The Case for Self-Employment with Dr. Tod Stillson

This post was originally published on the White Coat Investor January 01, 2026

Today’s episode dives into a hotly debated topic in physician employment. We are talking about 1099 work. We’re joined by Dr. Tod Stillson, who brings an enthusiastic case for why independent contracting and self-employment can open doors and empower doctors in ways traditional employment often doesn’t. Dr. Jim Dahle offers a thoughtful counterpoint, questioning just how impactful 1099 status really is for most physicians. It’s a friendly, engaging conversation with plenty of respectful debate, and we think listeners on both sides of the issue will find something to appreciate—and maybe even reconsider.

Watch this on YouTube: https://youtu.be/yS7yMHXk3MA

• WCI Podcast Transcript

1099 vs. W-2

Jim framed the conversation around self-employment as something that requires nuance rather than blanket advice. He emphasized that while owning your work and having control over your career can be appealing, forming a corporation does not automatically create tax savings or liability protection. His goal is to help physicians understand the tradeoffs clearly before assuming one structure is inherently better than another.

He started by laying out the basic tax classifications physicians encounter. He explained that a W-2 physician is an employee with relatively simple taxes, limited control over work conditions, and an employer that handles payroll and benefits. A 1099 physician is not an employee but a business owner, even if there is only one client. In that case, the physician files a Schedule C and chooses a business structure—such as a sole proprietorship, LLC, or S Corporation. He also explained that physicians paid on a K-1 are partners, which is another form of self-employment, but it comes with shared ownership and more complex tax reporting.

Tod added an important practical distinction by focusing on the W-9 form. He pointed out that this is where classification becomes real, not just a verbal discussion about being W-2 or 1099. When physicians complete a W-9, they are being asked how the IRS should view them, as an individual or as a business. He argued that many doctors default to using their Social Security number without realizing they have the option to present themselves as a business. In his view, this is a key moment for physicians to assert agency and think of themselves as micro-businesses.

Jim agreed in principle but emphasized that the IRS does set guidelines that ultimately matter. He outlined the three broad categories the IRS uses to evaluate classification, which include behavioral control, financial control, and the nature of the relationship. He explained that these factors are intentionally gray, but they exist for a reason. He also stressed that misclassification risk largely falls on the employer. If a physician is treated as an independent contractor but later deemed an employee, the employer may be responsible for unpaid payroll taxes. That risk explains why employers often prefer W-2 arrangements.

Tod pushed back by focusing on physician-specific realities. He argued that doctors who have multiple clients, pay their own malpractice insurance, and contract through a professional entity can legitimately meet independent contractor criteria. He believes that if a physician can demonstrate those elements, employers should provide the option to work as a contractor rather than defaulting to W-2 employment out of fear. He also noted that professionals like physicians are often viewed differently than hourly workers, and that misclassification cases involving doctors are relatively rare.

Both ultimately agreed on the same conclusion, though, even if they approached it from different angles. Jim emphasized that many young physicians ask whether they should choose 1099 work simply because they have heard it is better, and his answer is always that it depends. Tod agreed, stressing that physicians often have more power and choice than they realize. The right decision depends on the details of the role, the compensation, the level of control, and the physician’s understanding of what they are taking on—not the label itself.

More information here:

W-2 vs. Self-Employed

Why ‘Going 1099’ Won’t Solve All Your Financial Problems

Is 1099 Actually Better?

They moved the conversation to a practical breakdown of why a 1099 role needs to pay more than a W-2 role to truly be a fair comparison. Jim emphasized that self-employed physicians are on the hook for both halves of payroll taxes, and they must fully cover benefits that are often hidden as employees. Health insurance is the biggest blind spot. Many doctors underestimate the cost because employers typically subsidize most of it. When physicians see the full price tag—often $12,000-$25,000 per year for a family—it becomes clear that equal pay between 1099 and W-2 is usually a bad deal.

Tod agreed with this math and reinforced the idea of “grossing up” pay to account for taxes and benefits. Where he leans harder is on the broader issue of business literacy. He argued that physicians are trained to be both financially and business illiterate, which weakens their negotiating power and limits their awareness of available options. He contrasts today’s training environment with earlier generations of physicians who expected to operate as businesses and thought that way from the start.

From there, Tod made the case that forming a corporation should be viewed as a capstone to medical training. After investing hundreds of thousands of dollars in education, he argued that spending a relatively small amount to set up a corporate structure empowers physicians by giving them flexibility in the marketplace. In his view, having a corporation in place allows doctors to choose between being an employee or an independent contractor instead of defaulting to W-2 simply because they are unprepared.

