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Do I need a business entity like an LLC to work locum tenens?
Locum tenens physicians are self-employed contractors who function as a separate business from the staffing agency that coordinates their assignments. The way you structure your business affects how you’ll pay taxes and your level of protection from certain legal liabilities.
As an independent contractor, you can choose to pay taxes on your locums income through your personal tax return or file as a corporation. While you should meet with a financial advisor to determine the best option for your circumstances and goals, let’s take a look at some of the potential perks of having an LLC (or another business entity) for locum tenens physicians.
Preparing to work as a locum tenens physician
Regardless of the business entity you choose, there are certain steps you should take to prepare for working as an independent contractor:
Get a federal Employer Identification Number (EIN): You can get one from the IRS here.
Separate your finances: Open a dedicated bank account and credit card for your business so your personal finances are totally separate from your business income and expenses.
Plan ahead for taxes: Self-employed locums physicians need to pay estimated taxes quarterly. Consult with a tax expert early and often, and be sure to put aside a portion of your income for your tax bill. Learn more about how taxes work for locum tenens providers.
Keep detailed records: You’ll need to keep detailed receipts for any expenses — the IRS will not accept credit card statements for business deductions. Bookkeeping software like Quickbooks, Wave, Zoho, or Freshbooks can also help you stay organized.
Does forming a business entity reduce my liability?
Malpractice claims are the main liability concern for any locum tenens physician. Forming a corporation does not protect physicians against malpractice claims. However, it can protect your personal assets from accrued debt or other types of business-related lawsuits.
Leading locums agencies like Weatherby Healthcare include comprehensive malpractice coverage with every assignment, so you’ll be well-protected despite the malpractice limitations of LLCs and other business entities.
What are my options for forming a business?
An LLC isn’t the only option for locum tenens physicians who want to separate their business from their personal finances. Several types of business entities are available, each with their own perks and tax implications. Some of the most popular options include:
Sole proprietorship: If you don’t set up another type of business entity, you’ll be a sole proprietorship by default when working locums. Sole proprietorship makes sense for many physicians, especially those who also have a W-2 job. There’s no extra liability protection, and you’ll report your income and expenses on a Schedule C form through your personal tax return.
Limited liability company (LLC): LLCs separate an individual from their business, and can help protect your personal assets from debt or certain types of lawsuits. Many physicians choose this structure to help them stay organized.
S corporation: An S corp is an excellent choice for high earners who work locums full time. It’s not recommended for physicians with a separate W-2 position, as your earnings will be double-taxed. In an S corp, you’ll act as an owner/employee and receive a W-2 salary from your own business entity. Any profit beyond your salary becomes a business distribution to the owner (that’s you!) which can offer savings on payroll taxes like Social Security and Medicare.
Your income, the state(s) where you work locums, and your desired level of liability protection will all be factors in determining the ideal business structure for you. Meeting with a financial advisor or accountant is the best way to make a well-informed decision.
Choose a locums agency that sets you up for success
Whether you choose to operate as a sole proprietor, an LLC, or through another business entity, a top-tier locum tenens agency can help you achieve greater flexibility, financial freedom, and a work/life balance that aligns with your lifestyle.
When you work locums with Weatherby, you’ll be matched with a specialty-trained consultant who gets to know your personal preferences and professional goals, and delivers hand-picked assignments to match. And thanks to our broad network of top healthcare organizations, we’re able to offer more of the best assignments in the best facilities.
Learn more about the benefits of working locum tenens, or explore our other helpful resources for physicians.