Sole Proprietor Checklist
This post is geared towards locums derms who have decided to set up their business as a sole proprietorship. Getting the foundation right early on saves you from a massive headache during tax season.
One of the best parts about being a sole prop is simplicity. You don't need a separate corporate tax return or a complicated payroll system. You just report your income on a Schedule C with your personal taxes. Here is a succinct checklist to get you moving.
☐ Get an EIN (Employer Identification Number)
Go to the IRS website and get an EIN. Make sure you’re on the actual .gov website that I linked. There are several third-party sites that look official but will try to charge you a fee for this. Getting an EIN is free and takes a few minutes. Even though as a sole prop you are the business in the eyes of the IRS, an EIN is helpful for two reasons:
Privacy: You don't want your Social Security number sitting in a folder in every clinic’s billing department.
Separation: It draws a professional line between your personal life and your clinical contracts, and you'll need it to open a business bank account.
☐ Register with your city or county
Check if your local government requires a business license or a "Doing Business As" (DBA) registration. I had to do this in San Diego. Many cities require this even if you’re just "working" from a home office to handle your billing and scheduling.
☐ Open a business checking account
Open a dedicated business checking account so your income and expenses stay in one clean, auditable place. Feel free to explore your options before you rush into something. I picked Chase because I had an existing banking relationship with them and they had a sign-up bonus at the time. This step isn't strictly necessary—because again, as a sole prop, you are the business—but I highly recommend it for your own sanity come tax season.
☐ Get a business credit card (and watch your timing)
I recommend that you pick a travel-focused business card to earn points on the flights and hotels you’ll be booking. The Points Guy has a table that summarizes the airline transfer partners for the most popular travel reward cards. If you know where your assignments will be, try to have a general sense of what airline or hotel chain you’ll use most. It’s ideal to keep your credit card points, hotels, and airlines in the same rewards ecosystem so you can transfer points easily. I opted for the Chase Ink Business Cash Card because I was already in the Chase ecosystem (personal and business checking account, Chase UR rewards) and it’s a no annual fee card.
Important: Don't rush to pay for work related stuff like new state medical licenses, DEA renewals, society memberships, or scrubs until your business account and card are active. You want these startup costs to come directly off your business card. It makes bookkeeping much cleaner and ensures you can easily write them off against your locums income.
☐Set up your "Pay-as-you-go" Tax System
Since nobody is withholding taxes from your checks, the IRS expects you to pay Quarterly Estimated Taxes. Put these dates on your calendar so you aren't caught by surprise.
The "Safe Harbor" Tip: To avoid penalties in your first year, aim to pay 100% (or 110% if your prior year income was >$150k) of what you paid in taxes last year. It’s the easiest way to stay compliant without having to guess your exact 2026 income.
Once you hire a trusted tax professional, they can crunch more precise numbers for quarterly estimated tax payments as you start earning your 1099 income. The math gets more complicated if you additionally have a W2 income with withheld taxes, so keep that in mind.
☐ Establish your Solo 401(k)
I preferred this over a SEP IRA. A SEP IRA can trigger the "pro-rata rule," which makes doing a Backdoor Roth IRA (a favorite for physicians) much more complicated and tax-heavy. A Solo 401(k) usually doesn't have this conflict, letting you shield more money from taxes while keeping your Roth options open. (You can check out my post on Solo 401(k) basics here).
☐ Submit your W-9 and Track your 1099s
Before you start at a new clinic, they’ll ask you for a W-9. This is where you provide your newly minted EIN so they can pay you. In return, after the year ends, each clinic will send you a Form 1099-NEC (Non-Employee Compensation) summarizing what they paid you.
Consider creating a simple spreadsheet to track which clinics you've sent a W-9 to and check them off as the 1099s arrive in January.