This is where Jim pushed back slightly. He agreed that the cost and friction of forming a business entity are very low, but he disagreed with framing it as a major capstone step. He pointed out that in many states, an LLC can be formed for under $100 and maintained cheaply, and he said that physicians have multiple structural options beyond a formal corporation, including simple sole proprietorships. Both ultimately agreed that the key issue is awareness. Doctors need to understand their options so they can intentionally choose what works best for their stage of life, rather than drifting into a default arrangement without realizing the tradeoffs.Business Structure Debate: Sole Proprietor vs. LLC vs. S Corp

Jim then argued that many physicians with limited 1099 income and no employees can reasonably remain sole proprietors without losing meaningful benefits. He emphasized that forming an LLC or corporation does not reduce malpractice risk because malpractice liability is always personal. From his perspective, if a physician has little true business liability beyond their clinical work, the practical upside of adding a formal entity can be small. Dr. Stilson agreed that sole proprietorship can make sense at low income levels but framed incorporation as inherently empowering because it creates optionality and reinforces an ownership mindset, even if the structure is not fully utilized right away.

The disagreement sharpened around income thresholds and tax value. Tod argued that once 1099 income reaches certain levels, incorporation becomes more compelling. He suggested that below $30,000 of 1099 income, a sole proprietorship is usually best; that $30,000-$50,000 is a gray zone worth analyzing; and that above $50,000, the economics of an S Corp often favor incorporating. Dr. Dahle pushed back by asking what specific tax savings actually appear at those levels. He argued that the only real tax advantage of an S Corp comes from payroll tax savings, mainly Medicare tax, once Social Security taxes are already maxed out—and that these savings are often modest.

That tax debate continued when they moved to discuss retirement plans. Tod believed that S Corps can expand planning opportunities and allow physicians to retain more income over time. Jim strongly disagreed, stating that sole proprietors can already open and fully fund solo 401(k) plans and defined benefit or cash balance plans without incorporating. He noted that in some cases, S Corp rules can actually limit contributions because of required salary levels. He also pointed out that the cost of filing a corporate tax return often offsets much of the projected tax savings, making the outcome close to break-even for many doctors.

Asset protection was another area of disagreement. Tod argued that a corporation or professional LLC creates a meaningful separation between business activity and household assets, which he sees as valuable even when risks are not obvious in advance. Jim countered that asset protection only matters if there is real business liability and that most solo 1099 physicians have little exposure beyond malpractice, which the entity does not shield. He acknowledged there may be narrow edge cases where an entity helps but questioned whether that benefit alone justifies the added complexity. Both agreed that if liability protection is the goal, an LLC often provides similar legal protection to a corporation under state law.

Where they ultimately align is on motivation and mindset. Tod argued that incorporation and self-employment can meaningfully improve autonomy, agency, and identity as an owner, which he believes plays a major role in reducing burnout. Jim agreed that ownership and control matter and that self-employment often leads to greater career satisfaction, especially later in a physician’s career. But he remained unconvinced that simply adding a corporate structure provides additional benefit beyond being self-employed in any form. Their shared conclusion is that entity choice should be based on individual circumstances, real numbers, and personal priorities, and it should ideally be tested through side-by-side analysis with a qualified professional rather than assumptions or rules of thumb.

More information here:

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Final Thoughts from Jim

Jim walked through follow-up points from the interview, focusing on what forming a corporation actually does and does not get you compared to staying a sole proprietor. He explained that many commonly cited “corporate perks”—like accountable reimbursement plans, family payroll, and fringe benefits—are often overstated or available in a similar form to sole proprietors. Some deductions are a little cleaner or easier inside a corporation, but for small side gigs or modest 1099 income, the extra complexity usually outweighs the benefit.

He pushed back hard on the idea that forming an S Corp magically allows much larger retirement contributions. In most cases, retirement contribution limits are driven by actual profits, not entity type, and corporations do not create extra money out of thin air. The only time corporate structure really matters for retirement is at very high income levels, especially when someone is considering a cash balance plan and already earning well into six figures. At that point, an S Corp usually makes sense anyway, largely because of Medicare tax savings.

He added that a very practical downside of 1099 work is financing friction. Being self-employed can make refinancing student loans or getting a physician mortgage more difficult, especially early on, because many lenders want one or two years of tax returns. The takeaway is balance and realism. Corporate structures can help in the right circumstances, but they are not a shortcut to massive tax or retirement wins for small or moderate 1099 income. And while self-employment offers flexibility and tax-planning opportunities, it can also create extra hurdles with lenders that physicians should be prepared to navigate.

If you want to learn more from Dr. Tod Stillson, you can check out his website. He provided further information after the interview that you can read here and here, and he also wanted to share his ebook with white coat investors free of charge.