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The Vision Of A Community For Empowering Micro-Business Physicians

The Vision Of A Community For Empowering Micro-Business Physicians

Sep 23, 2023

 

My Dream, My Passion

My dream is to empower every physician with the knowledge and skills to establish their own micro-corporation as the foundational step towards preserving their professional autonomy.

With the power you have earned through your professional license, you don’t have to passively enter the marketplace as an individual and resign yourself to accepting the high burnout rate associated with traditional employment. This co-dependent work relationship is characterized by control, and ultimately, business owners have control over you as an employee. This is not a fulfilling way to live as a professional, and you have so much more potential! Instead, you can actively choose a better path that will enable you to thrive.

Self-employment through a micro-corporation offers you greater control over your life and can greatly benefit your personal and financial well-being. By entering the marketplace as a micro-business instead of an individual, you can effectively preserve your autonomy.

When you add the support and empowerment of like-minded doctors who come together in a community, it adds a greater power and inspiration to the entire process.

My vision for our SimpliMD community is this:

To inspire every US physician to empower themselves as a micro-business within the marketplace.

Imagine the Possibilities

It is time to ignite a movement within our physician tribe that helps each and every one of you see what is possible.

Avoiding burnout is possible, but it requires more than just wishful thinking. You cannot simply rely on luck to avoid becoming a victim of systemic burnout, as the odds are stacked against you (1 in 2), nor can you cannot depend on your employer to provide you with meaningful solutions. Instead, each of us needs to band together to take back control of our healthcare.

The system is rigged against us, and now is the time to rise up and take control of our future.

Imagine a future where you are not dependent on an employer or third parties, but instead, you can practice medicine with the professional autonomy you have earned. This means truly helping patients and enjoying the lifestyle you have always envisioned.

We Need To Band Together and Invite Others to Join

You are one of over 2000 doctors who are currently part of our SimpliMD community. Thank you for joining me on this empowering journey for our profession!

Today, I am reaching out to you for your help because I have a vision to grow our community to 10,000 members over the next year. Why? Because there is power, momentum, and inspiration in numbers when it comes to changing the mindset of doctors.

Yes, I know 10,000 members is a big, hairy, audacious goal. However, I firmly believe it is possible because doctors across the country are exhausted and frustrated with the current insanity of traditional employment. They are actively seeking solutions and answers.

Sadly, young doctors who have recently completed their training often have limited knowledge of what lies ahead for them, as they are often pushed into employment without fully understanding the implications.

Knowledge is power.

Every doctor needs to know that they have options beyond traditional employment.

You might be wondering about our plan to get this message out and grow our community five-fold in one year. Will we buy a bunch of email lists, create clever lead magnets, or pay a media company to assist us?

Nope, simply put, I want to do it with YOUR help.

No matter where you are on your micro-business journey, being connected to our SimpliMD community empowers you with valuable knowledge. Our stream of content consistently keeps you informed and equipped, hopefully empowering you to thrive!

Now is the time for you to share your knowledge and empower your physician friends who may be lacking business literacy and are unaware of what they are missing out on.

I Need Your Help

The reality is that physicians have a deep respect for and listen to their colleagues, particularly those who possess similar knowledge and expertise. This mutual understanding forms the foundation of effective collaboration among doctors. The secret lies in one doctor sharing trusted professional solutions with another doctor.

The most effective way to grow our community is by reaching out to YOUR professional peer network and inviting them to join us in our valuable community. There aren’t many strings attached or any fancy affiliate links involved.

The first step is to invite others to join our movement by signing up to receive our regular emails that will provide information and inspiration about physician own micro-corporations. You can easily do this by sharing the following link: https://www.simplimd.com/doctorvirtualcommunity

As an added bonus, when they sign up, they can also download my best-selling book“Doctor Incorporated: Stop The Insanity of Traditional Employment and Preserve Your Professional Autonomy” for FREE here. (Yes you can download it too)

Please send them the links to our virtual community and the free book. Encourage them to join you in our community!

But wait there is more! If you send out 5 or more invitations to your peers, just email me at tod@simplimd.com and I will send you the link for a FREE annual membership to SimpliMD worth $2500.

By the way, I would like to suggest that you become a SimpliMD member and then sign up to become an affiliate before sending out your invitations because it could be financially advantageous for you.

To ensure the best experience for my affiliates, I prefer you to become members first. As an added incentive, I’m pleased to offer you a 50% off coupon for your membership here. Simply use the code “MEMBERSHIP50” at checkout.

I invite you to take your next step now by committing to become a member of our SimpliMD community now.

The Mission

Now let’s come back to exploring my dream of our community being one that empowers and supports physicians everywhere in their micro-business endeavors.

Imagine a community where physicians who own micro-businesses come together to share their experiences, challenges, and triumphs. This community would serve as a safe haven where doctors can find resources, advice, and inspiration to navigate the often turbulent waters of running micro-corporations that intersect with their lives as healthcare professionals.

It is a mission born out of my personal experience that there is a hidden professional space for doctors that needs exposed.

Our Mission at SimpliMD is to inform, inspire, and support physicians to flourish through micro-business competency, which in turn will empower doctors to thrive in their roles as both healers and entrepreneurs.

In the upcoming weeks, I will delve deeper into this mission for our SimpliMD community and thoroughly review the Roadmap for achieving this mission and vision.

Following that, I will examine what I refer to as the SimpliMD Way—a set of 9 practices that are critical to flourishing as micro-business owners in the marketplace.

I look forward to having you join me and help shape the future of our micro-business community.

Choosing To Work For Yourself Rather Than A Factory Owner

Choosing To Work For Yourself Rather Than A Factory Owner

Sep 1, 2023

Choosing To Work For Yourself Rather Than A Factory Owner

This is the final post in a three-part series on our role as workers in the healthcare factories of America. The first two posts were:

You Weren’t Designed To Be Healthcare Factory Workers

You Were Meant For More Than Healthcare Factor Work

We will conclude this series with my passionate exhortation for you to choose to work for yourself instead of being an employee in a factory.

Classifying Your Work As A Doctor

When you accept your worker classification as an “employee” to a large corporation, it puts you in a position where your professional status can slowly be eroded. Essentially, they gain control over you.

In contrast, establishing a micro-corporation and becoming self-employed is the most crucial step to maintaining your professional autonomy. It allows you to maintain control over your professional life and empowers you to define the type of worker you prefer to be: either an employee or a non-employee.

When it comes to your work as a doctor, there are multiple ways to view and organize it.

  • Length of work: Permanent (i.e.: long-term) job or Non-Permanent (i.e.: short-term) Job

  • Your worker classification: Employee or Non-employee (i.e.: self-employed, contractor, etc..)

