How to Create Your Own LLC as a Locum Physician: A 7-Step Guide

What An LLC Does For A Physician (And What It Doesn’t)

An LLC (limited liability company) is a legal structure created at the state level. Think of it as a container for your business activities, like receiving 1099 income, paying business expenses, and running bookkeeping through a separate bank account.

What an LLC can help with

• Separating business and personal finances: This is one of the biggest practical wins for locums.
• Professional presentation: Many agencies and facilities are used to working with entities (not just individuals).
• Business liability protection (in some situations): An LLC can help shield personal assets from certain business-related debts or claims tied to the company’s operations.

What an LLC typically does not protect

• Professional malpractice exposure: An LLC or PLLC usually does not “solve” malpractice risk from your professional services. Malpractice coverage is still essential, and state rules vary on what liability protection is available for licensed professionals.
• Commingling of Funds: An LLC can only get you so far.  However, if you treat your business as a personal piggy bank rather than separating business expenses from your personal expenses, there is no limit to the liability you CAN incur.

If you’re forming an entity mainly for malpractice protection, slow down and research your state’s rules and licensing requirements, because this is where assumptions can create expensive misunderstandings.

The Tax Reality: An LLC is Not a Tax Status

This matters because it changes how you evaluate “LLC savings.”

An LLC is a state legal structure. Federal taxes are a separate question. Your LLC’s tax treatment depends on things like:

• How many owners (members) of the LLC
• Whether you make a tax election (for example, S corporation treatment)

So when you hear “an LLC saves taxes,” what people usually mean is, “I formed an LLC and then chose a tax treatment that fit my situation.”

We’ll cover S corp considerations later in the physician-specific section.

Create Your Own LLC in 7 Steps

Creating an LLC is mostly a paperwork process, but the details matter, especially for locum physicians juggling 1099 income, travel, and multiple state requirements. The steps below walk you through the formation workflow and the “after filing” tasks that make your LLC functional, not just official, so you can set up clean contracts, clean banking, and clean records from day one.

Step 1: Choose a name that works for contracts and compliance

Your LLC name has to be unique (or acceptably distinct) in your state. States also have naming rules, such as requiring “LLC” or “Limited Liability Company” in the name.

Practical naming tips for locum physicians:

• Keep it professional and flexible. Your future self may not want “Rapid ER Shifts LLC.”
• Consider privacy. Using your full legal name can make it easier to connect the entity to you in public searches.
• Think about branding later. You can operate under a different public-facing name (often called a DBA) if needed, but start with a clean legal name.

An important point to consider.  Several states require a “P” in front of your LLC (PLLC). The “P” stands for Professional, clearly indicating that the business is set up by a professionally licensed individual.  The state, specifically some state medical boards, will even verify the validity of your medical license before approving your PLLC entity setup and receiving any payments within your entity.

Step 2: Decide Where to Form Your LLC

This is where locums can get tripped up, especially if you work in multiple states.

A common rule of thumb:

• Form the LLC in the state where you primarily live and run the business, unless there is a clear reason not to.

Forming “where it’s cheaper” can backfire if you still have to register in the state where you actually work or live. Extra filings, annual reports, and registered agent fees can erase any perceived savings.

Because multi-state work is common for locums, keep reading. We’ll address foreign qualifications in the physician-specific section.

Step 3: Appoint a Registered Agent

A registered agent is the person or company designated to receive official mail for the LLC, including legal notices and state correspondence.

What to consider:

• Availability during business hours: You do not want important mail returned because no one was there.
• Privacy: If you use your home address, it may become part of the public record.
• Multi-state planning: If you later register your LLC in additional states, you may need registered agent coverage there, too.

Many locums choose a commercial registered agent service for consistency and privacy, especially if they travel frequently.

Step 4: File Articles of Organization With Your State

This is the official filing that creates the LLC.

The document is usually called Articles of Organization (sometimes a “Certificate of Organization” or similar). Filing requirements vary by state, but commonly include:

• LLC name
• Registered agent name and address
• Business address
• Member or manager structure
• Organizer name

Cost and timing notes:

• Fees vary by state. Some states are low-cost; others are several hundred dollars.
• Processing timelines vary by state. Some states approve in days, others take weeks, and many offer paid expedited options.

After approval, keep the stamped/approved filing with your permanent records.

Step 5: Create an Operating Agreement (Yes, Even if You’re Solo)

An LLC operating agreement outlines how the LLC is run, how money moves, and what happens if something changes (like adding an owner).

Even for a single-member LLC, an operating agreement helps with:

• Banking and credibility: Banks and lenders may ask for it.
• Clean documentation: It shows you treat the LLC like a real business.
• Clarity: If you ever bring on a spouse as a member, add a partner, or sell part of the business, you’ll be glad you have a framework.

Keep it straightforward. The goal is clarity and professionalism, not legal theater.

Step 6: Apply For an EIN (Employer Identification Number)

An EIN is like a Social Security Number for your business.

