Payroll Companies for Direct Primary Care — Startup DPC Blog

Payroll for your direct primary care practice can be scary - for most doctors who start a direct primary care practice, this is the first time paying themselves and it’s their first time paying employees.

But, don’t be scared any more! By the time you finish this blog post, you will have a good idea of how to pay your employees in a reasonably easy way.

All the options

There are several payroll options available for small business owners, including:

Manual Payroll: This involves calculating and processing payroll manually using spreadsheets or paper-based systems. While this option is low-cost, it can be time-consuming and prone to errors. I strongly recommend against doing this. Your time is WAY better spent taking care of patients or growing the business. Unless you have a background in accounting, do not do this.
Payroll Software: Payroll software can automate the payroll process, including calculating wages, taxes, and deductions. There are several software options available, ranging from simple and low-cost solutions to more advanced platforms with additional features such as time-tracking and benefits administration.
One example of a payroll software is Gusto. Gusto offers a cloud-based payroll platform that automates the payroll process. It includes features such as direct deposit, tax calculations, and benefit administration. Gusto also offers time-tracking and HR features, such as onboarding and document management. Small business owners can choose from several pricing plans based on the number of employees and the features they need. Payroll software like Gusto is a good option for small businesses that want to streamline their payroll process and have more control over the payroll function.
Online Payroll Services: Online payroll services provide a cloud-based platform for managing payroll. These services often offer features such as direct deposit, tax filing, and time-tracking. Online payroll services are typically easy to use and affordable, making them a popular choice for small businesses.
An example of an online payroll service is ADP. ADP offers a cloud-based payroll platform that provides payroll processing, tax filing, and compliance management. ADP also offers HR features such as time and attendance tracking, employee benefits, and talent management. Small business owners can choose from several pricing plans based on the number of employees and the features they need. Online payroll services like ADP are a good option for small businesses that want a simple and easy-to-use payroll solution, without having to invest in additional software or hardware.
Options 2 and 3 have some overlap because Gusto can be completed online (without downloading a software suite). Other companies that offer payroll software include QuickBooks, PayChex, Xero, and others.
Accountant or Bookkeeper: Small business owners can also outsource payroll to an accountant or bookkeeper. These professionals can handle all aspects of payroll processing, including calculating wages, taxes, and deductions. While this option can be more expensive than other options, it can provide peace of mind and ensure compliance with tax laws and regulations.
Professional Employer Organizations (PEOs): PEOs are third-party companies that manage HR and payroll functions for small businesses. They offer a range of services, including payroll processing, benefits administration, and compliance management. PEOs can be a good option for small businesses that need comprehensive HR services. If you want to completely outsource payroll and benefits, you’d use an option like this. i don’t know any DPC doctor who uses something like this, as larger businesses would use this option.

It's important for direct primary care doctors to consider their specific needs and budget when selecting a payroll option. They should also consult with a financial professional or tax expert to ensure compliance with tax laws and regulations.

What we use at Plum Health DPC for Payroll

When I started my DPC practice and hired my first employee, I had a really hard time with this. It was more of a mental barrier than anything. I ended up picking Gusto because they have a really nice user experience/design on their website.

I ran payroll for a year using this, but my account found that Gusto was NOT paying my taxes accurately, so we had to put some extra money in at the end of the year. After discovering this, we switched to “RunPayroll”, an online-based platform. I now submit payroll via RunPayroll and my accountant checks on it quarterly.

I pay $62 monthly for accounting, $250 quarterly to my accountant for them to review my books and make sure that all of my expenses are categorized perfectly, and about $1,800 annually for tax preparation for myself and for my business.

DO I NEED A PAYROLL COMPANY IF I’M THE ONLY EMPLOYEE?

If you’re a solo doc and if you have an accounting software like Quickbooks, you can pay yourself through an owner’s draw. This is a simple way of paying yourself when you’re just starting out.

When you take an owner’s draw, you should set aside 40% of that owner’s draw for taxes. You will likely pay 25% to 35% of your Net Operating Income in taxes, so be mindful of these numbers. Your accountant should be able to calculate the amount of taxes that you need to pay each quarter.