  • Contractual Structure: Business to Individual (direct care models), Business to Business (old style private practice, contractor work, PC-employment lite, etc…), and Individual to Business (traditional employment)

  • Physician Labor From Corporate View: Employee vs Contracted-Temporary Labor

For a number of business reasons, factory owners will want you to be permanent(long-term) employees.

For a number of professional and business reasons, you should want to be a non-employee micro-business whose work could be either long-term or short-term. This will allow for maximum flexibility in your work and professional life and is consistent with the evolving view of work for Gen-Z and Millenial physicians—who prefer to job stack as illustrated below:

The Changing Reality Of Physician Labor

In the modern world, the concept of permanent labor is changing. Workers no longer seek to simply find a job and stay with it until retirement. Instead, they are actively seeking ways to enhance their career paths and pursue personal growth. They are embracing agility and adaptability, recognizing the importance of continuous learning and development. This is also true for physicians who are merging into the marketplace.

You can do this through a combination of long-term and short-term contracts or by starting your own micro-business. For physician workers, it’s all about having the flexibility and freedom to pursue your dream life and seize the opportunities that your professional status has to offer.

In line with this new physician-worker mindset, medical corporations are increasingly inclined to hire independent contractors or remote workers for their labor, rather than relying solely on permanent staff, whom they refer to as employees. This is especially true for jobs that require specialized skills or tasks that can be easily outsourced. Add in the layer of location-independent work, and you can see why the telehealth industry is experiencing rapid expansion, creating a plethora of job opportunities for you in this niche.

Moreover, employers have also become more open to offering a percentage of full-time equivalent (FTE) positions as an alternative to traditional full-time employment. This not only provides individuals with flexibility but also opens the door for them to potentially become long-term independent contractors rather than employees.

Long-Term and Short-term Non-Permanent Professional Labor Is Rising

You possess a unique superpower – the ability to function as a micro-business. In this evolving labor landscape with high demand for your professional services, you need to adapt and manage your medical career in a different way.

You have the power to embrace the modern view that all labor is non-permanent, while also reflecting your preference for flexibility, work-life balance, and quality of life as fully functional independent contractors.

There is a growing realization that designating your work as permanent professional labor is truly an oxymoron. While some may still be okay with being identified as an employee, others prefer to be called long-term independent contractors.

The concept of long-term independent contractors is a relatively new idea that deserves recognition and legitimacy as a distinct job category. It should be seen as separate from both traditional employment and short-term independent contractors.

Long-term independent contracting truly adds an important third category for workers and embraces the evolving cultural views of the labor force & this includes doctors

It is highly probable that newer generations of doctors will choose to embrace all three categories and shape their medical careers around a self-directed combination of employment, long-term independent contracting jobs, and short-term independent contracting jobs. The total workload will be self-determined and will support individuals in achieving their holistic personal and professional goals.

How To Earn The Right To Help Choose Your Worker Classification

Properly organizing yourself from the beginning of your career is crucial for several reasons. The most important reason is that once you become an employee, transitioning from being an independent contractor with the same employer later on becomes significantly more challenging.

Take These Steps To Preserve Your Autonomy

As you prepare to enter the marketplace, I enthusiastically encourage you to get ready for this exciting moment by following these steps to take control of your professional life and determine exactly how you want to interface with any job option. Doing it as an individual taxpayer (W-2) is easiest but has the most negative downstream consequences. Doing it as a micro-corporation (1099 contractor) requires some extra steps, but will lead to your best life as a doctor.

I highly recommend starting here to embark on your journey towards self-employment as a contractor through your own micro-corporation:

  1. Create a micro-professional corporation that can be utilized for your professional services in both long-term and short-term jobs—whether it be for a primary job or side jobs.

  2. Identify multiple sources of income for yourself. For most doctors, this will include a primary job along with additional side work. The monetary value of these side jobs is less important. What truly matters is having multiple income streams. This is not only beneficial financially, but it also solidifies your contractor status as you offer your professional services to multiple sources through your business. There are three general categories of income that can and will be created:

    1. Active Income-The income associated with your professional status as a physician typically requires your physical presence to generate revenue.

    2. Passive Income-Income generated from sources outside of your professional status may or may not require your physical presence to manage.

    3. Retained Income-My personal favorite is the approach that requires no extra time or work. It’s all about working smarter, not harder. In fact, a micro-corporation can typically unlock 10-15% of retained income for the average doctor.

  3. Once these two ingredients are in place, you have fulfilled what I would consider the minimum necessary characteristics for a company to recognize you as a contractor when they onboard you for work.

    It is crucial to note that by establishing your status as both an individual taxpayer and a micro-corporation, you now have the flexibility to be referred to as either an employee or an independent contractor by both yourself and any employer. This power is critical as you enter the marketplace.

  4. Next, if this were your primary job, I would highly recommend expressing your desire for a long-term relationship, if that is indeed what you’re seeking. However, it is important to discuss with your employer whether the job could be classified as permanent or non-permanent.—Your desire would be to be labeled as a “long-term non-permanent laborer.” Don’t be afraid of this designation, as virtually every physician contract is valid for only 90 days, regardless of whether it is permanent or not.

  5. It is important to note that, although they may refer to you as an employee, the contract they are offering you is legally a 90-day renewable contract that can last anywhere from 1 to 3 years. The terms of this type of professional agreement are ultimately more aligned with non-permanent labor.

  6. You & the employer can classify non-permanent labor as either an employee or a contractor.

    1. At this point, if you prefer to be an employee, you can walk through that door. However, please be aware that once you accept this classification, it may be challenging to be reclassified within the same company in the future.

    2. If you prefer working as a long-term independent contractor, you can present your evidence and confidently walk through that door. However, please be aware that you always have the option to later convert to an employee with the same corporation.

  7. There are several other characteristics that will clearly demonstrate to a corporation that you are a contractor. Check out this 11-point key graphic covering things:

Start Your Micro-Corporation & Consider Employment Lite

For several compelling reasons, I firmly believe that every one of you should establish your own micro-corporation right from the start of your career. Then you will have the opportunity to maintain control over how you want to utilize, or not utilize, a business structure in any job situation.

If your primary job is to provide professional services for the patients of a large corporate employer, it would be wise to consider receiving your earnings as an independent contractor (1099) rather than as an employee (W-2). Before you jump to the assumption that this means you’ll be going into private practice, let me introduce you to the hidden yet most rewarding form of employment available to doctors. It’s called “employment lite,” and it’s a fusion of employment and independent contractor work through a professional services agreement. Think of it as long-term independent contractor work.

This arrangement offers numerous benefits and one of the most compelling reasons to consider it is the significant impact it can have on reducing your effective tax rate as well as preserving your professional autonomy.

