This blog is perfect for you if you’re a Chiropractic student or new graduate Chiropractor preparing for the future, wondering if you should be an Associate or Independent Contractor. This post will also be good for you if you are a practicing Chiropractor who is looking to add an Associate or Independent Contractor to your practice, and you’re wondering what the difference is.
When you are hired as a Chiropractic Associate, you are an employee of that practice. You will have set hours, a uniform, and in most cases you will be asked to perform treatment according to the way the owning Chiropractor wants it done. As an Associate, you are being brought in to the practice to help grow the practice and to make more money for the owning Chiropractor. You will also be brought on to take over practice members from the owner in order to give him/her more time for their own things. As part of an Associate contract, you will most likely be asked to sign a non-compete, so that when you quit you aren’t able to open up or work in a practice too close to the practice, to prevent their practice members from leaving and following you to your new place. Also, as an associate, the office will own all patient files, meaning you can’t take them with you, when you leave. All of the services you perform will be billed under the office tax ID and paid to the practice.
There are several benefits to taking an Associate position. Primarily, the ability to work in and learn from a Chiropractor who’s been in practice a long time, can be a great benefit, almost like being in a residency. In most cases you will start with a salary, plus bonus, and have patients given to you by the practice owner. Occasionally the office will also pay for your malpractice benefits, pay for CE hours, pay for vacation/sick leave, offer health benefits and even investments, such as a 401K. Most of these benefits will depend quite heavily on the size of the office, how hard you work, and how well Chiropractic is paid for by insurances in your area.
The downside to being an Associate is that you are spinning your wheels to build someone else’s practice, while having minimal control over the manner in which you treat the patients. Work time and vacations will not be nearly as flexible as when you’re working for yourself, and in the event you want to leave the practice, you won’t be able to setup practice nearby due to the non-compete clause.
One of the most important things to do when considering to be an Associate at a practice is to make sure the office runs compatible to your morals an values. If you find yourself in a bad situation, then you’ll need to be careful, as being an employee does not mean that the employee Chiropractor can defer ethical responsibility for care. That always rests with the individual professional. “The boss made me do it” is never a good defense! So make sure the office runs in a manner that your are okay with, with regards to marketing, billing, notes, treatment, etc.
There are two possibilities for being an Independent Contractor(IC). In one case, you would be temporarily filling information another doctor, for a set time-frame. You might be asked to do this if the primary doctor is out on maternity leave, sick or suffered trauma, on vacation, you are filling in between Associates. In this case you would be similar to an Associate, but without the non-compete or benefits of an Associate. You would fill in certain days and times, treat the way you are instructed to, and able to fill in at other practices at the same time.
The other type of Independent Contractor(IC) is when you rent space in an established office to run your own practice. There is no non-compete, you set your own hours, you wear whatever clothes you want, you bill under your own tax ID, and you own your own files. You can also practice however you want, within the scope of Chiropractic in your state
How do you choose?
Being an Associate is best when you have no savings (start-up capital), high credit card debt, a family to feed, you don’t have a lot of
flexibility with resources, you need income now, or you plan to move and need a job until then.
It is best to be an Independent Contractor, Fill-in doctor when you need extra income, you’re located somewhere temporarily or you are contemplating being an associate in the future or possibly even purchase the practice in the future. As a fill-in doc, you will be paid hourly or per a shift, but you’ll have to cover all of your own taxes
Starting your practice as an independent contractor, by paying fair market value rent, can be one of the most ideal situations. We have 3 independent contractors in our office in Kansas City. They are all there, with low overhead, but accessibility to X-ray, rehab equipment, mentorship, etc. Once they build their practices large enough to move into their own space, they can take all of their patient files with them, and start with that patient base, rather than starting from scratch. Renting a space is also ideal if you’re new to the area, and want to get a feel for where you might want to eventually end up in practice. It’s also ideal if you have a fear of committing to a long-term lease, are unsure of financing, there’s a lack of available space in your town, you have some savings, but not a lot. Remember that you will have to cover all of your own taxes, need to have general liability insurance, but you’ll also be able to deduct expenses from your taxes.
When Should you Open your Own Office?
You should consider renting a larger space if you are able to get financing, are planning to buy an existing practice, your very committed to an area, maybe it’s your hometow, you have multiple docs wanting to be independent contractors in your space, you have flexibility with time and resources, you have help meeting your home budget expenses, you’re able to invest in a building.
When we graduated, we opened our office because we were confident in our ability to build a business. Rich had a history in sales and business management. Haley had a long history of working in Chiropractic offices, billing, business management, and marketing. We were fully committed and confident that we would succeed, even in a tough financial time.
Common challenges with Associate vs. Independent Contractor
If you are an Associate then it is okay to make a percentage of fees, however, when being an independent contractor this would be considered fee splitting, which is illegal federally and in most states it can be even broader, like in CA. Among other things, the federal Office of the Inspector General (OIG) has issued a fraud alert regarding joint ventures between physicians and other entities and individuals.
Many managing Chiropractors will treat an IC as an Associate by making them sign a non-compete, set work times, set uniform, set care guidelines, inability to take files when they leave, etc. It is absolutely necessary to analyze the business relationship that exists or will exist between the employer and the person performing the services. As a general rule, according to the IRS, an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who works as an independent contractor are subject to Self-Employment Tax (the total amount of social security/Medicare tax as discussed in a previous section, ~15.3% up to an income threshold which increases from time to time). In determining whether the person is an employee or independent contractor in the eyes of the Internal Revenue Service, a preponderance of the evidence defines the business relationship that exists between the employer and the person performing the services. All information that provides evidence of the degree of control and independence must be considered. The facts that provide evidence of the degree of control fall into three categories.
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (These include items such as how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (such as retirement plan, vacation pay, liability insurance, etc.)? Will the relationship continue and is the work performed a key aspect of the business?29 Finally, does the person work for other businesses?
IRS Form SS-8 delineates the lengthy list of questions to be answered in determining employee vs. independent contractor status.
In many cases owner Chiropractors are looking for ways to avoid having to pay payroll taxes, unemployment insurance, pension contributions, etc. Thus, it is advantageous financially for an employer to designate an associate as an independent contractor. An attempt to classify an associate as an independent contractor in the long run may prove to be costly to all parties concerned. As far as the IRS is concerned, employment agreements carry no weight in the determination as to the status of the individual performing the services.