With quarterly income taxes, you will mail up to three checks to your city, state, and the federal government from the money you make during that period. Here in Detroit, Michigan, we have city taxes paid each quarter (about $125) and state taxes paid each quarter (maybe $1,250). This is usually an estimate. If you over estimate, you could get money back during tax time or have a small tax bill. If you under estimate, you could owe a larger balance during tax time.

I hope this was helpful, and best of luck with your DPC practice!

- Dr. Paul Thomas with Plum Health DPC in Detroit, Michigan.

This is a big questions that a lot of soon-to-be direct primary care doctors have - what should I be getting out of my accountant or what questions should I be asking of my accountant when I start my direct primary care practice?

What Should I ask my accountant before I start my Direct Primary Care Practice?

First of all, congrats on starting your direct primary care practice! When you first meet with your accountant, make sure that you trust them and make sure that they’ve worked with similar businesses in the past. There’s nothing worse than an accountant that sees you as a dollar sign.

Next, you can find out what your accountant prefers in terms of everyday tools that you’ll need to be successful. For example, you could ask your accountant how they intend to manage your profit and loss sheets. You can also ask them how to manage your payroll services. You can also ask your accountant if they’ve had experience in helping doctors get funding for their direct primary care practices. All of these will help you pick an excellent accountant.

What is an Employer Identification Number (EIN) and why do I need one for my Direct Primary Care practice?

Before you meet with your accountant, you should probably register your business with your State so that you can get an EIN. According to Wikipedia: “The Employer Identification Number (EIN), also known as the Federal Employer Identification Number (FEIN) or the Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities operating in the United States for the purposes of identification.”

The EIN is important for you because you’ll need this number to set up a bank account for your business. Once you have a business bank account, you can transfer money into this account and then start making purchases through your business bank account. This will help you to build credit in your business and help you to become eligible for a loan in the future.

Which Accounting Software Should I Use for my Direct Primary Care practice?

When you meet with your accountant, you should definitely discuss accounting software. There are a few options out there in the marketplace, but I currently use and enjoy using Quickbooks by Intuit. Quickbooks is about $70 monthly and it shows you how much money you’re bringing in or your profit and how much money your spending on your business or your losses. These two elements and the charges therein comprise your profit and loss statement.

Personally, I check my profit and loss (P&L) statement everyday as it gives me a good idea on how well our business is performing. Every quarter, I review my P&L with my accountant and we discuss what’s going well and reconcile any ambiguous, erroneous, or duplicate charges.

If you don’t know your numbers and you give complete control of your profit and loss statement to your accountant, it will be hard for you to keep your finger on the pulse of your business. That’s why I recommend discussing these things up front when you first meet up.

Do I need a Payroll Company if I’m the Only Employee?

Usually you don’t need a payroll company if you’re the only employee in your direct primary care practice. Once you hire another doctor or a medical assistant, you’ll need to set up an account with a payroll company so that they can help you keep track of payroll taxes. If you’re a solo doc and if you have an accounting software like Quickbooks, you can pay yourself through an owner’s draw. This is a simple way of paying yourself when you’re just starting out.

Other things to discuss with your accountant when starting a Direct Primary Care practice

There are so many other things you can discuss with your accountant when starting your direct primary care practice. Here’s a few other topics to broach:

How long have they been an accountant?
How long do they plan on continuing to practice accounting?
What kind of lending options or practice finance options they’re familiar with for medical startups?
Which payroll do they frequently work with and what are the pros and cons of using that payroll service?

Some banks have a strong practice finance division that could help fund your startup and find out if your accountant has worked with these banks in the past and understands the processes involved.

Find out which payroll company your accountant recommends and then compare that one to others like Gusto or Paychex to make sure you're getting a good/honest deal.

HOW CAN I LEARN MORE ABOUT STARTING A DIRECT PRIMARY CARE Practice?

If you enjoyed reading this blog post and if you want to learn more about starting and growing your direct primary care practice, look no further than our courses on how to start and grow your direct primary care practice. We at Startup DPC have begun compiling some of the best content available on this blog and in our courses.

The best place to start is to take our Direct Primary Care Business Plan course, available here. From there, you can learn how to attract new patients to your direct primary care practice and how to find the perfect location or build out the practice of your dreams.

Thanks for reading and watching, and best of luck in your direct primary care journey!

- Dr. Paul Thomas with Startup DPC

What Payroll Option Should I use for my Direct Primary Care Practice?