Here’s a graphic of what it looks like:

Prepare For The Future

Don’t wait to start your micro-corporation, because the hard truth is that once a large employer hires and designates you as an employee instead of a long-term independent contractor, it will become very difficult to change your designation back to an independent contractor. Over the years, while coaching physicians, I have repeatedly witnessed this scenario play out. No matter how much you may desire to change your job title, your current employer will often be hesitant to allow you to transition to the status of a long-term independent contractor.

Force The Decision

I firmly believe that opting to be called a long-term independent contractor will offer you the predictability and security you desire, while also providing the flexibility and quality of life you need.

I can personally attest to this because I made the transition from being a traditional employee to a long-term independent contractor at the same job with the same corporation about 10 years ago. Let me tell you, it was the best decision I ever made, beyond the decision to marry my dear wife. My best-selling book walks you through that journey.

Be Ready For The Opportunity(s)

To be recognized as an independent contractor in the marketplace, it is essential that you prepare yourself to make the best possible choices. This involves organizing your work and being prepared to take the path that suits you best.

The question of whether you are a contractor will come up repeatedly throughout your career, especially when it comes to side jobs. That’s why it’s valuable to start a micro-corporation for your professional services early on because you will inevitably need it.

In my opinion, during the latter half of your residency is ideal You can not only use it for moonlighting but also position yourself to secure your first attending physician job.

Action Steps

The latest generation of doctors has become convinced that traditional employment is in their best interest. Corporate employers are also making strong efforts to persuade you that it is the best option, especially with the attractive financial incentives they offer at the beginning of your career.

But it’s time for doctors to wake up from their passive slumber about their professional lives.

Here are 4 action steps for you.

  1. Become a member of SimpliMD.com and join a community of physicians who are on the journey of becoming micro-business competent. Our newly revamped website will provide you with a wide range of free and paid resources Membership unlocks $2500 in savings at the site.

  2. Purchase a copy of my best-selling book “Doctor Incorporated: Stop The Insanity of Traditional Employment and Preserve Your Professional Autonomy” and read about my personal journey to a micro-corporation.

  3. Join my live webinar scheduled for September 29th at 7:30 pm CST called “Are You Ready To Take Control of Your Future?” where I will be speaking to residents and fellows in the Dallas-Fort Worth area.

  4. Reach out to me to schedule a FREE 45-minute business consultation to discuss your professional life.

We must take back control of our profession by establishing a micro-corporation and leveraging it in the marketplace. This will empower us and liberate us from the grasp of corporations that seek to manipulate and dominate us!

You Were Meant For More Than Healthcare factory Work

You Were Meant For More Than Healthcare factory Work

Aug 23, 2023

The Good Life?

It’s important to note that those on the outside often have a romanticized view of your “doctor’s life,” seeing it as a perfect blend of altruism, professional autonomy, and high income. It appears to have all the ingredients for a fulfilling and prosperous life—what many call the good life. Thus, our close friends and family may be initially surprised to hear about our professional frustrations and disappointments. After all, it was assumed that these challenges would disappear once you became an attending physician. Both you and your confidants are beginning to realize that the “good life” of being a doctor may not be as fulfilling when you are working at your employer’s medical factory.

You are likely to persevere believing that much like your training, things will often get better with more time. So you will utilize your best personal resilience techniques, all while simultaneously hoping for systemic changes that will improve the situation.

Spoiler alert: In the employment world, the never-ending series of “it’s gonna get better” will always include some combination of needed changes that address your tension over:

  • Inadequate staffing

  • New management

  • New ownership

  • A new practice location

  • The next contract

  • New corporate HR policies

  • Trying to land the newest piece of medical equipment

  • Needing more doctors, NPs, PAs, or other extenders to share your load

  • The need for scribes to help you with documentation

  • An EHR transition

  • A new compensation formula

  • Side jobs to help boost your income

  • Too much or too little call

  • Too many or too few shifts

This merry-go-round of changes, tension, and the mindset that things will get better will continue for years. I can confidently say this based on my personal experience, as it was the reality of my life for the first 15 years of my career. My wife would witness my misery and stress at home, growing increasingly bitter over the moral injury inflicted on me by my employer. Despite this, she would resign herself to believing in my defense of our employer-employee relationship. She accepted my reassurances that things would improve when “x” happened. In a strange way, I became accustomed to defending my employer, believing that they would change and stop hurting me.

Harmful Co-Dependence

To be completely honest, this is an incredibly unsettling similarity to the dynamics of co-dependence that are often present in cases of domestic abuse.

Co-dependent domestic abuse relationships occur when two parties rely on each other and engage in a mutually destructive dynamic. This often manifests as physical, emotional, or psychological abuse, where one partner exhibits controlling and manipulative behavior while the other partner passively accepts this dynamic. The victim may feel compelled to remain with their abuser due to fear or a misguided sense of loyalty. The abuser relies on their partner’s ongoing presence to exert control and maintain power. The abuser depends on their partner’s continued presence to exert control and retain power. Recognizing co-dependent relationships can be challenging, as both parties are trapped in a cycle of fear and dependency that often perpetuates further abuse. This type of relationship creates a vicious cycle that can be difficult for victims to break free from without external assistance.

The interdependence between you and your employer can be a challenging bond to break for both parties. Ultimately, this dependency can become suffocating for you.

The business culture has labeled this as burnout, unfairly placing the blame on you and suggesting that you have failed to resiliently handle your workload.

More appropriately, our profession now recognizes this as a moral injury, acknowledging that systemic forces are to blame for the harm inflicted on individuals who find themselves trapped in medical factory work.

Modern doctors, who were once revered for their power and prestige, have now become lifelong workers in the medical factories of our country.

We, along with nurses, housekeeping, dietary, security, and maintenance workers, are now referred to as “associates,” just mere cogs in their wheels. The only distinction is that we are paid more. However, we are all equally controlled workers, identified by our badges, and trained like Pavlov’s dogs to eagerly await our paychecks on payday.

Employed Doctors Are Non-Permanent Workers

In a previous post, I discussed the need to redefine physician labor and brought attention to the fact that many employed doctors are classified as non-permanent workers under their contracts. Thus, every doctor should be given the choice to classify themselves as either long-term independent contractors or employees within these jobs.

There are two obstacles that hinder the implementation of this functionality in today’s employment climate:

  1. Corporations have a responsibility to the IRS to classify every worker as either an employee or an independent contractor. However, when it comes to doctors and traditional labor views, they tend to want to classify any long-term working relationship as an employee. Not only is this option safer and easier, but it also saves money compared to the more common independent contractor physician labor with locums. The bottom line is that you will be considered an employee by default.

