I am a resident finishing my training in a few months. I am planning on doing locum tenens and have licenses in 5 states. FL, TX, MA, CA, and AZ. I have spoke with a few people/friends who said that I must incorporate as it will look "cleaner" in the eyes of the IRS and that I will able to take more deductions. I did read your article on incorporating with interest. My main question is what state should I incorporate in?? Does it matter?
I have ties to MA and some in Florida which is an income tax free state. Since I am doing locums I am not sure how many months I will be in each state. What state should be my "home base"?? Does that have any bearing come tax time. I just want to save as much moneya as possible and more pay any unnesessary extra taxes.

Thanks!

Zip Code: 10467

For starters, I think it makes a lot of sense for people who have a practice and plan to maintain that practice for a number of years to incorporate.

That being said, I never understand why people say that you can deduct more business expenses as a corporation than you can as a sole proprietor. (If anyone can let me know what I'm missing here, I'd appreciate it.)

What I've seen is that everything that is deductible to a corporation is also deductible to an unincorporated business. Plus, some expenses like the home office deduction and your automobile expenses are easier for an unincorporated business to claim.

Plus, there are a lot of costs that go along with setting up and maintaining a corporation. You also need to put yourself on the corporation's payroll, which comes with a host of headaches and costs.

Finally, you probably need to register your corp as a foreign corp before you can work in any state. More headaches!!!

So from a purely tax perspective, if you'll only be doing your Locums for a few years, I vote that you consider doing so as an unincorporated business.

(You should definitely seek the advice of a lawyer, however, to see what risks you can minimize by incorporating.)

Zip Code: 01801