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Business Structure for New Graduate with W-2 and 1099 Income

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  • Business Structure for New Graduate with W-2 and 1099 Income

    Hoping there is a straight forward approach to a fairly simple scenario with seemingly many options:


    Residency training complete 2018: ~34k W2 Gross Income for 2018

    W2 Partnership Track Position Starting Sept 2018: ~100K W2 Gross for 2018 (~360K W2 2019)

    Preparing for Locums 1099 Work July & August 2018 with anticipation of ~30K 1099 Income 2018 (10K-30K 1099 2019+)

    Would really like recommendations for selecting a business structure set up for the 1099 work: S-Corp, LLC, Sole Proprietorship, Etc. and why.  Feel free to refer me to further reading, if you think it will clarify the decision and steps to take.

    Really appreciate the guidance!

  • #2
    At that level of 1099 income, I don't see any real reason to do anything other than sole-proprietor.  Which means you don't have to do anything.

    S-corp is only really needed at much higher income levels to save a few thousand on payroll taxes.

    No need for LLC really unless you are forming an S-corp.  LLC doesn't protect you from malpractice and you won't have any employees that it could theoretically protect you from.

    Congrats on your pending attendinghood!


    • #3
      Sole proprietorship.

      Llc has very limited value. Malpractice is personal liability no matter how you organize.

      S Corp is only useful if you can save on FICA/Medicare by having some income as dividends/distributions after a "reasonable" salary but it takes a few thousand at a minimum to setup/manage so your income level does not make it worth it.


      • #4
        Do NOT be an S-corp for a side job when you've got a primary W-2 job. The S-corp will be on the hook for 6.2% Social Security tax on your S-corp W-2 income, and your pass through deduction is limited to half your S-corp W-2 amount, so you're boned either way.

        Stick to sole proprietor. You can still take the 20% pass-through deduction if your taxable income is below $315k (or a lesser percentage up to $415k).