  2. Most physicians are unprepared for the moment when a prospective employer approaches them about a contract. Frankly, most of you lack proper coaching and understanding of why you would even want to become a contractor. And, most importantly, you likely lack the necessary proof to confidently classify yourself as a contractor in the judgment of the IRS, which is crucial for anyone considering hiring you. As I mentioned in a previous blog post, Empower Yourself To Choose Your Worker Classification, the classification of whether you will be considered an employee is subjective, and historically has been the responsibility of the employer to determine. However, the IRS does offer some objective guidance for you and your employers on this matter. Ultimately, you will by default be considered an employee because that is safer to employers—unless you can provide compelling proof that you are truly a contractor.

Why Does It Matter That You Are An Employee?

As you all know, there are numerous benefits to physician employment, which include:

Just like there are two sides to every coin, the downsides of employment become more visible a few years into the job. Over time, these negative elements begin to inflict harm on you as an employee. Some of these moral injuries include:

The Power to Choose

Regardless of the employer you choose to work for, what I am advocating for is your empowerment to make the decision on whether to be classified as an employee or an independent contractor, based on what is best for you. The decision of whether you are an employee or not should not be solely determined by the business that hires you. However, unfortunately, that is the current status quo—where large corporations have the power to define your employment status. The issue at hand, for both them and you, boils down to one critical word: control. Employees are subject to the control of their employers, whereas contractors are not. Therefore, the aim is to establish a relationship with you from the beginning that involves mutual control on their part.

At first, the control will seem subtle, but over time, it can become suffocating.

To gain a better understanding, let’s explore how corporations have traditionally perceived physician labor.

The Past Views of Physician Labor

In the past, there was a strong and resounding preference for all of a company’s physician labor to be primarily called permanent employment by default. Long-term professional services enable corporations to establish predictable and sustainable service lines that are not only more reliably profitable but also scalable.

Long-Term Work Horses

This notion is based on the belief that physicians are reliable and hardworking individuals in the business world. They can be trusted to generate revenue for the corporations that employ them over extended periods of time. Employers prefer to view this as a long-term relationship with you, which typically includes 2-3 contractual terms. These contracts, however, often have 90-day no-cause opt-out clauses.

Doesn’t that sound permanent, does it?

Short-Term Gap Fillers

Additionally, corporations will also hire temporary labor to meet their physician staffing needs. Non-permanent or non-employee labor has always been synonymous with locum tenens. In most instances, hiring locum tenens will result in additional costs for that type of physician labor for a corporation. Furthermore, locums often lack the necessary ingredients to sustain and grow a service line. Essentially, they serve as temporary gap fillers—which is consistent with the literal definition of a locum: a person who stands in temporarily for someone else of the same profession.

A New Space

However, the combination of non-employee labor with long-term positions has traditionally been an uncommon combination offered by employers. This is because they preferred to have control over you and then prefer to call you long-term physician labor. This need for control over your business powers is one of the fundamental reasons why most employment contracts include some sort of non-compete clause. Employers often have concerns about losing control over you and the fear of the loyalty of patients towards you personally rather than their corporate brand. This emphasis on brand loyalty over a relational bond with your patients can often leave you feeling like a transactional commodity, where the focus from your employer is solely on generating revenue from patients.

In recent years, we have begun to witness the emergence of a new physician labor space called “employment lite.” This space combines non-employee labor with long-term positions in a unique manner, and it is quickly gaining recognition as a viable alternative to traditional employment.

It is a space that I think you need to know about, because to be honest, discovering this space saved my career.

I invite you to learn more about employment lite here or you can also download my free guide about why it’s best here.

It’s time for our tribe to put an end to the insanity of traditional employment and embark on something different! If you want something a little meatier on this, subject, you can check out and purchase my book on this topic right here.

Don’t Repeat Your Mistakes

Regrettably, many of you as employed physicians will find yourself trapped and held co-dependently hostage by the large corporations you work for.

However, you have the option to break free of this unhealthy professional relationship by seeking a new job opportunity—albeit acknowledging that this can be a challenging and arduous process. However, if you choose to do this, please consider not signing another long-term labor contract as a traditional employee. Instead, consider working as a long-term independent contractor through an employment lite agreement.

Four Steps

Whether you are at the beginning of your career or considering a transition, I encourage you to take the following four steps as necessary ingredients for preserving your professional autonomy through the formation of a professional micro-corporation.

These steps will empower you to seize the moment and confidently sign your contract as an independent contractor rather than as a traditional employee.

  1. Choose to become business competent by joining a community of like-minded physicians who are determined to grow in their business knowledge. SimpliMD can provide you with a complete menu of free and paid resources that all have one mission—to grow your business competency—through courses, content, coaching, community, or consultation.

  2. Decide whether you plan to view yourself as a professional micro-corporation rather than as an individual taxpayer for your professional services. I highly recommend the former and I also suggest using someone familiar with physicians to help you set up our micro-corporation. This legal entity should be highly personalized and shaped around your personal and professional life. The process of personalization and the inclusion of built-in fringe benefits in your micro-corporation will come at a cost—with the amount ranging from $5,000 to $12,000 depending on the fringe benefit structure you choose. However, those dollars will undoubtedly prove to be a worthwhile investment in the long run.

  3. Outsource the management and operation of your micro-corporation. I recommend you choose a physician-centric agency that can help you manage your micro-corporation, develop a personalized fringe benefit plan, provide your accounting services, supply tax, and legal advice, give wealth management counsel, and provide business coaching. Through these comprehensive services, you can ensure that your needs are met with expertise and tailored small business solutions. You can get all of this under one roof with SimpliMD. We offer you the option to hit the easy button and let us handle everything for you. Alternatively, you have the option to assemble your own team of professionals to provide the needed support for your micro-corporation.

  4. Diversify your income channels by considering side work through your professional micro-corporation that is outside of your primary job. Start slowly and create a combination of primary and side jobs that align with your personal and professional goals. By following this approach, you can ensure that all your efforts will contribute towards successfully achieving your goals. In the past, the traditional mindset involved having only one job. However, the more progressive approach is to diversify and stack combinations of jobs. Having a professional micro-business will make this much easier and more efficient. This empowers you to adjust the volume controls for each of your jobs, giving you even greater flexibility and control over your professional life.

Do you think someone on one professional business coaching from a fellow physician on how to do all this would be helpful? I invite you to check out my micro-business coaching options that we offer exclusively to our SimpliMD community.

Or if you just need some help setting up your corporation to get things off the ground, you check to follow this link to make a FREE introductory appointment to SimpliMD consultative services with me.

Combining Forces to Meet Your Micro-Business Needs

Combining Forces to Meet Your Micro-Business Needs

Aug 13, 2023

Growth

I am excited to make some growth-related transitions for my followers in order to meet your micro-business needs.

