Dermatologists as Doctorpreneurs: Best Practices for Physician Side Hustles

Many dermatologists, including those employed by institutions and those in private practice, choose to become involved with entrepreneurial activities or engage in “side hustles” at some point in their careers. This can come from the desire to increase total income, expand skill sets, or even flex an entrepreneurial muscle that their main clinical work does not afford. Whatever the reason, because such outside work is becoming increasingly popular, we thought it important to cover it here.

Definitions and Examples

Before we delve into best practices, we should define our terms. We use the term doctorpreneur broadly to mean essentially any physician interested in, or actually pursuing, some type of business or income source outside of their primary medical/clinical activities.

This can range on a spectrum of formality, from launching an investor-backed start-up corporation or limited liability company (LLC; most formal) to simply doing extra medical contract work a few hours per week (least formal and what would generally be considered a side hustle). In this way, for our definitions, all the examples below could be called either doctorpreneurships or side hustles:

• Locum tenens work
• Moonlighting
• Expert medical witness
• Telemedicine outside primary job
• Consulting for industry
• Paid speaking
• Medical surveys
• Creating a patentable medical device
• Real estate investing/Airbnb
• Launching a start-up

Doctorpreneurship and Side Hustles

Beyond the examples and definitions above, we also wanted to draw out best practices learned from our more than 25 years of advising over 1500 physicians and from your fellow physicians interviewed on the Wealth Planning for the Modern Physician Podcast (hosted by the author).

1 Brand Yourself

Whether you are launching an entrepreneurial venture and want to attract investors or you never engage in a side hustle and simply want to build a successful clinical practice, your reputation among colleagues, staff, patients, and the general public is paramount. Professional referrals and online reviews are dictated by what others think of you and your work for patients.

In a 2021 podcast episode, Michael Ast, an accomplished orthopedic surgeon, shared his insights on the importance of personal and professional branding for physicians of all specialties. He underscored a dual approach: excellence in clinical care and strategic professional outreach. Physicians must first prove themselves to be outstanding clinicians by taking care of patients, supporting colleagues, and maintaining professionalism across all interactions. The second dimension involves proactive brand development, including outreach to referring providers, engagement with local communities, and even interactions with competitors. He also highlighted that vendor partners and industry collaborators can provide valuable market insights to help physicians grow their practices in ways that are both ethical and effective.

2 Understand Contracts

If you want to pursue any entrepreneurial activity or side hustle, your first step must be to understand the current rules and restrictions under which you are presently working. Unless you own your own practice, this means a review of your current employment or partnership agreement and a possible discussion/renegotiation to allow you to proceed. Advice from an experienced health care attorney or consultant specializing in physician contract review can prove invaluable in the early stages of a new venture and help to avoid costly setbacks and delays.

3 Use a Corporate Structure

We reiterate what dermatologists learned at the outset of their training: “First, do no harm.” Here, we want to make sure that the outside activity doesn’t unnecessarily expose you to further liability. The first way to achieve this objective is to properly structure the outside activity. For side hustles that justify the cost of it, this may involve the creation of a separate LLC for the activity. More than one LLC may be needed for some ventures, such as real estate ownership of multiple properties. One size does not fit all.

4 Protect Yourself Through Insurance

Continuing on the theme of shielding the side activity from liability, property and casualty insurance is crucial to protect personal and practice assets and activity. This fundamental tool should apply to ventures and side hustles as well. As an example, for locum tenens and moonlighting work, covering your activity with a medical malpractice policy is paramount, whereas landlord-type policies may make sense for real estate ownership. No single type of insurance or policy is suited for all activities, and the doctorpreneur should work with an experienced insurance adviser to customize the coverage for each venture.

5 Choose the Best Tax Treatment

Depending on the income generated by the venture or side hustle and its liability risk profile, the best tax treatment may simply mean taking the income personally on one’s Schedule C income, with no legal entity in place. On the other hand, the income from the outside activity may justify the creation of an entity purely for tax purposes and then going through the Subchapter S vs Subchapter C corporation analysis described in other articles.

6 Implement a QRP/IRA/Nonqualified Plan

Depending on the goals of the dermatologist and the amount of income generated by the venture, a qualified retirement plan (QRP) or individual retirement account (IRA) might make sense to defer taxes on side hustle income and leverage state asset protection exemptions. A nonqualified plan might also be considered as an effective tool to leverage tax diversification while building wealth for retirement.

Conclusion

Many physicians will choose to launch or become involved with entrepreneurial activities or engage in side hustles at some point in their careers. For those who do, these opportunities can be extremely valuable for their long-term wealth planning. In this article, we described several important best practices to help doctorpreneurs brand themselves, understand their current employment contracts, and maximize the potential tax planning and asset protection benefits of their ventures.

David Mandell, JD, MBA, is an attorney and author of more than a dozen books for doctors. He is a partner in the wealth management firm OJM Group (www.ojmgroup.com), where he can be reached at 877-656-4362 or mandell@ojmgroup.com.

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