1099 Doctor? Here’s How to Set Up Your Business the Right Way

Transitioning to 1099 status as a doctor or locum tenens professional offers financial independence and brings new tax responsibilities. Choosing the right business structure impacts your liability, tax obligations, and long-term financial success. This guide outlines the best business entity options for 1099 doctors and how each affects your taxes.

Why Business Structure Matters

As an independent physician, your business structure determines how much you pay in taxes, what deductions you can claim, and how much legal protection you have. The most common structures are:

• Sole Proprietorship – The simplest option but offers no liability protection, and all income is subject to self-employment tax.
• Limited Liability Company (LLC) – Provides liability protection while allowing flexibility in tax treatment.
• S-Corporation (S-Corp) – Can reduce self-employment taxes by splitting income between salary and distributions.

Why Business Structure Matters for 1099 Doctors & Locum Tenens

When transitioning from W-2 employment to 1099 status, many physicians overlook the importance of business structure. The right structure can:

• Reduce self-employment taxes
• Provide liability protection
• Improve tax efficiency and retirement savings options

The IRS treats different entities uniquely, impacting how much you owe and how you report income. Below is a comparison of the most common structures for independent physicians.

Sole Proprietorship vs. LLC vs. S-Corp: Which One Is Right for You?

How Business Structure Affects Your Taxes

1. Self-Employment Taxes
   • Sole proprietors and LLC owners (without S-Corp election) pay 15.3% self-employment tax on net income (IRS Form 1040 Schedule SE).
   • S-Corps reduce this by allowing owners to split income into salary (subject to payroll taxes) and distributions (exempt from self-employment tax).
2. Tax Reporting Requirements
   • Sole Proprietors & Single-Member LLCs: Report income on Schedule C (Form 1040).
   • S-Corps: File a separate business tax return (Form 1120S) and issue a K-1 form for distributions.
3. Estimated Taxes
   • 1099 doctors must pay quarterly estimated taxes using Form 1040-ES.
   • S-Corp owners also file Form 941 for payroll taxes if they pay themselves a salary.

Key Tax Forms & Filing Deadlines for 1099 Doctors

Notes:

• Form 1099-NEC: Must be furnished to recipients and filed with the IRS by January 31, 2025.
• Form 1120S: Due by March 17, 2025.
• Schedule C (Form 1040): The individual income tax return, including Schedule C for sole proprietors, is due by April 15, 2025.

Additional Considerations:

• Extensions: If you require additional time to file any of these forms, ensure you submit the appropriate extension forms by the original due dates to avoid penalties.​

For more detailed information on tax deadlines and requirements, consult the IRS Publication 509 (2025), Tax Calendars.

By adhering to these deadlines and considering the day-of-week and holiday factors, you can ensure timely and accurate tax filings for the 2024 tax year.

Steps to Set Up Your 1099 Business Correctly

1. Register Your Business
   • If forming an LLC or S-Corp, file with your state’s Secretary of State.
   • Obtain an Employer Identification Number (EIN) from the IRS (Form SS-4).
2. Open a Business Bank Account
   • Keep business and personal expenses separate.
3. Track Expenses & Income
   • Use accounting software to record deductions such as malpractice insurance, CME costs, and business travel.
4. Consider S-Corp Election (if beneficial)
   • File Form 2553 with the IRS within 75 days of forming your LLC (or start of the year for existing businesses).
   • Need help determining if an S-Corp is right for you? Our guide to S-Corp election breaks down the pros, cons, and financial impact for independent doctors.

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