I will be combining forces with my free content-driven site called Dr. Incorporated with my newly revised membership-based micro-business support site at SimpliMD. This will broaden the number of self-guided resources available to you at both sites. This change was needed as many of you have reached out to me to request a broader menu of support options that go beyond information.

I have heard your requests, and have begun the transformation journey.

The Truth Blog

One significant change will be the transitioning of the publication of my communications and blogs from Dr. Incorporated to SimpliMD. So if you note that the emails are now coming from a different source than constant contact, that is the reason.

In addition to this, due to reader feedback, I will be broadening my posts to 5 posts/week that will be shorter but cover a broader range of topics pertinent to physicians as micro-businesses.

  • “Is That Deductible?” This will include personal stories & experiences about running my businesses, enterprise, life, family, travel, health, etc.

  • “Stop The Insanity”. This will be excerpts & talking points from my best-selling book “Doctor Incorporated: Stop The Insanity of Traditional Employment and Preserve Your Professional Autonomy”

  • “It Takes A Village” Here I will re-post blogs from other writers & provide guest posts with a primary focus on physicians working on their micro-business and personal financial competency in the following areas:

    • Professional Autonomy

    • Personal Finance

    • Micro-Corporation Concepts

    • Tax Issues

    • Business Competency

    • FatFIRE

    • Business Enterprise

    • Residents & Fellows Insights 

  • “Business School” I will continue to inform and inspire you with a wide variety of micro-business subjects that will all be connected to free and purchasable resources at the SimpliMD and Dr. Incorporated sites.

  • “Coaches Corner” I will provide coaching points associated with doctor coaching calls, SimpliMD client success stories about the journey to independence as a micro-corporation and this will also include the highly popular new series called “Walk In Your Shoes” where John & Cheyenne Stillson share about their experiences during residency.

SimpliMD Changes

SimpliMD is undergoing massive changes in order to better support your needs for a comprehensive menu of resources to support your micro-business journey.

I have joined the Kajabi online business community and invite you to do the same here. You will given a free 30-day trial of this innovative knowledge community that many of you could use for creating health-related courses and content for those who would benefit from your knowledge.

Supporting Your Journey To Micro-Business Competency

Through my new SimpliMD Kajabi website and CRM, I will be able to efficiently provide you with a vast array of free & paid content for you that will support your journey to small business competency.

Quite honestly, this has become my retirement-based passion project ( I will FIRE in June of 2024!). This is because I truly believe one of the fundamental systemic changes that need to happen to stem the burnout crisis is to empower doctors to preserve their professional autonomy through a micro-corporation. How do I know this? Because it has been my personal experience that I chronicle in my best-selling book “Doctor Incorporated: Stop The Insanity of Traditional Employment and Preserve Your Professional Autonomy”

In the process of writing the book and then after speaking to scores of doctors who have reached out to me after reading the book I have come to realize that many of you are hungry for alternatives & resources that will empower you to avoid broken status quo system that is rigged against you.

A Practical Business School

But the gap is that you need practical micro-business knowledge that doesn’t require you to get an MBA.

I have decided to take what I have learned through my own small business experience as a micro-corporation and build a community of mutually supportive physicians who desire to grow in their small business competency.

Our tribe tends to be self-sufficient, life-long pursuers of knowledge, and are often inspired by peer-based experiential learning.

But given the time demands of our training and then life as an attending physician, it is difficult to find time to pursue practical business knowledge in a business knowledge world that operates under “banker hours”.

Community Is The Cornerstone

My re-vamped site will encourage your journey through membership in a community of like-minded doctors. Here you will be able to pick and choose from an array of free and purchasable resources that will help build your micro-business competency.

You will be able to pick and choose resources that match your need as well as access them in your SimpliMD member library in a way that matches your schedule.

Fundamentally my goal will be to support your journey to micro-business competency and I will do it through 5 basic channels:

  • Community When you become a member of our SimpliMD community you will find a supportive group of physicians who collaboratively come alongside you to support your journey to business competency. The age-old medical model of “see one, do one, teach one” will be brought to life through a community of co-learners that is led by an experienced physician who is passionate about sharing what he has learned (me!).

  • Content. I will provide a regular flow of free and purchasable content that will inspire and inform you through my blog, book, e-books, webinars, and landing pages on the site.

  • Courses I am excited to begin producing course-based learning for you that provides you with practical knowledge about the next steps. Please note these are currently under construction, but I will be diligently working on getting these up and running as soon as possible. They will include the following 4 courses:

  • Coaching This has bubbled up as a significant need among many of you, as you feel the need for holistic micro-business coaching that supports your individual journey. Thus I have created several options for you to consider that range from 4 sessions to 12 sessions. Again this is under construction on the site, but the bones of it are in place, and you are invited to consider joining me by signing up to be coached.

  • Consultation I will continue to provide business consultation services for you for a host of micro-business needs ranging from helping you start your own professional micro-corporation to all the way up to our comprehensive SimpliMD employment lite product that is the best option for working for a large corporate employer WITHOUT being their employee. (this option is hidden from view for most of you).

It All Begins With Membership

Your best first step to being a part of my growing community is to sign up for membership. You can check out my SimpliMD membership landing page here. This will provide you with $2500 in discounts at the SimpliMD store. It’s a great deal for only $99 for attending physicians and $10 for residents & fellows.

And because you have been such a loyal follower of Dr. Incorporated, I am going to offer your membership for 50% off by following this link for attendings and this link for residents & fellows.

Here is what you will get with your SimpliMD membership:

  • 20% off all SimpliMD/Dr. Inc. paid courses

    • Doctor-You Are A Business

    • Bookkeeping For Your Professional Micro-Corporation

    • Master Your Enterprise

    • Micro-Business Skills for Independent Doctors

  • Free Book: “Dr. Incorporated: Stop The Insanity..”

  • An annual $200 off coupon for SimpliMD professional services

  • Free 45-minute business coaching session with SimpliMD worth $500

  • $150 off SimpliMD Business Coaching Program

  • A weekly micro-business blog for subscribers called “The Truth” that supports your journey to business competency

  • Exclusive offers through SimpliMD vetted affiliates

  • Discounted Business-Legal Services through SimpliMD

  • Complete Access to SimpliMD and Dr. Incorporated’s library of e-books to download for free

  • Membership in a private “Every Doctor Is A Business” Facebook community of doctors who support one another as owners of professional micro-corporations

  • Free small business Webinars for members only that include live Q & A with guests

Estimated Value for $99 Membership =$2500:

  • $800 by saving $200 per SimpliMD course (each course costs $999)

  • $20 Dr. Inc book

  • $31 value in free e-books

  • $99 store credit for referring a friend program

  • Annual $200 coupon for SimpliMD Professional Business Services

  • $500 free business coaching session

  • $150 coupon for SimpliMD Coaching

  • $600 savings through SimpliMD Business-Legal Services

  • $100 savings for access to a business webinar

Total Value: $2500

Join Me

I am so excited to be making these changes to better support our growing community of like-minded doctors.

