Best Business Structure for Locum Tenens Physicians and APPs

The best business structure for locum tenens physicians depends on their goals, income level, and risk tolerance. Most clinicians begin as sole proprietors because it’s simple to set up, but as income grows, many transition to an LLC or even an S-Corporation to improve liability protection and tax efficiency.

Why business structure matters in locum tenens

When you work locum tenens, you are not an employee — you operate as a business. Starting a business has a few steps to it, but it protects you from personal liability in most instances. There are several forms of business structures, and laws differ from state to state, but we’ll cover the basics here.

When you become an independent 1099 contractor instead of an employee, you manage your financial assets. This means you are now responsible for:

• How your income is taxed
• How to obtain health and other insurance
• How your personal assets are protected
• How you plan for retirement and long-term wealth
• How to remain compliant with federal and state regulations

This shift is one of the most important (and often underestimated) parts of moving into locum tenens. But it’s easier than feared, and we’re right here to help guide you through it all.

How locum tenens work is structured

Locum tenens physicians and APPs operate as independent contractors, meaning you function as a separate entity from the healthcare facilities you work with. This gives you more control over your schedule and career, but it also means you are responsible for managing your own business decisions, including taxes and financial planning.

There are three primary business structures most locum tenens physicians consider. Each offers a different balance of simplicity, protection, and tax flexibility.

Sole Proprietor

A sole proprietorship allows you to begin working immediately without forming a separate entity. It’s the fastest and most straightforward way to get started. But it does come with the biggest personal risk.

Best for:

• Physicians testing locum tenens
• Sporadic locums work

Key considerations:

• No liability protection (your personal assets are exposed via lawsuits)
• Minimal setup and cost
• Limited long-term scalability

Limited Liability Company (LLC)

An LLC creates a legal separation between your personal and business finances, making it one of the most common structures for locum tenens physicians because it’s the easiest and quickest to set up.

Best for:

• Physicians working locums consistently
• Those looking for liability protection

Key benefits:

• Protects personal assets
• Flexible and relatively simple to maintain
• Strong long-term foundation

S-Corporation

An S-Corporation is a tax election that can reduce self-employment taxes at higher income levels. It’s typically layered onto an LLC.

Best for:

• Higher-earning locum physicians
• Those working with a CPA

Key considerations:

• Requires more administration (payroll, accounting)
• Not beneficial at all income levels
• Should be implemented with professional guidance
• Has higher tax flexibility

Quick comparison: which structure is right for you?

Factor	Sole Proprietor	LLC	S-Corp
Setup Complexity	Low	Medium	Higher
Liability Protection	None	Yes	Yes
Tax Flexibility	Low	Medium	High
Best for	Beginners	Most Locums	High Earners

How to choose the right structure

The right structure depends on how you plan to use locum tenens.

There isn’t a single “best” option, only the one that best aligns with your current stage and goals. The best way forward is to speak with a business tax professional and financial planner.

We have recommendations for tax professionals, financial planners, attorneys, and more who specialize in locum tenens in our free Locums Toolkit.

How to set up your locum tenens business

Setting up your business structure, if you choose an LLC or S-Corp, is relatively straightforward, but each step is important. After choosing your structure, you’ll typically:

• Register your business with your state
• Obtain an EIN for tax purposes
• Open a business bank account
• Check for any state-specific requirements such as licenses or registrations

While these steps are manageable, the decisions behind them can have long-term implications, especially when it comes to taxes.

How taxes work with locum tenens

One of the biggest adjustments for physicians entering locum tenens is how taxes are handled. Instead of having taxes withheld automatically from your paychecks, you are responsible for:

• Paying quarterly estimated taxes
• Managing your own tax planning
• Covering both employer and employee portions of payroll taxes

Because of this, it’s critical to plan ahead and set aside income throughout the year.

At this point, many clinicians realize that choosing a business structure is only part of the equation. The bigger challenge is understanding how that structure fits into a complete financial strategy.

While there is plenty of general advice available, most accountants and advisors do not specialize in locum tenens. The realities of multi-state work, locums lifestyle, and contractor tax planning require specific expertise.

How Floyd Lee Locums supports you beyond placements

This is where Floyd Lee Locums takes a different approach. Through our Locums Toolkit, we connect clinicians with a curated network of professionals who specialize in the locum tenens industry.

This includes:

• Professionals who understand multi-state income
• CPAs who understand 1099 physician income
• Financial planners experienced with contractor-based careers
• Attorneys who can guide business structure decisions

These professionals understand the specific challenges and opportunities that come with locum tenens.

Think of this as having a trusted address book of experts to guide you through key decisions, rather than trying to navigate them alone.

Download our free Locums Toolkit now

We don’t expect you to navigate all of these operational and administrative challenges alone. Instead, we step in to make the process seamless.

What we’ve seen from locum tenens clinicians

In practice, clinicians tend to follow a similar path. They begin with a simple structure, then evolve as their career grows. The biggest challenges tend to come when clinicians:

• Delay getting financial guidance
• Underestimate tax responsibilities
• Try to manage everything independently

On the other hand, those who build a strong support system early often experience smoother transitions and better financial outcomes.

That’s where Floyd Lee Locums shines. From helping you understand contract terms to guiding you through credentialing and licensing requirements, our team is here at every step. We can assist with completing paperwork, coordinating documentation, and managing timelines so nothing falls through the cracks.

Instead of spending hours trying to figure out processes or chase down requirements, you have a dedicated team supporting you.

We are your front desk, behind-the-scenes support, and your guide. That’s our concierge approach.

Common mistakes to avoid

Many of the most common mistakes are preventable with the right guidance. The most common mistakes we see include:

• Choosing a structure based only on convenience or impatience
• Not planning for or paying quarterly taxes
• Mixing personal and business finances
• Not working with a CPA or financial advisor
• Delaying getting help
• Trying to DIY locum tenens contracts, jobs, and lifestyle

Do you need a CPA or attorney?

In most cases, yes. Working with a CPA or attorney ensures that your business structure, tax strategy, and long-term planning are aligned. We strongly recommend seeking professional guidance to avoid costly mistakes and optimize your financial strategy.

A CPA or attorney can help you with decisions that go far beyond basic setup. These include choosing the right entity based on your income, planning for quarterly taxes, identifying deductions, and ensuring you remain compliant with state and federal requirements. Without this guidance, it’s easy to overlook details that can have significant financial consequences over time.

Get expert guidance tailored to locum tenens

Choosing a business structure for locum tenens impacts how you protect your income, how you manage risk, and how you build long-term financial success. After all, you’re likely choosing locum tenens for its flexibility and higher income.

The right choice depends on your goals, but having the right guidance makes all the difference.

At Floyd Lee Locums, we go beyond placements. We help you navigate the entire locum tenens lifestyle, including the financial and business decisions that come with it. We can connect you with experienced professionals who specialize in locum tenens so you can make informed decisions with confidence.