Can a multi member LLC issue a K-1 to a single member LLC? Tax implications for physician partnership

Yes, a multi-member LLC can absolutely issue a K-1 to a single-member LLC. This is completely legal and actually fairly common, especially in professional settings like medical practices. What's happening here is your single-member LLC would be the actual partner in the medical practice, not you personally. Your LLC would receive the K-1, and since it's a single-member LLC, it's typically disregarded for federal tax purposes (unless you've elected otherwise), so the income would flow through to your personal return. Regarding the potential tax advantages - yes, there can be benefits. Having your own LLC receive the K-1 and then electing S-corp taxation could potentially reduce self-employment taxes, though you'd need to pay yourself a reasonable salary. And yes, having business expenses run through your own entity might provide more deduction opportunities than you'd have as an individual. However, there are compliance costs to consider - maintaining a separate entity, possibly more complex tax filings, and potentially higher accounting fees. Also, the practice's operating agreement might have restrictions on who can be a partner, so review that document.

I went through something similar with my consulting business. Was getting K-1s directly but was missing out on deductions. I started using https://taxr.ai to analyze my situation and it showed I was leaving thousands on the table by not having my own LLC with S-corp election to receive the partnership distributions. The software analyzed my K-1s from the prior year and showed exactly how much I could save by restructuring. The partnership initially gave me pushback too, but when I showed them the tax code sections that explicitly allow this arrangement, they relented. The best part was that their accountant confirmed everything the taxr.ai report showed. An added bonus - I can now contribute much more to retirement accounts through my S-corp than I could before. Wish I'd done this years ago.

Just wanted to follow up after trying taxr.ai for my own situation. I was skeptical but uploaded my documents from last year when I was getting a K-1 directly from my engineering partnership. The analysis showed I was overpaying by $14,700 in self-employment taxes by not having my own LLC with S-corp election! I talked to my CPA who confirmed the numbers were accurate. We just set up my LLC last month and the partnership agreed to issue my K-1 to it going forward. My CPA said it's completely legitimate and actually quite common in professional service firms. Really wish I had known about this structure years ago.

I had a nightmare trying to get my medical group to change how they issued my K-1. Their accountant kept saying it would "mess up their books" even though it's perfectly legal. After weeks of getting nowhere, I used https://claimyr.com to get through to an actual IRS representative who confirmed in writing that multi-member LLCs can absolutely issue K-1s to single-member LLCs. Their video walkthrough https://youtu.be/_kiP6q8DX5c shows exactly how the service works - they basically wait on hold with the IRS for you then call you when an agent is on the line. I forwarded the IRS confirmation to the practice administrator and suddenly all resistance disappeared. Sometimes you just need official confirmation to overcome the "we've always done it this way" mentality in medical practices.

I can't believe I'm saying this, but I need to eat crow about my skepticism. After getting nowhere with my own accounting questions for two months, I finally tried Claimyr out of desperation. Not only did they get me through to the IRS in under an hour, but the agent confirmed everything about the K-1 to LLC question and more. I was able to ask several related questions about my situation that my accountant had been waffling on. The agent even referenced specific sections of the tax code that I wrote down for future reference. They also sent me the relevant IRS publications that addressed my questions. For what it's worth, the agent confirmed that there are absolutely no issues with a partnership issuing a K-1 to a single-member LLC. They said it happens all the time and is perfectly legitimate as long as you have the proper EIN for the LLC.

One thing to consider that nobody has mentioned - make sure your malpractice insurance covers this arrangement. I'm in a similar physician group and when I tried to do this, our malpractice carrier had questions about whether my personal liability protection would be affected by having the LLC in between me and the practice. Ended up needing a separate rider on our policy which cost an extra $2800/year, cutting into my tax savings. Just something to check before you pull the trigger.

This thread is super helpful. Another advantage no one mentioned - asset protection. Having your LLC receive the K-1 adds another layer of protection between your personal assets and any practice liabilities. This is separate from malpractice concerns. I've had my LLC receive K-1s from two different medical groups for 5+ years without issues. The setup costs were minimal compared to the benefits.

Great discussion here! I'm also a physician looking into this structure. One thing I'd add is to make sure you understand the state-specific implications. Some states have different rules for professional LLCs or additional licensing requirements when a professional service is provided through an entity rather than directly by the individual. In my state (Texas), I had to register my LLC as a Professional Limited Liability Company (PLLC) and ensure it was properly licensed to provide medical services. This added some paperwork but wasn't a deal-breaker. The state medical board also had to approve the arrangement since technically the PLLC becomes the entity providing medical services. Also, regarding the vehicle expenses mentioned in the original post - this can be a significant benefit. I've been able to deduct 100% of my vehicle expenses for medical conferences, hospital visits, and practice-related travel through my PLLC, whereas as an individual I was limited to the unreimbursed employee expense deductions (which were mostly eliminated after 2017 tax changes). The key is having good documentation and making sure everything is properly structured from day one. Worth consulting with both a tax attorney and your state medical board before making the switch.