You can expect to continue receiving your regular feeds of free content, but I invite you to also take a step forward and join our membership movement.

The Minimalist Doctor-How To Thrive Today

The Minimalist Doctor-How To Thrive Today

Aug 4, 2023

Minimalism is a design and lifestyle philosophy that emphasizes simplicity, functionality, and the use of minimal elements to create a visually appealing and functional space. It is characterized by a pared-down aesthetic that focuses on clean lines, neutral colors, and the elimination of unnecessary elements.

Minimalism also refers to a lifestyle that promotes a simpler way of living, focusing on reducing clutter, prioritizing experiences over material possessions, and simplifying one’s daily routine. The goal is to live with less and to focus on what is truly essential, allowing for greater clarity, focus, and a sense of calm.

In essence, minimalism is about stripping away the excess in order to create a more intentional and meaningful way of living. It encourages us to reevaluate our priorities, eliminate distractions, and focus on what truly matters in our lives.

The Influence of Minimalism on the Mindset of Doctors

There are a lot of social, psychological, and economic forces that led to the massive shift from doctors going into private practice to doctors choosing employment. Minimizing financial risks and minimizing the complexity of managing a medical practice are very important mindsets that influence doctors’ decisions about how they will choose to practice medicine.

Thus choosing employment with its financial incentives for loan repayment and where you receive a predictable paycheck based on your autonomously driven productivity cadence makes perfect sense. No business to manage, no employees to oversee, no medical office to pay off, and no group practice/shareholders to wring your hands over.

You show up to work, do your job, collect a paycheck then get full control over organizing your non-work lifestyle.

Employment checks all the minimalist boxes.

It’s why I chose this route many years ago.

The Ugly Underbelly of Employment

But as I discovered, and as many of have also experienced, there are serious consequences to the traditional employment path and it’s not as calming as you had hoped for.

Employment essentially means the corporation that you work for has control over you. Professionals like doctors need and thrive on autonomy. When your autonomy is gradually eroded by the constraints of corporate policies, procedures, and processes—it negatively affects your well-being. Your job becomes a grind, and when your employer begins to “crack the whip” to make you go faster, work harder, and “not be a low performer”—you begin to feel the pressure all the more. They explain to you there are financial incentives within your compensation formula for working harder, doing more, and meeting the quality metrics—thus working harder for them—ultimately benefits you.

In the end, you will begin to see that you are a business asset that have invested in, like a piece of medical equipment. They will see you impersonally in this light, and their focus is to get the best ROI possible on that investment. Thus running the “business machine” a little longer, faster, and harder just makes sense—cause it leads to more revenue for them.

This is where your light bulb goes off. Indeed you are a mini-business and it’s why the large corporation chose to employ you in the first place. Their upfront investment in you to pay off your loans was like purchasing a piece of small business equipment. Your professional services generate three-fold revenue for their enterprise:

  • Direct patient care

  • Downstream system revenue for your indirect care

  • Minable data in the EHR

As time goes on, they will hold you accountable as to why your direct patient care in your clinical setting is “losing so much money”. Never mind it’s because they have translocated your cost center into an accountant’s shuffling of the cards to the downstream enterprise. Thus you will always “lose money” at your clinical space—it’s just a matter of how much. And they will remind you that “just seeing one more patient/day” will help reduce their losses.

And then they will ask you to do “just a few more clicks of the mouse” on each patient so that “you get credit for the quality data”. Never mind that an increasing proportion of your time is spent doing this mind-numbing computer work that distances you even further from the actual patient. Coming back to point number one, the extra time to do this will make it more difficult to see more patients, making you horribly inefficient. They won’t be able to “staff you up” to support this EHR clerical work, nor to help your clinical efficiency—because they are losing too much money in the clinic—and this extra expense does not fit in the budget.

Suddenly you will feel trapped and drowning in their revenue-creating matrix, feeling the pressure to earn their deep investment in you—all while feeling less valued personally by them.

Then there is the lifestyle that you have created around this job, location, compensation, and family life. These will all additively make it increasingly difficult to make any job changes. You will feel stuck and hopeless—searching for resiliency interventions that allow you to more easily tolerate a job that makes you feel unappreciated and unloved.

So you will find that your efforts to embrace the minimalist architecture of the modern physician’s life come at an expense

You Have Options

Before you dutifully enroll in your employer’s physician wellness program and start doing your yoga and mindfulness training that is aimed at normalizing the pain of working as an employee. Please know that you have other options.

Employment Lite

Employment lite is the minimalist version of employment. You operate an individual professional micro-corporation. You then contract your services to your employer as a long-term independent contractor via what is called a PSA. This is called “employment lite” and is becoming increasingly popular among both doctors and employers.

As a contractor, your expenses don’t involve a building, employees, and medical equipment. Think of this like a version of a minimalist doctor who still interfaces with the traditional medical system—but does it efficiently with little overhead.

This is the route that I took professionally and it has been the best decision I ever made. I chronicle it in my book “Doctor Incorporated: Stop The Insanity of Traditional Employment and Preserve Your Professional Autonomy”. Grab a copy on Amazon, or can learn more about employment lite at SimpliMD where they help doctors with this process

Of course, the ultimate minimalist doctor will set up a professional micro-corporation and then use their skills to provide direct patient care—completely bypassing 3rd parties—while doing it in a virtual office space.

The Micro Medical Practice Option

This space is part of a growing network of primary care and specialty doctors who have “gone off the grid” and provide care directly to patients based on a cash-fee schedule.

If you imagine a virtual professional micro-corporation on one end of the spectrum as a minimalist medical practice—basically using their contracted employer’s space, equipment, and employees—and all professional business expenses are personal to your provision of professional services.

Then imagine on the other end of the spectrum, a full-service private practice clinic whose business expenses include retail space-building, employees, equipment, management, etc.

Doctors who choose “off the grid” direct care medical practices can land anywhere between these two ends of the spectrum—from virtual practice to fully present in a singular location.

There are lots of options here—from a mobile medical clinic—with your vehicle outfitted to basically having a mobile clinic that allows you to do both virtual, at-home car, or parked in a public parking lot somewhere—allowing patients to come to you. It’s kinda like the “food truck” idea applied to medicine. Low overhead, and high mobility/visibility.

Some doctors don’t want the everyday costs of leasing/owning a building for clinical space, thus they will cooperatively lease a medical space for “x” % of use per month. Depending on the type of clinical work you do, this allows you to comfortably have a location to examine and do medical care that is specific to your specialty (including available medical equipment) at a much lower expense.

