Options for Adding Physicians To A Practice: A Micro-Corporation Perspective

I am truly exhilarated by the opportunities for learning and sharing that unfold through my diverse coaching channels at SimpliMD.

Each interaction is a gateway to new insights and profound connections, enriching both my understanding and those I have the privilege to guide. The energy and enthusiasm that fuel these exchanges ignite a passion for growth that is contagious. With this spirit of exploration in mind, let's dive into one intriguing question from this past month—a question that has sparked curiosity and engaged minds, inspiring lively dialogue and fresh perspectives.

I had a reader reach out with the following question:

I am a radiologist who owns a teleradiology business. What is a “micro-corporation” and how would this affect how I hire radiologist to work for me?

My coaching answer to him was as follows:

Options For Adding Physicians

When considering how to bring other physicians into your medical practice or entrepreneurial venture, understanding different employment models is critical. Whether you’re a radiologist running a teleradiology business or a physician branching into telehealth, each approach offers unique advantages and challenges. By incorporating the concept of a micro-corporation, you gain additional flexibility, financial benefits, and autonomy that traditional models often lack.

Here’s a breakdown of four primary ways this can be done and the solution will range from traditional models to hybrid approaches:

1. Traditional Owner-Employees (Private Practice Model)

In this model, the radiologists join the practice as employees and, over time, may have the option to buy into ownership of the business. This is the classic private practice model where radiologists eventually become partners or shareholders.

• Key Features:

  • Radiologists work as employees initially, with the opportunity to purchase shares or become partners in the business after proving their value or tenure.

  • Income is based on a salary and bonuses, with additional income from ownership in the form of profit distributions.

  • Decision-Making: As owners, these radiologists have a say in the business’s strategic decisions, which can include management, direction, and growth strategies.

• Advantages:

  • Strong alignment with the business’s goals since owner-employees have a vested interest in its success.

  • Long-term career growth opportunities for radiologists who seek to be more than just employees.

• Challenges:

  • Significant upfront costs and commitment when buying into the practice.

  • Potential for complex decision-making as multiple owners are involved.

2. Hybrid Employees (Micro-Corporation Ownership Model)

In this hybrid model, the radiologist creates their own micro-corporation (an entity they own and control) and that corporation becomes the owner of shares in the teleradiology business. Instead of the radiologist directly owning shares as an individual, their micro-corporation owns the shares.

• Key Features:

  • The radiologist contracts through their micro-corporation, which purchases ownership shares in the teleradiology practice.

  • The radiologist is an employee of their own micro-corporation, receiving compensation and benefits through it rather than directly from the teleradiology business.

  • This model allows radiologists to separate personal liability from the business, access tax benefits, and enjoy the entrepreneurial advantages of owning a corporation.

• Advantages:

  • Radiologists can structure their compensation and tax strategy within their micro-corporation, offering flexibility and tax efficiency.

  • Potential for reduced personal liability, as the micro-corporation holds the ownership shares.

  • Provides an entrepreneurial pathway without completely sacrificing ownership rights or control over practice decisions.

• Challenges:

  • Complexity in setting up and maintaining a micro-corporation, requiring tax, legal, and financial expertise.

  • The structure of ownership can become more complex for the teleradiology business, especially if many micro-corporations own shares.

3. Employees Without Ownership Options

In this model, radiologists are employed as salaried employees with no ownership stake in the business. They earn a set salary, and in some cases, may be eligible for performance-based bonuses, but they do not have the opportunity to buy into the business.

• Key Features:

  • Radiologists receive a steady salary with potential bonuses tied to productivity or performance metrics.

  • There is no buy-in or ownership stake, meaning the radiologist remains a straightforward employee of the business.

  • They are not involved in the management or strategic direction of the company.

• Advantages:

  • Predictable, stable income without the risk or commitment of ownership.

  • Focus purely on clinical work without the administrative or business responsibilities of owning or managing a practice.

• Challenges:

  • Less financial upside compared to ownership models, with no profit-sharing or equity appreciation.

  • No say in the long-term direction of the company, which can be a drawback for radiologists seeking more influence.

4. Independent Contractors

In this model, radiologists join the practice as 1099 independent contractors, meaning they are not employees of the business but are contracted to provide services.

• Key Features:

  • Independent contractors are paid per reading or on a case-by-case basis, often with more control over their work schedules.

  • They are responsible for their own taxes, benefits, and other employment-related expenses.

