sole prop? If so, I'd like to know more, as we have clients in both NH and MA and I'm always open to learning more about other states.

[DrSam]

Slipping in the parking lot and cracking of one's skull would/should be covered by a PUP. An LLC is most helpful for real estate, but we were talking about a SMLLC for a physician providing medical advice. Siloing and having partners and owning RE is a totally different convo. Are you saying you would save taxes in NH by operating a one-physician, no-employee practice as a SMLLC rather than a sole prop? If so, I'd like to know more, as we have clients in both NH and MA and I'm always open to learning more about other states.

If one has a judgement against them that exceeds the limits of their insurance, the plaintiff will then come after their personal assets. If however, that judgment is against their well structured Limited Liability Company, or collection of Limited Liability Companies, then, as the name implies, there is some potential limit on their personal liabilities.

I was not aware that this thread was limited to discussions of only Single Member Limited Liability Companies., nor that we were limiting discussion to entities with no employees. So no, I am not saying that you would save taxes in NH by operating a one-physician, no-employee practice as a SMLLC rather than a sole prop. I'm neither an attorney, nor an accountant, nor a financial planner or adviser. I totally defer to others, including yourself, with regards to commentary on matters in which they hold expertise that I do not. If you are asserting that there is no potential tax savings in NH by operating a one-physician, no-employee practice as a SMLLC rather than a sole prop, I'll take your word for it, but again, I've not asserted anything in this thread to the contrary.

The only things that I have asserted are that in terms of physician professional liability, a Limited Liability Company is not likely to provide any liability protection beyond ones Professional Liability Insurance, but that dependent upon ones specific individual circumstances, there may be other reasons to consider formation of an LLC or LLCs, including potential liability protections in areas beyond the realm of medical malpractice, and potentially optimization of taxes (not so much federal taxes as far as I know, but potentially with state taxes), and that an attorney who is well versed in the nuances of LLC law would be reasonable to consider consulting with.

I don't know the particular personal details of the original poster of this thread, and even if I did, as I've already mentioned, I'm not qualified to offer legal or financial advice. I'm just saying that depending upon his/her particular details, consulting with someone who is qualified in this regard might be a good idea.

[childay]

I would tend to agree there is probably little or no value to set up an LLC as a solo radiologist. Can't think of any liability that would actually protect from. That said, depending on the state it's not all that expensive or difficult to set up.