Speaker 1: Did you know that choosing the right business structure as a locum tenants professional can save you thousands in taxes? In this video, we'll explore whether you should form an LLC or an S corporation as a locum tenants professional and why it matters. Welcome to the Locum CPA Podcast, where we talk about the business of being a locums professional. I'm Stephen Lee, a certified public accountant out of Chicago, Illinois. In this video, we'll explore whether you should form an LLC or an S corporation as a locum tenants professional and why it matters. I will let you know exactly at which point you should consider switching from an LLC to an S corporation. So let's get right into it. Many locum tenants professionals struggle with understanding the benefits and drawbacks of a different business structure, leading to a lot of confusion and potential financial loss. But as a locum tenants professional, you're probably no stranger to working with a variety of medical facilities and hospitals, but when it comes to setting up your own business, things can get a little murky. You might be wondering what kind of business structure is best for you, whether it's an LLC or an S corporation or something else entirely. The truth is each structure has its own set of advantages and disadvantages. And if you don't understand them, you could be leaving money on the table. Even experienced locum professionals can find themselves lost in a sea of different acronyms and legal jargon. And it's not uncommon for professionals to seek the advice of a financial advisor, a lawyer, or an accountant, and only be presented with a laundry list of options that makes it very confusing. But the reality is choosing the right structure is crucial for your financial wellbeing as a locums professional. So many locums professionals are drawn to the idea of forming an LLC or an S corp because you've heard that there are big tax savings, and that's true. But it's only one factor to consider. You need to think about the liability protection, the administrative costs, and how your business structure will impact your daily operations. So how do you make sense of it all? That's what we're going to talk about in this video. So stick around. We'll break down the key differences between the LLC and an S corp, including the tax implications, liability protection, as well as administrative requirements. Remember certain states require you to register as a PLLC or other known as Professional Limited Liability Company, PLLC. So you have to check with your state specific requirements. Okay. So PLLC versus LLC in this video, I'll continue to refer to it as an LLC because not all states have that requirement. One of the main advantages of an LLC is its flexibility when it comes to the tax treatment. As an LLC owner, you can choose to be taxed as a sole proprietor, a partnership, or even as an S corporation. But that flexibility also comes at a cost because LLCs typically offer less liability protection than an S corporation. On the other hand, S corporations offer excellent liability protection, but they're subject to stricter rules and regulations. For example, with an S corporation, shareholders must be U.S. citizens, and there are limits on the number of shareholders you can have. Another key difference between LLCs and S corporations is the administrative requirements. LLCs tend to have fewer formalities like annual meetings, shareholder minutes, whereas S corporations are subject to more rigorous record-keeping and reporting requirements. One of the big differences between an LLC and S corporation is that with an S corporation, you are required to take a reasonable salary or compensation from the S corp. This is an additional administrative duty and expense that you'll need to be prepared for. And in a future video, I'll cover what is considered a reasonable salary. One of the most crucial things you need to understand is what your income level is going to be from your locum's activities, as well as your entire household, whether you're married, you're single, head of household, you have to know your entire income level and situation. As a locum's professional, your income level from locum activities may fluctuate year to year. If your income is higher in one year, then it might be better to be an S corporation, but that might fluctuate in other years. The reason why the S corporation is typically recommended for income that's higher is because it helps you reduce your self-employment taxes. But on the other hand, if you're just starting out and you have lower income, an LLC might be more suitable. And that's the best entryway into doing locum's as an LLC, rather than going full out S corp in the beginning. Your business activities also plays a crucial role in determining which structure is best for you. If you're working with a lot of different medical facilities, an LLC might offer more flexibility. But if you're building a larger medical practice, an S corp might provide better liability protection. So really depending on what your goals are for your locum practice, that will also be a big factor between whether you're choosing an LLC or an S corporation. If you're profiting at least $80,000 from your locum's business, remember profit is total revenue minus all business expenses, and if that is at least $80,000, then an S corporation may be the ideal structure for you. And the reason why I come up with $80,000 is because once again, with an S corporation, you have different administrative burdens or expenses like reasonable salary, payroll taxes, as well as filing a separate tax return, which I highly recommend that you have a certified public accountant or a tax specialist. Try not to do that on your own because it can be a very technical tax return, which you will have to pay for. So you want to make sure that you have at least $80,000 worth of profit to make it worth it to be an S corp versus an LLC because of all these additional administrative costs. Once again, $80,000 is the rule of thumb I like to use of profit from your locum's practice before you consider becoming an S corporation. Once again, I recommend set up an LLC or a PLLC, depending on your state, for your practice. Never run it as a sole proprietor. Okay. From the beginning. And to wrap things up, remember that choosing the right business entity can significantly impact your finances. So weigh your options carefully. And if you found this video helpful, make sure to check out my other videos on tax saving strategies and tips for locum professionals like yourself. Thank you again for watching. Have a wonderful day. Bye.