Does a PLLC offer any advantages to an MD?

[Slav4ikMD]

I am curious what you guys think regarding PLLCs (or other corporate structures) in terms of being in any way advantageous to a physician.

Now to get too much into my personal situation, but I am both employed and self-employed and have formed a PLLC a couple of years ago, having been running self-employed income through an S-corp, which was admittedly an uneducated decision and now with guidance I am realizing that it did not save me money but in fact cost me a few grand a year extra.  So I plan to dissolve the corp, but wondering if I should form a new PLLC anyway (now for taxation as that is not recognized anyway, but as a "business structure") - but should I?  Or just do all the work as me, MD and keep things simple?  (No employees, no assets in the corp, my only real "goal" is to max out pre-tax retirement savings and save on taxes overall, which really has nothing to do with this.)

[Zaphod]

Then dont do it. Sounds like its going to cost you money and time and have no benefits.

[childay]

The PLLC is to limit your liability.  Do you have any liabilities it would protect?  Employees that might sue you etc?

[jfoxcpacfp]

The use for a Limited Liability Company is not to save taxes but to "limit liability"; hence, the name :-) If you are otherwise protected through proper insurance and have no need for additional liability coverage, and will not have employees/partners, there is no need for the shield. Your attorney may have a different opinion.

[gsastow]

As a healthcare attorney, I would suggest that the primary reason to have a PLLC is to limit your liability.  There are other means for addressing tax concerns which should be addressed with a CPA.  Importantly, it should be noted that a PLLC (or PC) does not limit your liability for your acts of malpractice.  A PLLC, however, would protect you from most other business liabilities.  These other liabilities can by limited by insurance, but that limitation of liability extends only to the extend of the terms of the insurance policies and is not necessarily complete protection.  The most important protection, if it is applicable, is if you have other healthcare providers working for or with you, i.e., partners, employees, etc.  In this case, the PLLC will protect you against claims made against these other healthcare providers with whom you are associated with through what is called vicarious liability.  Operating your practice through a PLLC will cut off any vicarious liability.  Should you wish to discuss this further, please feel free to reach out to me.  Thanks, Gary.

[jhwkr542]

If you're in ks, then LLCs don't pay state income taxes. It's a controversial tax break that's bankrupted the state but caused many people to organize as such.

[jfoxcpacfp]

jhwkr542 wrote:

If you’re in ks, then LLCs don’t pay state income taxes. It’s a controversial tax break that’s bankrupted the state but caused many people to organize as such.

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The OP is in NY, but I'm glad you posted that. Same for distributions (but not salaries) from s-corps, sole proprietors, and partnerships. Since it has been effect only sine 1/1/13, I doubt it has had time to "bankrupt" the state, but that is sure some tax loophole. Wonder how long before it is deep-sixed?

[Docbeans]

gsastow wrote:

As a healthcare attorney, I would suggest that the primary reason to have a PLLC is to limit your liability.  There are other means for addressing tax concerns which should be addressed with a CPA.  Importantly, it should be noted that a PLLC (or PC) does not limit your liability for your acts of malpractice.  A PLLC, however, would protect you from most other business liabilities.  These other liabilities can by limited by insurance, but that limitation of liability extends only to the extend of the terms of the insurance policies and is not necessarily complete protection.  The most important protection, if it is applicable, is if you have other healthcare providers working for or with you, i.e., partners, employees, etc.  In this case, the PLLC will protect you against claims made against these other healthcare providers with whom you are associated with through what is called vicarious liability.  Operating your practice through a PLLC will cut off any vicarious liability.  Should you wish to discuss this further, please feel free to reach out to me.  Thanks, Gary.

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Would a medical malpractice claim against other doctor(s) that OP works with be an example of vicarious liability that OP is exposed to? And would it help OP to operate as a PLLC in this example? I am aware that his own malpractice liability is not protected by an LLC structure. Thanks

[jhwkr542]

jfoxcpacfp wrote:

jhwkr542 wrote:

If you’re in ks, then LLCs don’t pay state income taxes. It’s a controversial tax break that’s bankrupted the state but caused many people to organize as such.

