California Employment Law
California Employment Law Questions Answered by Legal Experts
In California, I am an Orthodontist. I would like to know how I decide whether to be an Employee or Independent Contractor.
Also, I would like to find out the tax benefits of an Employee vs Independent contractor?
What corporations can I , as an Orthodontist, establish as an independent contractor to reduce taxes?
LLC? S-corp, C-corp and what are the advantages disadvantages?
Thank you for your humor!
A: For a small business practitioner, an LLC is probably the most cost efficient business form -- if the goal is to distribute all profits in the business to yourself on an annual basis (or less). An LLC permits you to avoid a lot of legal formalities that accompanies a coporation form (stock issuance, director meetings, officer appointments, etc.). And, an LLC provides the same tax opportunities as does an S-Corporation -- which is the corporate equivalent.
A: Discussed above. There is one potential benefit to an S-Corporation that does not appear in any other type of business entity: If you pay yourself a reasonable salary, you can avoid self-employment tax (Social Security and Medicare) on the remaining profits, which pass through to you without such obligations. However, the tradeoff is that you must pay yourself as an employee, so you will have unemployment insurance contributions for yourself, as well as FICA, FUTA, and the accompanying administrative headaches, which most professionals will inevitably outsource to a payroll company -- especially if you have any other employees. The result frequently is that you end up paying administrative overhead that you may as well have paid to the Social Security Administration (for which, hopefully you will get some benefits).
BotXXXXX XXXXXne, I think that the LLC is the best option. However, it is not entirely clear to me as to whether or not a dentist can operate as an LLC. As an attorney, I am restricted to solo proprietorship, professional corporation or limited liability partnership business forms. I do not see anything in the law that expressly prohibits LLC practice for dentists -- however, I encourage you to contact the Dental Board and make certain that LLC practice is permitted.
Hope this helps.
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