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Transitioning from W-2 to sole proprietor

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  • Transitioning from W-2 to sole proprietor

    Hey everyone,

    Let me preface this with the more I look into how I should set myself up as a sole proprietor, the more confused I get, and I'm looking for general advice and good direction.

    I'm currently salaried as a hospital outpt PMR doc and will be changing work to doing SNF consults where I see patients at a SNF and will be charting from home through EMR. I'm contracted through National Health Rehab and will be paid as an independent contractor, so I don't have the overhead of a private practice situation. I do some as needed coverage for the inpatient physiatrist and get paid through the physician directly, leading to some 1099 income currently but not more than 30k yearly.

    As a result most of my income is currently W2 and once I'm at my new work it will all be 1099. I've been talking to various accounting groups that work with physicians and it seems like with every professional I talk with, I end up with more questions.

    I'm working in Kansas, and I've been told by some that I will need to incorporate as a Professional Association should I decide to Incorporate. I have also heard an S corp will not be ideal as I start this job in September and there will be some growing pains before my income is nice and steady, and even then the year's income is not going to justify the accounting service costs for this year.

    I know schedule C will be the move in regards to taxes, but the rest just confuses me further. One accountant said something about a Texas franchise but I'm working in Kansas so I don't know where that came from. I tried looking up the stuff on the KS department of commerce and the secretary of state and don't see anything about having to set up a professional association in KS.

    Do I need to look into a tax lawyer as well? I wanna making the best decision I can with moving forward into 1099 territory but all this info makes my head spin. I'm just looking for broad strokes type general advice on 1099 income so I can make a decision that doesn't give me ulcers.

  • #2
    Sounds like you are over-complicating things. You do not need to incorporate to be a 1099 independent Contractor/sole proprietor, and you didn’t mention any reason why you should.
    Here’s a good discussion on W2 and 1099 from a previous forum post.

    And a good article by Jim from back in the day.


    • #3
      Business entity issues can often be state specific. I have no knowledge of Kansas laws in this regard. You will need Kansas specific legal advice. With that said:
      • Generally it is perfectly permissable for a physician to be a sole proprietor in any state.
      • Many states have a strict corporate practice of medicine law. This holds that only licensed physicians may own a corporation providing physician services.
      • Some states do not allow physicians to use LLCs unless they elect to be treated as an S-Corp. This is not really a problem for independent contractors. LLCs provide little to no benefit if you are only providing professional services.


      • #4
        If we have talked and I confused you (and I hope that’s not the case), then I apologize! I don’t understand the TX recommendation, either. If you want to email me, I’ll help clarify, but, if you’re talking to traditional “doctor CPA firms” and comparing everything you hear, it’s no wonder you’re confused. You need to talk to firms that are very entrenched in the WCI community and focus solely on doctors. Impo, sorry to say that there are only 2 advertisers I could recommend at the moment, truly hope that improves. You need specific advice, tttt, not just broad strokes. Being a f.t. 1099 is more complex than that.

        As for a tax lawyer, you need that only in the event of a field audit that is going south. Highly unlikely.
        Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087