February 15, 2023

Part 3: Business Structures for A Single Locum Tenens

Locum Tenens in the medical community, such as physicians (MD), physician assistants (PA), nurses (RN), advanced nurses (NP & CRNA) and other medical specialists (PT, OT, SLP), have played a crucial role in ensuring that our healthcare facilities can continue to provide quality care to patients by filling in the place of the regular providers when they are not available. While providing standard care to patients, this has also allowed flexibility and autonomy for the Locum Tenens professionals.

In the previous blogs, we have discussed the changes in the tax requirement from a W2 employee to an independent contractor and enumerated some of the qualified deductions available to Locum Tenens doing a solo practice. In this third and last part of the series, we will be exploring some of the most common business structures available for a solo Locum Tenens, their benefits, and disadvantages.

Sole Proprietorship. This business structure is a popular choice for locum tenens due to its simplicity, ease of setup, low cost, and flexibility in controlling the business. In fact, a single locum tenens is by default considered a sole proprietorship as soon as their service is performed. Though, a main disadvantage of a sole proprietorship is that you are personally liable for all business debts and obligations and your personal assets and properties are not protected when there are lawsuits filed against your business. In addition, sole proprietors may find their self-employment tax costly to bear.

Limited Liability Corporation (LLC). An LLC is a business structure that combines the liability protection of a corporation and the tax benefit of a sole proprietorship. An LLC is a separate legal entity that protects the owner’s personal properties from being used to pay the business debts and obligations. However, it is important to note that there is no business structure that provides protection against malpractice and other wrongful acts. 

The income tax for a single member LLC is treated the same way as a sole proprietorship in which all business income and expenses flow through the business owner and therefore avoids the double taxation present in a corporation. However, forming an LLC is more costly and is more complex than a sole proprietorship due to the required filing of Articles of Incorporation and obtaining an Employer Identification Number (EIN) from the IRS. Also, the LLC owner is still considered self-employed by the IRS and therefore still has the burden of paying high self-employment taxes.

S Corporation. An S Corporation is not a type of business entity but a special tax election available for certain types of LLCs and C Corporations. Since the IRS considers an LLC as a disregarded entity, its owner may elect to be treated as an S Corporation by filing the IRS Form 8832 – Entity Classification Election. This way the locum tenens would be considered an employee and would receive salary at the end of the year in a W2 form. The business entity will then be responsible for withholding and paying their self-employment taxes. Electing to be an S Corporation also avoids the double taxation present in a regular corporation since an S Corporation’s income passes through its owners.

Choosing a business structure for your Locum Tenens profession will depend on your specific circumstances. It is important to carefully study and weigh the advantages and disadvantages of each business structure and consult a financial advisor to determine the best structure for your individual needs. 

Want to learn more?

You may want to consult and work with 1099 Accountant – we offer online bookkeeping, online advisory services and online tax and accounting services. We offer reasonable rates. We only work with independent contractors, freelancers, and one-person business. We work with locum tenens from California to New York City and everywhere in between. 

Contact us toll-free (855)529-1099 or make an appointment for a free consultation.


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