As a locum tenens provider, you enjoy flexibility, autonomy, and the ability to practice medicine on your terms.
But with this independence comes the responsibility of managing your business structure, taxes, and legal protections. One of the most common questions locum tenens providers ask is whether forming a Limited Liability Company (LLC) is worth it.
An LLC for locum tenens physicians can offer liability protection, tax advantages, administrative ease, and enhanced professional credibility. However, it’s not a one-size-fits-all solution. In this guide, we’ll break down the benefits of an LLC for physicians working locum tenens so you can make an informed decision about your business structure.
Liability Protection: What an LLC Can and Can’t Do for You
For many independent contractors, forming a Limited Liability Company (LLC) is essential in separating personal and business assets. An LLC for physicians, especially those working as locum tenens providers, can help limit liability in contract disputes or company debts. However, your primary risk as a locum tenens physician isn’t typically business-related debt—it’s medical malpractice.
Unfortunately, medical malpractice lawsuits are always filed against you personally, meaning an LLC won’t shield you from liability in these cases. Forming a locum tenens LLC still provides legal protections you wouldn’t have as a sole proprietor, such as protection from contract disputes and business debts. Here’s a quick comparison:
| Business Structure | Protection from Contract Disputes? | Assets Protected from Business Debts? | Protection from Malpractice Lawsuits? |
|---|---|---|---|
| Sole Proprietorship | No | No | No |
| Locum Tenens LLC | Yes | Yes | No |
While it’s unlikely that a locum tenens provider will accumulate significant business debts, having an LLC ensures that personal assets such as your home, car, and investments are protected from creditors or legal claims unrelated to malpractice. Any locums provider with significant real estate or other investments should consider an LLC for the liability protection it provides.
The key here is to avoid the co-mingling of business and personal funds. Piercing the corporate veil is a steadfast method to nullify any and all the benefits and protection stated above.
Tax Flexibility and Savings: Why Filing as an S-Corp Physician Matters
One of the most significant advantages of forming an LLC for physicians is choosing how you’re taxed. As an LLC, you can elect to be taxed as an S corporation. For a locum tenens provider, filing as an S-Corp is often the most tax-efficient option, depending on your income level.
When you work as an independent contractor, your employers send your earnings directly to your LLC. As an S-corp, your business must pay you a “reasonable” W-2 salary, and any remaining profits are distributed to you as the owner. Unlike salary income, this profit distribution is not subject to payroll taxes like Social Security and Medicare, which can lead to substantial tax savings.
However, there are some important considerations:
- Are you a W-2 employee elsewhere? If you have another job that withholds Social Security taxes, filing as an S-corp may not offer significant benefits initially, as both employers must pay Social Security, leading to double taxation. However, when filing your income taxes, the IRS does credit your FICA overpayments against your income taxes.
- You must pay yourself a “reasonable salary.” The IRS requires that you compensate yourself fairly based on industry standards. For full-time locum tenens providers, this often means earning at least the Social Security Wage Limit ($176,100 in 2025), with payroll tax savings applying only to earnings above that threshold.
Administrative Ease: Simplicity Over Complexity
Locum tenens LLCs are significantly more straightforward to form and manage than corporations. Even if you choose to be taxed as an S-corp, you can still operate as an LLC and avoid the administrative burdens of incorporating.
Key benefits of LLCs over corporations include:
- Fewer compliance measures: Corporations must maintain extensive financial records, use accrual accounting, and follow strict organizational structures. LLCs have far fewer requirements.
- Easier formation: Unlike corporations, which issue stock and other formalities, forming an LLC is relatively straightforward. You simply choose your state, register a business name, appoint a registered agent, and file Articles of Organization.
- Lower filing costs: Incorporation fees range from $500 to $1,500, while LLC filing fees typically fall between $50 and $500, depending on the state.
- Tax Filing Separation: By upgrading your LLC to an S-corporation, you must file a tax return separate from your personal income tax return. This allows you to separate your personal tax deductions from your business tax deductions, reducing the potential risk of an IRS audit.
For locum tenens providers, an LLC’s simplicity and flexibility make it a more practical choice than forming a corporation.
Professional Credibility: Standing Out in the Market
In the competitive world of locum tenens work, making a strong impression on potential employers is crucial. Operating under an LLC can enhance your professional image.
An LLC allows you to present yourself as an established business rather than contracting under your name. Hospitals and staffing agencies often prefer working with LLCs because they signal professionalism, stability, and predictability, qualities that can help you secure more job opportunities.
State-Specific Regulations: Where Should You Register Your LLC?
Each state has its own rules and fees for LLCs, and as a locum tenens provider, you have the flexibility to form your LLC in any state. However, if you primarily work in one state, registering there is often best to minimize fees and simplify compliance.
If you’re considering filing out of state, here are some popular options:
- Wyoming is known for substantial liability and privacy protections, plus a legal system that efficiently resolves business disputes.
- Delaware does not tax out-of-state income and has a dedicated business court that expedites legal matters, though it does require a $300 annual franchise tax.
- Nevada offers similar advantages to Delaware, including a specialized business court and strong privacy protections, making it a preferred choice for many professionals.
While these states provide significant benefits, most locum tenens providers would be best served by filing in their primary state of employment. However, regardless of the state of filing, your locum contracts, travel schedule, and property ownership may be subject to non-resident taxes in other states. Before filing, consult with a CPA or a financial advisor to review what your state requires.
Secure Your Financial Future
While an LLC won’t protect you from malpractice liability, it offers valuable benefits, including asset protection, tax savings, simplified administration, and enhanced professional credibility. For locum tenens providers looking to optimize their business structure, forming an LLC, especially one that elects S-corp taxation, can be a smart financial and legal move.
The Doctor’s CPA specializes in helping providers like you navigate the complexities of financial management. From forming an LLC to tax strategies, we’re here to ensure you’re protected and getting the most out of your investments.
Let’s build a financial blueprint for your success. Schedule your consultation today.