Why You Shouldn’t Use An LLC For Locums Work

by | | Other Cool Stuff, Taxes

This post explains why you shouldn’t use an LLC for locums work.

Introduction

Locums docs ask about an LLC for two main reasons: liability protection and tax advantages.

In fact, an LLC gives you neither, and makes your life more complicated!

So, an LLC isn’t worth it. Just practice as yourself, not Yourself, LLC.

Disclaimer: We’re not attorneys and can’t give you legal advice. Consider this general information to inform your own research, and consult an attorney about your personal situation.

Poor Liability Protection

An LLC (Limited Liability Company) is a type of business entity.

People form a business entity for liability protection. If something goes wrong, your personal assets aren’t at risk.

Sounds great in theory, but it doesn’t help you as a locums doc.

Malpractice Is Always Personal

Your main liability is malpractice, and malpractice liability is always personal. No business entity – LLC or otherwise – protects you from it.

No Other Material Liability

As a locums doc, other sources of liability don’t apply, or you can address them with insurance.

  • A partner’s malpractice. (No partners.)
  • A disgruntled employee. (No employees.)
  • Somebody slipping on a banana peel in your office. (No office.)
  • Auto accident on the way to a shift. (Insurance.)

Regarding an auto accident, protect yourself in three ways:

  • Personal auto coverage of at least $500K per person/$500K per accident for bodily injury.
  • Personal umbrella coverage of at least $1 million per occurrence.
  • Your personal auto and umbrella coverage should pay. But to be extra safe, you can add “business use of personal vehicle” coverage to your personal auto policy. This should be inexpensive, a few hundred dollars per year, and you can deduct it as a business expense.

No Tax Advantages

Many people think forming an LLC helps you save taxes. Having a business entity should help you deduct business expenses, right?

It actually doesn’t. With OR without an LLC, you can:

  • Deduct all unreimbursed business expenses.
  • Set up a solo 401(k) or SEP IRA.
  • Take the self-employed health insurance deduction, qualified business income (QBI) deduction, and home office deduction if you qualify for them.

For further reading, we offer Locum Tenens Taxes: The Complete Guide.

More Work

It’s not THAT hard to form an LLC and operate it properly, but it does take some work and make your finances more complex. Why do any work at all when an LLC gives you poor liability protection and no tax advantages?

Besides what’s mentioned in the linked article, you now also have to file a Beneficial Ownership Information Report with the federal government within 90 days of forming your LLC! This is for LLCs formed in 2024. For LLCs formed before 2024, you must file this report before January 1, 2025. For LLCs formed in 2025 or later, you must file this report within 30 days of formation.

Now you know why you shouldn’t use an LLC for locums work. Keep it simple and just practice as yourself.

Have financial questions? Schedule a free 30 minute “ask me anything” conversation. We’ll answer as many questions as we can during our time together. If you’re interested in working with a fee-only fiduciary advisor, we can discuss that too. If you’re not interested in working with an advisor, no problem! You’ll still leave our call with answers to your questions.

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