Re: Pllc vs s corp for start up

[Guest guest]

Randy,

You need an accountant and/or a lawyer in NYC to answer this due to the laws of

NYC. However, for everyone else and as background for you, I've added what

follows:

Business entities are established on a state level. Not all states are the

same. LLCs and PLLCs are relatively new business entities and some states don't

have them. Because they are new, there is not a lot of legal precedence which

makes business lawyers nervous. Delaware has a long history of being " early

adopters " of different business entities. As a result, that state has the

largest legal precedence ... which attracts businesses to form their company in

Delaware. Everyone likes it when you know the rules and Delaware has the most

defined rules. That's why you see most big companies " form " in Delaware. For

example, Ford, which is based in the Detroit area, is actually a Delaware

company.

You can form a company in any state. But if you are small, it's best to stick

with your own state. Lots of reasons for this but I think too much for this

post.

So in Michigan, I had the option of sole proprietor, PLLC, S-corp, and C-corp.

I highly recommend against the sole proprietor b/c there is no corporate

protection. In other words, you are the company and you take 100% risk of

everything ... not just your medical decisions.

PLLCs were made to create an easy method for people to create the liability

protection of a small company. With PLLCs (and LLC), the company is separate

from the creator. So if someone sues the company, you are not liable ... with

some caveats. In Michigan, I created a PLLC with a simple 2 page form which

required maybe 10 words and $75 to complete. The annual fee is $75.

There is no good reason I can see to create an S-corp with your state. This is

b/c you can still file as an S-corp with the IRS even though you are a PLLC (see

below). C-corps provide lots of benefits but they are administratively

burdensome. A really, really, really savvy IMP could do this and get enough

fringe benefits to offset the increase costs.

So PLLC is the way to go for most IMPS (my opinion). Now for the IRS. The

interesting thing is that the IRS does not recognize PLLCs. PLLCs are created

under state law, not federal. Once you have your PLLC, you need to tell the IRS

how you want your company to be treated. If you do nothing, the IRS will treat

you as " disregarded entity " (a what??). I have no clue what it means to be

disregarded (well, I guess I do from being disregarded in the past (joke)) but

to the IRS that means they will treat you as a sole proprietor for federal

taxes. This means you file a Sched C and your income equals your revenue minus

expenses. Your state taxes follow from your IRS 1040.

The better thing to do (in my opinion), is to file the form (I can find if

needed) with the IRS to be regarded as an S-corp by the IRS for taxes. The

advantage of S-corp is that " profits " (income - expenses - your salary) are

" passed through " to the owner. Pass-through means the profit is income to the

the owner but no FICA payroll taxes are paid. This can provide significant

savings. The disadvantage is tax preparation is more difficult. You have to

file a 1120S by March 15th which generates a Sched K-1 to the owner. The owner

then files by April 15th their salary (from W-2) and profits (from K-1). The

state will then take your 1040 and go from there. HOWEVER, always talk to a

qualified CPA and/or lawyer. In NYC, they have a GCT (General Corporate Tax)

and NYC does not recognize the NY State nor Federal S-Corp designation. I have

no clue what this means to you except the city wants your money.

A warning to PLLCs/LLCs that file as S-Corps. You have to pay yourself a

" reasonable salary " . Obviously, a lower salary means higher profit which means

less FICA taxes paid. The IRS knows this and is actively looking for S-corps

who aren't paying " reasonable salaries " to the owners. What is " reasonable

salary " ? Unknown. We know " zero " is not reasonable salary. paid

himself $350,000 for being a lawyer for his S-corp which had profits of, I

think, $20+ million. His " salary " was considered " reasonable " by the law

community but this was never investigated by the IRS. If you are the lowest

" salaried " provider in town, it's likely your salary is not " reasonable " . I'm

paying myself a " reasonable " practice manager's salary with 3 years of

experience b/c with a practice to open this month, I'll be doing a lot more

practice management than doctoring.

IMP camp is a wonderful resource for information about many parts of running a

practice. I gave a presentation on this topic during the past 2 IMP Camps.

Come to Camp!!

Craig

>

> > **

> >

> >

> > Hi everyone first time poster

> > I am starting a peds practice in the next few months in nyc.

> > I have struggled for the answer to this question since the difference

> > between the 2 is not obvious.

> > So the question i have is what would u choose if you were to open a

> > practice today pllc or s corp and why?

> > Thanks

> > randy

> >

> >

> > Sent from my iPhone

> >

> >

> >

>

>

>

> --

> Anne Walch, MHS, PA-C

> Healing Path Integrative Medicine

> www.hpimed.com

>

[Guest guest]

Just to be clear, I'm paying myself practice manager wages b/c I'm still in

start-up mode (i.e. no patients yet). Once I start seeing patients I'll

periodically adjust to a blended provider:practice manager wage and document the

rationale in my business diary.

> >

> > > **

> > >

> > >

> > > Hi everyone first time poster

> > > I am starting a peds practice in the next few months in nyc.

> > > I have struggled for the answer to this question since the difference

> > > between the 2 is not obvious.

> > > So the question i have is what would u choose if you were to open a

> > > practice today pllc or s corp and why?

> > > Thanks

> > > randy

> > >

> > >

> > > Sent from my iPhone

> > >

> > >

> > >

> >

> >

> >

> > --

> > Anne Walch, MHS, PA-C

> > Healing Path Integrative Medicine

> > www.hpimed.com

> >

>