Click to expand…

The OP is in NY, but I’m glad you posted that. Same for distributions (but not salaries) from s-corps, sole proprietors, and partnerships. Since it has been effect only sine 1/1/13, I doubt it has had time to “bankrupt” the state, but that is sure some tax loophole. Wonder how long before it is deep-sixed?

Click to expand...

Bankrupt, no, but the cuts are happening.  There's been budget shortfalls every year since implementation, and medicaid, higher education, and roads/transportation have all been cut already.  I agree that it's a matter of time before they're repealed since the state is hemorrhaging money, but it may take an election or two.

[gsastow]

Potentially, yes.  If you are partners with the doctor being sued or if the doctor being sued is your employee, you would have vicarious liability for that person's actions and you would be open to being sued as well.  If you have a PLLC (or PC), technically speaking the doctor being sued is the PLLC.  Therefore the vicarious liability is on the part of the PLLC, not you.  The doctor being sued will turn to his or her malpractice carrier to defend the action.  It should be noted that the owner of the PLLC should obtain vicarious liability insurance coverage since the PLLC will likely be sued as well and will need to at least nominally defend itself.  Many insurance companies do not even charge any additional premium for this coverage since it is only really theoretical liability and the actual liability rests with the doctor who committed the malpractice.  I hope this answers your questions.

[Zaphod]

jfoxcpacfp wrote:

jhwkr542 wrote:

If you’re in ks, then LLCs don’t pay state income taxes. It’s a controversial tax break that’s bankrupted the state but caused many people to organize as such.

Click to expand…

The OP is in NY, but I’m glad you posted that. Same for distributions (but not salaries) from s-corps, sole proprietors, and partnerships. Since it has been effect only sine 1/1/13, I doubt it has had time to “bankrupt” the state, but that is sure some tax loophole. Wonder how long before it is deep-sixed?

Click to expand...

this is among one of the many cuts that are contributing to the states fiscal troubles.

[Docbeans]

gsastow wrote:

Potentially, yes.  If you are partners with the doctor being sued or if the doctor being sued is your employee, you would have vicarious liability for that person’s actions and you would be open to being sued as well.  If you have a PLLC (or PC), technically speaking the doctor being sued is the PLLC.  Therefore the vicarious liability is on the part of the PLLC, not you.  The doctor being sued will turn to his or her malpractice carrier to defend the action.  It should be noted that the owner of the PLLC should obtain vicarious liability insurance coverage since the PLLC will likely be sued as well and will need to at least nominally defend itself.  Many insurance companies do not even charge any additional premium for this coverage since it is only really theoretical liability and the actual liability rests with the doctor who committed the malpractice.  I hope this answers your questions.

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Thank you for explaining it. So, in OP's case, since he doesn't have any employees, the risk for vicarious liability is largely theoretical.

In one blog post, WCI recommends in this situation, that a self-employed doc/IC stay unincorporated to save hassle and money, unless it makes sense in order to save on payroll taxes- depending on level of income.

[Slav4ikMD]

Did some basic research http://info.legalzoom.com/terminate-scorp-election-revert-llc-23367.html and so did my new CPA and it seems like I can dissolve my S-corp and still keep the PLLC, it will NOT revert to C-corp once I complete form 8832.  Certainly makes things easier, I just sort of like keeping my PLLC if I can and don't want to go through the hassle of forming a new one.  Do you guys think this makes sense or am I missing something that's key?

[childay]

Slav I am not a cPA but it is my understanding you can get rid of the S-Corp election and keep the PLLC taxed as a pass-through.  No reason not to keep it except for whatever your fee is in your state which for us is minimal.

[jfoxcpacfp]

Slav4ikMD I'm glad you've found your new CPA! I'm not sure it is going to be as simple as the article describes. Once the S-election is revoked, you will revert to being a C-corporation until you elect to be taxed as an LLC. According to IRS Pub 3402, you have to wait 60 months from the date you elected to be taxed as a corporation to change your election to be treated as a disregarded entity. Before you proceed, I think you should discuss this with your CPA.