As a minimalist doctor, you can operate your medical practice efficiently by following these tips:

  1. Keep it simple: Simplify your practice by minimizing unnecessary paperwork and adopting a streamlined approach to patient care. You can use technology to automate administrative tasks and focus on patient care.

  2. Reduce overhead costs: Keep your overhead costs low by sharing office space, using cloud-based software, and buying used medical equipment. This will allow you to focus on providing high-quality patient care without breaking the bank.

  3. Outsource non-medical tasks: Consider outsourcing non-medical tasks, such as billing and accounting, to third-party companies that specialize in those areas. This will allow you to focus on patient care while leaving the administrative tasks to the experts.

  4. Maximize patient education: Focus on educating your patients about their health and preventive care. This can help reduce the need for expensive medical interventions and keep your practice running efficiently.

  5. Use telemedicine: Consider incorporating telemedicine into your practice to provide remote consultations and follow-up care. This can save time and money for both you and your patients and can be especially useful for patients who have difficulty traveling to your office.

The Minimalist Doctor demonstrates that minimalism extends beyond decluttering physical spaces; it is a powerful philosophy that can revolutionize the way healthcare professionals thrive in their personal and professional lives. By simplifying work-life balance, streamlining medical practices, and adopting mindful patient care, they find purpose, satisfaction, and fulfillment in an increasingly complex world. Through minimalism, The Minimalist Doctor is not only a healer but also an advocate for a more conscious, purposeful, and sustainable approach to life and medicine.

Check out our membership resources at SimpliMD that help empower you to thrive as an autonomous minimalist physician.

The Self-Employed Physician’s Guide To Determining Their Salary

The Self-Employed Physician’s Guide To Determining Their Salary

Jun 30, 2023

How Much Should You Pay Yourself?

What Is The Value Of Your Services?

In my last post, I discussed the importance of getting paid what you are worth. This is a critical concept to understand whether you are an employee, or whether you are self-employed as a small business owner/ independent contractor. Knowing the value of your professional services to others is an essential feature of negotiating a fair-market-value contract.

How Much To Pay Yourself?

In response to my post, a self-employed physician from California asked the question:

What if you own the business and pay yourself?

This is a fantastic question whether you are in traditional private practice, or a single-member professional corporation. Each of the small business owners has to decide how much to pay themself.

I am going to answer this self-employed doctor’s question from the perspective of the single-member professional corporation owner who is working as an independent contractor in a primary job via what is called an employment lite agreement. It’s what I do, so I can speak to it from a personal perspective.

Your Professional Micro-Corporation Will Be Paid

First, understand that your compensation for your professional services will be paid to your professional corporation in this contractual arrangement. The value of that compensation is essentially the same whether you are employed or a contractor. Also, understand that the total value is not just the salary/comp formula but also includes benefits and professional fees.

Put another way the labor expenses for employed doctors include their salary/compensation formula + benefits +retirement contributions +professional fees like malpractice insurance. This represents your total value and expense to your employer.

When you either start with a fresh employment lite agreement or convert from a traditional employee to an employment lite agreement it is important to know that your professional micro-corporation should be paid the equivalent total fair market total value labor expense as the employed doctor. This “grossed up” number is important because your micro-corporation will be responsible to pay for your retirement, benefits, and professional fees like malpractice insurance.

In the end, what an employer pays you for your professional services should be the same whether you have a traditional employment contract or an employment lite contract. Locums are a whole different thing and will cost employers more than both of these contractual arrangements.

Much like a traditional employee, you will want to maximize the Fair Market Value of your employment lite contract—which was the point of my last post. I encourage you to reach out to Contract Diagnostics to complete their Compensation Rx for only $297 to find out your true value.

As a professional micro-business owner, you may also have additional side job incomes that contribute to your primary job compensation. Just like any small business, generating revenue is a critical feature of a healthy business and therefore having diversified revenue sources/contracts is always helpful.

How Much Should You Pay Yourself?

For the single-member professional micro-corporation owner, once you have a relatively predictable value for your annual corporate revenue (based on FMV contracts), this is where the fun begins—especially if you are a high-income earner like a doctor.

This is one of the elements that sets you apart from the rest of the single-member small business owners in America—their income can be less predictable and they are always working towards stabilizing and growing their revenue. As a physician, your professional micro-corporation has a very predictable high revenue based on your FMV contract, but it also lacks scalability due to it being a single-member corporation that is completely dependent on you alone. In the end, you as an individual doctor can only do so much work. Therefore your professional corporation will usually have a ceiling on its potential revenue.

Savvy doctors who really begin to understand their business powers will use their high income, professional skills & earned assets to create an enterprise of active and passive income sources and businesses that eventually create additional income sources—that don’t require your time or presence—and thus brake the scalability barrier of your micro-corporation. In essence, they will master how to make their money work for them. This is why my enterprise is made up of 9 businesses and not just my PC.

The Fun

The “fun” for the self-employed physician in his/her single-member corporation is figuring out how to get as much of your earnings/corporate revenue into your household in the most tax-efficient manner. Unlike your traditionally employed peers whose earnings are filtered through the highly taxed W-2 channel—you have options.

As a micro-corporation owner, your household income will arrive to you via 4 basic channels as noted below.

You will note your salary is just one of those 4 channels. It is typically the largest of the 4 and thus it is the most important —and the good news is that you get to decide the amount!

I can’t over-emphasize this 4 channel concept enough to you:

small business owners understand all 4 of these cash flow channels and use each to wisely get dollars into their homes in the most tax-advantaged manner.

Your paycheck is just one of the sources of these dollars to your household.

This is in contrast to traditional employees, whose paycheck and ERISA-limited retirement contributions reflect the total household value of their work. Typically these doctors pay a much larger percentage of their earnings to taxes than self-employed doctors.

Reverse Engineering

Because the earnings for your PC are relatively predictable based on FMV, you have the power to determine your salary and the dollar value of the other sources of household money—through what I call a reverse engineering process.

The reverse engineering process requires you to know two important numbers:

  • Your annual household expenses/spending. Although I believe in budgets, at a minimum every doctor should know how much they are spending each year-including all loan and credit card payments. This number is the minimum value that you should set your salary at.

  • Your IRS-compliant lowest “reasonable salary”. This represents the range of income that the IRS expects a doctor in your specialty to make each year. If you pay yourself less than this amount, the IRS is more likely to audit you out of concern that you are trying to evade taxes. The “sweet spot” for lowering your taxes as a doctor is to keep your reasonable salary as low as possible.

    As a self-employed doctor, understanding the concept of a “reasonable salary” defined by the IRS can significantly impact your tax liabilities. By ensuring that you are paying yourself the lowest reasonable salary, you can effectively lower your payroll taxes and maximize your business’s financial potential.