You generally need an EIN for an LLC if you:

• Hire employees
• Add members (multi-member LLC)
• Elect S corporation tax treatment
• Want business banking that does not rely on your SSN
• Prefer to keep your SSN off forms like W-9s when possible (where allowed)

Important sequencing point:

• If you’re forming a legal entity, like an LLC, the IRS recommends forming the entity with your state before you apply for an EIN. (If you apply too early, your EIN application can be delayed.)
• The IRS also limits EIN issuance to one EIN per responsible party per day, so plan accordingly if you are forming multiple entities.

Step 7: Set Up Business Banking, Bookkeeping, and Compliance Habits

This is where an LLC becomes “real” in day-to-day life.

Open a separate business bank account

Use the approved Articles of Organization and EIN confirmation (if required by your bank).

Basic checklist:

• Business checking account
• Business savings account (optional but helpful for tax set-asides)
• Business credit card (optional, but useful for clean expense tracking)

Build a simple bookkeeping system

You do not need complicated software on day one, but you do need consistency.

Start with these categories most locum physicians use:

• Income (by agency or facility)
• Travel (airfare, lodging, ground transportation)
• Meals (where eligible, with documentation)
• Licensing and credentialing (state licenses, DEA, hospital credentialing fees)
• CME and professional education
• Professional dues and subscriptions
• Home office (if eligible)
• Phone and internet (business portion)
• Equipment and supplies
• Mileage (track dates, locations, purpose)

Create “audit-proof” habits

A few routine practices reduce stress later:

• Save receipts (digitally is fine)
• Write notes on unusual expenses (who, what, where, why)
• Keep business and personal spending separate
• Reconcile accounts monthly

Plan for quarterly taxes

Most 1099 locums need a system for estimated taxes.

A simple approach:

• Set aside a percentage of each deposit into a dedicated tax savings account
• Review quarterly so you can adjust if income changes

Physician-Specific Decision Points Most Guides Miss

Generic LLC guides assume everyone has the same options, but physicians often don’t. Depending on your state and licensing board rules, you may be required to form a professional entity, and the differences can affect everything from what you can name the business to what you must file. Before you choose a structure, it helps to understand how LLCs compare to physician-specific options, where liability protection typically ends, and malpractice coverage still matters.

LLC vs PLLC vs PC vs. PA: what doctors should know

Many generic articles treat LLCs as a universal option. For physicians, the state may have additional rules.

• LLC: Standard limited liability company in most industries.
• PLLC (professional LLC): Some states require or strongly prefer licensed professionals (including physicians) to form a PLLC rather than a standard LLC.
• PC (professional corporation): Another professional entity option in some states. Other states offer variations, such as a professional service corporation (PSC) in Oregon and a professional association (PA) in California.

The key takeaway:

• Check your state’s rules for licensed professionals and any medical board requirements before filing.

Multi-State Locum Work: “Where to Form” vs “Where You Work”

If you form an LLC in one state and then do business in another, you may need a foreign qualification (registration) in the state where you’re working.

General way to think about it:

• Your “home” state formation creates the entity.
• Other states may require registration if you’re doing ongoing business there.

This is highly state-specific. Locums often face this question because assignments change throughout the year.

Should Your LLC Be Taxed as an S Corp?

This is one of the most common physician questions, and it deserves a neutral framework.

First, the mechanism:

• Eligible LLCs can elect to be treated as an S corporation for federal tax purposes by filing IRS Form 2553.

Now, the decision factors to weigh:

S Corp tax treatment may be worth exploring if:

• You have a consistent profit beyond what would be considered a reasonable salary for your role
• You are willing to run payroll and handle additional compliance
• You want a structure that separates salary from distributions (with the right documentation)

S corp tax treatment may not be worth it if:

• Your income varies widely, or you’re early in locum work and still stabilizing cash flow
• You do not want the admin load of payroll, payroll filings, and stricter bookkeeping
• Your net profit is not high enough to justify the added costs

An S corp election is not a magic switch. It is a tax strategy with rules, reporting requirements, and ongoing maintenance.

Common Mistakes to Avoid

Here are quick pitfalls that show up often for locum physicians:

• Forming in the wrong state because it looks cheaper. Extra registrations and recurring fees can add complexity and cost.
• Mixing business and personal finances. Paying personal bills from the business account can weaken the separation you are trying to create.
• Assuming the LLC replaces malpractice insurance. An LLC generally does not remove personal responsibility for professional services.
• Skipping the operating agreement. Even solo owners benefit from having it in writing.
• Treating the LLC like a one-time project. Annual reports, state fees, licenses, and compliance still matter.

Final Checklist: What You Should Have When You’re Done

If you’ve completed the steps above, you should have:

• Approved Articles of Organization (or equivalent)
• Registered agent in place
• Operating agreement saved and signed
• EIN confirmation (if needed)
• Business bank account opened
• A bookkeeping process that tracks income and expenses cleanly
• A basic plan for estimated tax set-asides
• A compliance calendar for annual reports and renewals

Need Help Choosing the Right Setup for Your Locum Contracts?

If you’re not sure whether an LLC, PLLC, or S-corp tax treatment fits your locum situation, The Doctor’s CPA can help you map the setup to your contracts, state rules, and tax plan.