  • Contractors typically have more flexibility but also more risk in terms of income fluctuations and lack of benefits like health insurance or retirement plans.

• Advantages:

  • Greater flexibility in work hours, often allowing radiologists to work with multiple practices simultaneously.

  • Potentially higher income per case, since contractors often avoid the overhead costs and obligations that come with being an employee.

  • Ability to scale work based on personal needs and preferences.

• Challenges:

  • No benefits or job security, as they are not full-time employees.

  • Responsible for all their own administrative, legal, and financial management (taxes, malpractice insurance, retirement plans, etc.).

  • Less engagement with the practice’s long-term success and strategic goals.

Each of these models offers different advantages depending on the goals of the teleradiology business owner and the preferences of the radiologist joining the practice. They can even be combined to meet different needs within a growing teleradiology group. For instance, some radiologists may prefer the flexibility of independent contracting, while others seek the long-term stability and involvement that comes with ownership.

What Is a Micro-Corporation?

A micro-corporation is a small business entity created and owned by a physician to manage their professional work. Instead of being an individual employee or sole proprietor, you work through your corporation, providing professional services as its representative.

When I use the term micro-corporation in reference to non-employed/self-employed doctors, I am referring the following basic characteristics:

• You are single member business since you are the only employee and owner

• Your lean business model has a single intangible product: your professional services

• Your business is highly flexible in the marketplace including its visibility, mobility, and location

• You can choose the business entity as either unincorporated (sole proprietor, LLC, etc.) or incorporated (PC/PA and PLLC, designed for licensed professionals).

• You can choose the federal tax classification of the business entity

The simplest approach to establishing yourself as a micro-corporation is to call yourself a sole proprietor, with the pros being a simple setup, no separate business tax filings, and total control over the business. However, the cons include unlimited personal liability. Many physicians choose this option for its simplicity, but I recommend better corporate alternatives due to the lack of liability and asset protection as a sole proprietor, which is crucial given your high net worth.

Key Benefits of Micro-Corporations:

1. Financial Control: Allocate income strategically to optimize taxes.

2. Liability Protection: Separate your personal assets from professional risks.

3. Entrepreneurial Freedom: Pursue multiple revenue streams (telehealth, consulting, locums, etc.) through one entity.

4. Scalability: Expand your practice by hiring staff or contracting other professionals.

As a practical example beyond radiology, imagine you’re a family physician combining locums work, telehealth, and consulting. As a micro-corporation, you can bill each client or employer through your entity, consolidate expenses, and streamline taxes.

How Physicians Can Use Micro-Corporations in Each Model

Owner-Employee:

Even as part of a private practice, your micro-corporation can be the legal entity owning your shares, giving you financial and liability advantages.

Hybrid Employee:

Your micro-corporation owns shares in the practice while providing flexibility for future entrepreneurial ventures.

Employee Without Ownership:

You don’t have any opportunity to use your micro-corporation in this model and the tax consequences are significant at your high income level.

Independent Contractor:

A micro-corporation maximizes the autonomy and tax benefits inherent in this model, providing a scalable structure for growth and tax-advantaged pass-through for your salary and benefits.

SimpliMD Tools and Resources for Physicians

To help you succeed as a micro-corporation, SimpliMD offers a suite of products tailored for self-employed doctors.

SimpliMD Personalized Micro-Business Consult:

For only $99, receive a personalized consultation to establish your micro-corporation and access a 1-year SimpliMD membership valued at $2,500. This membership includes tools, guides, and templates to accelerate your journey to independence.

Creating a Practice Without Walls Course:

Learn how to structure your micro-corporation, navigate the healthcare marketplace, and create a location-independent practice. This course empowers you to take control of your professional life with proven strategies. For only $199 you can learn how to thrive independently in the marketplace.

SimpliMD Business Plan Bundle:

Gain access to essential templates in this bundle, including:

• SimpliMD Business Plan Template crafted for physicians.

• Micro-Corporation Budget Template to save you hours of time.

• SWOT Analysis Template to optimize your business planning.

These resources will help you transition from employee to self-employed physician entrepreneur seamlessly.

Take the Leap into Self-Employment

Operating as a micro-corporation is your gateway to autonomy, financial freedom, and professional satisfaction. Whether you’re joining a teleradiology business, launching your own telehealth service, or combining locums work with consulting, a micro-corporation provides the structure you need to thrive.