Now that you have completed your Internship and Residency, you are now an independent contractor physician, and about to make more money than you have ever made before. The next question in your mind is; “How do I keep what I make, and not pay out everything I make in taxes?”
To avoid the painful consequence and get all of the benefits, here are 5 things that must be done when forming your Corporation.
• Why Incorporate – Incorporating shields you from some liability by providing you with a corporate veil. It also provides you with the ability to pay certain expenses on a pre-tax basis, while also allowing you the opportunity to fund a variety of retirement plan vehicles, thus reducing your taxable income
• Form a Corporation – Forming your corporation is done in your state, and requires the filing of Articles of Incorporation with the Secretary of State. This can be done yourself, or you can hire a physician business manager to work with you.
• Apply for an EIN Number – Your EIN Number is the social security number for your business and is obtained from the Internal Revenue Service. It is necessary for establishing any bank accounts and retirement accounts, and will also be needed for your payroll taxes and annual corporate tax return.
• Become a Subchapter “S” Corporation –The amount of money you pay in income and payroll taxes is dependent on how you declare your income. By filing your “S” election form with the IRS, you are saying that your corporation will not pay income taxes, but that the profits of your corporation will be reflected as income on your personal tax return. Failure to file this form in a timely manner means that your corporation will pay taxes on its income, and you will then pay personal income taxes on this same income. The dreaded “double taxation”.
• Properly maintain your corporate records – Most people go take the steps listed in the last 3 items, and stop there. After your corporation has been filed, you then must hold an Initial Meeting of the Board of Directors, and perhaps file a fictitious name announcement if it applies in your situation.
After you have done all of this to make your corporation effective, please do not forget to do the following on a regular basis: File your Annual report, file quarterly payroll tax returns, hold regular board of director meetings and file your annual corporate tax return.
Selecting the right type of structure for your business is only the first step. Making sure you take the necessary steps to follow through and get everything done correctly the first time is paramount. So take your time, don ́t make any hasty decisions, and by all means, if you are going to hire someone to assist you along the way, use these 5 steps to help you find the partner that you can trust to be there to assist you after you pay the filing fees.
My Professional CFO, LLC, is a professional services firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians and Entrepreneurs. We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant.
We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts. We are not simply a document filing service, we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.
Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.