    The IRS has specific guidelines in place to determine what constitutes a reasonable salary for self-employed individuals, including doctors. This determination takes into account factors such as the nature of your medical practice, your level of experience and expertise, industry standards, and the amount of time and effort you dedicate to your business.

    By adhering to these guidelines and paying yourself a reasonable salary, you can demonstrate to the IRS that you are not attempting to evade taxes or artificially reduce your income. This not only helps you stay compliant with tax regulations but also provides solid documentation in case of an audit.

The reverse engineering process also ideally should include an evaluation of which tax entity for your professional corporation will provide your household with the maximum tax-advantaged dollars in each of the 4 channels.

Let me emphasize this is highly individualized for every doctor—and includes multiple factors including specialty, income, fringe benefit needs, family structure, assets, and other passive/active income. The complexity of this is why I recommend an agency like SimpliMD help you with this process—they have a team of legal, accounting, and business professionals who can provide you with an objective analysis of this for a reasonable fee. This What-If Tax planning worksheet provides extremely valuable data in a side-by-side analysis like this example.

You can schedule a free business coaching meeting with them here to begin exploring this.

For the sake of simplicity, let me walk you through some of the general concepts within the framework of an S-Corp vs a C-Corp for your professional micro-corporation.

Most doctors as single-member professional corporations will choose S-Corp taxation, but again this is very individualized and worth of analysis with a reputable agency like SimpliMD.

Physician Self-Employed Salary in Their Micro-Corporation: S Corp vs. C Corp

When establishing a micro-corporation as a self-employed physician, choosing the right corporate structure is crucial. The decision between an S corporation (S corp) and a C corporation (C corp) can have significant implications for how you pay yourself a salary. I am going to explore the differences between these two structures and discuss how they affect the determination of your salary as a self-employed physician.

  1. Understanding the S Corporation (S Corp): An S corporation is a pass-through entity that allows profits and losses to flow directly to the shareholders’ personal tax returns. In an S corp, the owners, known as shareholders, can pay themselves a reasonable salary as employees and receive additional income through distributions. These distributions are generally not subject to self-employment taxes, providing potential tax advantages.

  2. The C Corporation (C Corp) Option: A C corporation is a separate legal entity responsible for its taxes and liabilities. As a self-employed physician operating as a C corp, you would become an employee of the corporation. This means you would receive a salary, subject to income tax and payroll taxes, including Social Security and Medicare taxes. Any profits retained within the corporation are taxed at the corporate level. When distributing profits to shareholders, they may be subject to additional taxes, such as qualified dividend rates.

  3. Salary Determination for S Corporations: In an S corp, the IRS requires that shareholders who provide services to the corporation receive “reasonable compensation” for their work. The salary should be commensurate with the services provided and comparable to what a non-owner employee in a similar role would earn. Setting an unreasonably low salary and distributing most of the profits as dividends may attract scrutiny from the IRS. A reasonable salary helps ensure compliance and reduces the risk of audits.

  4. Salary Determination for C Corporations: As an employee of a C corp, your salary would be determined based on industry standards, your qualifications, and the specific services you provide. Unlike an S corp, there is no requirement for the salary to be “reasonable” in relation to the work performed. However, it is essential to ensure that the salary is justifiable and aligned with market rates to avoid potential tax issues or challenges in the event of an IRS audit.

  5. Tax Considerations: Both S corporations and C corporations have distinct tax considerations. In an S corp, the portion of profits distributed as dividends to shareholders is generally not subject to self-employment taxes. This means potential savings on Social Security and Medicare taxes. However, the salary portion is subject to payroll taxes.

    In a C corp, both salary and dividends are subject to taxes. The salary portion is subject to income tax and payroll taxes, including Social Security and Medicare taxes. Dividends received by shareholders are subject to taxation at the individual level, potentially at qualified dividend rates.

It’s important to consult with a tax professional or accountant specializing in physician finances to ensure compliance with tax laws and make informed decisions about your salary and overall tax strategy.

The 60/40 Rule

An important concept that is used for a physician who owns a single-member professional corporation taxed as an S-Corp is the 60/40 rule. This rule, which refers to the allocation of income between salary and distributions, can significantly impact your tax obligations and overall profitability.

The 60/40 rule states that as a physician S-Corp owner, you should allocate at least 60% of your PC’s revenue as a reasonable salary and no more than 40% as distributions. This allocation is based on the IRS guidelines aimed at preventing excessive tax avoidance through misclassification of income.

By adhering to this rule, you can ensure that you are properly compensating yourself for the services you provide while minimizing your tax liability. Allocating a reasonable salary demonstrates that you are paying yourself in line with industry standards and avoids potential audits or penalties from the IRS.

Moreover, following the 60/40 rule allows you to take advantage of potential tax savings. By keeping a portion of your income as distributions, which are subject to lower self-employment taxes compared to salaries, you can optimize your overall tax burden.

It is important to note that every physician’s situation may differ based on factors such as specialty, location, practice size, and personal financial goals. Consulting with a qualified accountant or financial advisor who specializes in physician S-Corps can provide valuable guidance tailored to your specific circumstances.

Understanding and implementing the 60/40 rule is essential for physician S-Corp owners seeking financial success. By appropriately allocating income between salary and distributions, you can ensure compliance with IRS guidelines while maximizing tax savings. Seek professional advice to navigate this complex area effectively and make informed decisions regarding your finances.

Example

If you were a physician currently earning $500,000 as a traditional employee you would pay W-2 taxes on all of that $500,000 income minus any itemized deductions.

If your PC was paid that same $500,000 (assume for the sake of this example that the benefits, professional expenses, and retirement costs are the cost neutral for both doctors), this doctor’s household income would arrive via:

  • 60% Salary: $300,000 as W-2 income

  • 40% Business Channels

    • Tax Advantaged Household Income/Expenses: $80,000

    • Tax Deferred Retirement Plan: $70,000

    • Business Distributions: $50,000

The W-2 tax burden for the physician as a professional micro-corporation will be significantly less than if they chose to be a traditional employee with only $300,000 being subjected to payroll taxes versus $500,000.

And in the end, the 4 channels of cash flow into dollars for the doctor as a professional micro-corporation will result in a 10-15% retention of the earnings in comparison to the traditional employee.

Summary

Determining your salary as a self-employed physician involves a thoughtful analysis of your financial health, personal needs, market conditions, long-term goals, and tax entity options. By considering these factors, seeking professional guidance, and continuously evaluating your financial situation, you can establish a fair and sustainable salary structure that aligns with your expertise and aspirations.

Consulting with professionals who specialize in physician finances can provide valuable insights and help you make informed decisions based on your specific circumstances. Ultimately, the choice between an S corp and a C corp should consider both tax implications and the long-term goals of your personal and professional life.