White Coat Investor Podcast #452: The Case for Self-Employment with Dr. Tod Stillson

Released: January 1, 2026
Host: Dr. Jim Dahle
Guest: Dr. Tod Stillson, rural family physician and founder of the Physician Entrepreneur Academy

Episode Overview

This episode centers on the pros and cons of self-employment for doctors—especially through 1099 independent contractor work—versus traditional W-2 employment. Dr. Jim Dahle and Dr. Tod Stillson dig into practical, financial, and psychological dimensions of self-employment for physicians. They also address common misconceptions around entity formation, taxes, asset protection, autonomy, agency, and burnout, occasionally engaging in good-natured debate over the financial mechanics and benefits of incorporation.

Key Discussion Points & Insights

1. Defining Employment Types (07:27-10:20)

• W-2: Employee status, simpler taxes, minimal job control.
• 1099/Independent Contractor: Run your own business, file Schedule C taxes, choose between sole proprietorship, LLC, S-corp, etc. More complexity, more autonomy.
• K-1/Partnerships: Shared control, additional complexity.

Quote:
_"Most docs are paid on one of three types of tax forms ... your financial situation’s relatively simple. The amount of control you have over your job is not very high." – Dr. Jim Dahle (08:01)*

2. Empowerment and the W-9 "Micro Corporation" (10:20-11:35)

• The W-9 form lets physicians choose if they want to represent themselves as an individual or a business.
• Many default to "individual" due to lack of business literacy.

"You have the power as a doctor to be a business...The IRS is literally saying that to you."
— Dr. Tod Stillson (10:50)

3. IRS Worker Classification & Risks (11:35–16:43)

• IRS outlines behavior, financial, and relationship tests for identifying contractors vs. employees.
• The greater risk for misclassification falls on the employer, not the worker.

"The real risk is for the employer...the IRS comes back and makes the employer pay the other half of the payroll taxes."
— Dr. Jim Dahle (12:47)

4. Choice, Qualifications, and Self-Determination (13:51–18:16)

• Tod explains doctors can qualify as true independent contractors by controlling behavioral, financial, and relational aspects (multiple clients, own malpractice, using a professional corporation).
• Many doctors lack both financial and business literacy, unlike older generations.

"Young doctors … are conditioned to be business illiterate and financially illiterate. And it puts them really in an impaired position."
— Dr. Tod Stillson (18:19)

5. Financial Realities: Grossing Up 1099 Pay (17:09–18:16)

• 1099 contractors must negotiate higher pay to cover both sides of payroll taxes and their own benefits, like health insurance.

"If they're going to pay you the same as a 1099 as they're going to pay you on a W2, that is not a good deal."
— Dr. Jim Dahle (17:54)

6. Incorporation: When, Why, and How? (20:16–29:36)

• Forming an LLC or S-corp is cheap and easy, but the financial return is dependent on income level.
• Below ~$30K of 1099 income: probably stay sole proprietor. Above ~$50K, S-corp may make sense for small tax advantages and some asset protection.

"If you’re at $30,000 plus in income ... probably makes sense to consider incorporating. If it’s below 30,000, sole proprietorship probably is your best model."
— Dr. Tod Stillson (24:10)

• Key tax savings: S-corps can pay part of income as distribution (not subject to Medicare tax). The true financial difference for most is small.

Debate:
Dr. Stillson suggests larger savings; Dr. Dahle argues the only meaningful tax benefit is via reduced Medicare taxes—often just a couple thousand dollars per $100K in income, which may be offset by higher administrative costs. (25:41–34:19)

7. Asset Protection: How Valuable Is It for Physicians? (35:03–43:14)

• LLCs/corporations protect against business liabilities—but malpractice is always personal for doctors.
• For a doctor with no employees, the asset protection is more theoretical than real.
• Professional LLCs (PLLCs) may be required, which are nearly identical to standard LLCs.

"The corporation doesn’t give you additional malpractice protection."
— Dr. Jim Dahle (37:21)

8. Deductions and Retirement Planning: Reality vs. Myth (43:14–47:23, 69:32–72:05)

• Most business expenses are deductible across all entity types; little difference whether sole proprietor or S-corp for standard deductions.
• The Augusta Rule (renting your home to your business for meetings)—unique to corporations/LLCs, not sole proprietors.
• Cash balance and retirement plan limits are often not higher for S-corps; debate on whether entity really allows larger contributions.

"If you’re making enough money you’re opening a cash balance plan, you ought to be opening up filing as an S Corp anyway just for Medicare tax savings..."
— Dr. Jim Dahle (71:20)

9. Quarterly Taxes, Administrative Hurdles, and Health Insurance (47:23–55:44)

• Self-employment brings the challenge of estimated quarterly tax payments without automated payroll withholding.
• Health insurance for the self-employed is expensive ($20K–$25K per family is typical), but many options exist (marketplace, medical societies, health sharing plans).

