We’re going back to basics and answering some recent investing questions we’ve received from the audience. Most of these pertain to early-career attendings regardless of specialty.

Quick disclaimer before we dig in: This is general education only. We're not financial or tax advisors, and the right call depends on details specific to you, so run your numbers with a CPA who works with physicians.

Let’s dive right in!

If you do a lot of contracting work (locums, medical writing, other physician side gigs), it might behoove you to open a business for legal and tax purposes.

Depending on your situation, you can even funnel that contracting income into retirement accounts like a Roth IRA or Solo 401k. However, you don't need an LLC or an S-corp to open a solo 401(k). If you collect 1099 income and pay self-employment tax, the IRS already considers you self-employed, which means you can open a solo 401(k) as a sole proprietor right now. No entity or formation paperwork, and no separate business return required.

That matters because the solo 401(k) is usually the real prize people are chasing when they ask this question. Here's what it gets you in 2026, where you contribute as both the employee and the employer:

For a locums physician, the most valuable detail is how this stacks in conjunction with a W-2 job. Your employee deferral is capped per person across every 401(k) and 403(b) you participate in, so if you also work a hospital W-2 job and max the deferral there, that bucket is already spent.

The employer profit-sharing piece is separate and based only on your 1099 income. So you can max your salaried job’s 401(k) and still put up to 20% of your net locums earnings into a solo 401(k) on top of it. For a physician running both income streams, that's tens of thousands of additional tax-advantaged dollars a year.

So where do the LLC and S-corp actually come in?

An LLC is a legal liability wrapper. By default, a single-member LLC is disregarded for tax purposes, so it doesn't change what you owe and doesn't unlock anything on the retirement side that you don't already have as a sole proprietor. For a solo locums doc, the liability protection it adds is thin next to the malpractice and umbrella coverage you should already be carrying.

An S-corp is a tax election that can sit on top of an LLC. The reason you’d do this is to shave down self-employment tax: you pay yourself a "reasonable salary" subject to payroll tax and take the remaining profit as distributions that skip the 12.4% Social Security and 2.9% Medicare hit.

There are a few catches and some quick math you’ll need to do.

Bottom line: if you want the extra money going to retirement, you can open a solo 401(k) as a sole proprietor. The S-corp is a separate, narrower question that tends to pay off only once your side gig net income is high and steady enough that the Medicare savings clear the additional cost and paperwork. Run your numbers with a physician-focused CPA before you form anything.

The concept is simple but the mechanics are where people get stuck, so here's a breakdown. Remember that Roth IRAs are a retirement account that allow tax-free growth since you’ve already paid taxes on the contributions.