"A lot of doctors...are just completely unprepared for the logistics of self-employment—especially quarterly taxes and buying insurance."
— Dr. Tod Stillson (summary)

10. Agency, Autonomy, and Burnout—The True Case for Self-Employment (55:44–59:48)

• Dr. Stillson’s strongest argument: Ownership breeds autonomy, identity as a professional, reduced burnout, and greater job satisfaction.
• Medscape surveys and his experience show independently practicing doctors report higher happiness and thriving.

"Self-employed doctors are happier, they thrive, and they like their professional life much better than doctors who are employed."
— Dr. Tod Stillson (57:04)

"What’s most important is for doctors to begin to see that they do have the opportunity in the marketplace today to not just blindly become an employee and expect a great outcome."
— Dr. Tod Stillson (58:30)

11. Trends and Structural Challenges (59:48–61:36)

• The drift toward employment continues—rising from 75% to around 80% of young doctors taking W-2 jobs.
• Market consolidation, facility fees, and negotiating power push many into employment, sometimes with higher pay but less autonomy.

12. Alternative Practice Models and Flexibility (65:06–69:17)

• "Employment light" is a hybrid: long-term 1099 independent contractor embedded within a hospital system, with higher pay and autonomy.
• Even highly specialized physicians have flexibility for locums or part-time arrangements.

"When I made the transition [to employment light], the net net was about $200,000 more a year."
— Dr. Tod Stillson (68:20)

Notable Quotes & Memorable Moments

• On negotiation and ignorance:
  "If you don’t know [about your options], you’re just going to lean right towards W2. Boom. That’s just how it goes down."
  — Dr. Tod Stillson (20:32)

• On business formation cost:
  "I can form an LLC here in Utah for 70 bucks, and then it’s $15 a year."
  — Dr. Jim Dahle (20:16)

• On overhead and real world benefit:
  "The only thing you can screw up really, is by having some other IRA ... but otherwise, just because you’re a high earner doesn’t mean you can’t contribute to a Roth IRA for yourself and for your spouse."
  — Dr. Jim Dahle (03:22)

Timestamps for Key Segments

• Defining W-2, 1099, K-1 – 07:27–10:20
• W-9 Micro Corporation Empowerment – 10:20–11:35
• IRS Classification & Risk – 11:35–16:43
• Negotiating as a 1099, Business Illiteracy – 18:16–22:35
• Cost/Benefit of 1099 and Entity Formation – 20:16–29:36
• Tax Debate: Salary vs. Distribution – 25:23–34:38
• Asset Protection Analysis – 35:03–43:14
• Expense Deductions, Augusta Rule, Retirement Plans – 43:14–47:23, 69:32–72:05
• Quarterly Tax Logistics – 47:23–52:34
• Health Insurance as a 1099 – 52:53–55:44
• Self-Employment and Burnout/Autonomy – 55:44–59:48
• Trends in Employment, Systemic Challenges – 59:48–61:36
• Hybrid/Alternative Models ("Employment Light") – 66:15–69:17

Additional Resources and Recommendations

• [Physician Entrepreneur Academy resources] (Recommended by Dr. Stillson for independent physicians; includes e-books on insurance options)
• Dr. Dahle’s blog post: “Why Going 1099 Won’t Solve All Your Financial Problems”
• White Coat Investor Bootcamp Podcast
• Medscape Self-Employment Survey (2025)

Conclusions & Takeaways

• Self-employment offers doctors maximum autonomy and the chance to build their own business/practice identity—but at the price of added complexity and financial risk.
• The financial benefits (via incorporation or S-corp status) are often overstated and, for most doctors, modest after extra administration and compliance costs are considered.
• Far more significant are the psychological and lifestyle benefits: agency, flexibility, and resistance to burnout.
• Every physician should analyze their specific situation, run the numbers with a CPA or advisor, and understand not just the potential tax savings but the broader impact on their life, family, and career satisfaction.
• Alternative models like "employment light" and locums exist, especially for physicians seeking flexibility or transitioning to retirement.
• Doctors must become both financially and business literate to take control of their futures and avoid defaulting into suboptimal employment based on ignorance.

For doctors weighing 1099 work, this episode is an essential listen, blending practical business mechanics with a strong case for regaining professional agency. Dr. Dahle and Dr. Stillson provide a frank, nuanced take that’s especially relevant to new graduates, mid-career physicians, and anyone questioning the W-2 status quo.