S-Corp vs PLLC for Physicians: Which Entity Structure Saves You More?
What Is a PLLC?
A Professional Limited Liability Company (PLLC) is a business structure specifically designed for licensed professionals — physicians, dentists, attorneys, and accountants. It provides liability protection while meeting your state’s specific practice requirements.
By default, a single-member PLLC is taxed as a sole proprietorship — all profits flow to your personal return and are subject to self-employment tax. That tax — 15.3% on the first $168,600 of net income and 2.9% above that — is where the problem begins for high-earning physicians.
What Is an S-Corp Election?
An S-Corp is not a separate business entity — it’s a tax election you make for your existing PLLC by filing Form 2553 with the IRS. When you make this election, your practice income splits into two components:
- A reasonable salary — subject to payroll taxes
- A distribution — NOT subject to self-employment tax
That split is where the savings come from.
The Math: Why S-Corp Election Matters
Dr. Chen earns $450,000 in net practice income as a single-member PLLC:
Without S-Corp Election:
Self-employment tax on $168,600 at 15.3% = $25,796
Self-employment tax on $281,400 at 2.9% = $8,161
Total self-employment tax = $33,957
With S-Corp Election (salary set at $180,000):
Payroll tax on $180,000 salary = $27,540
No self-employment tax on $270,000 distribution
Total payroll tax = $27,540
Annual savings = ~$6,417 — and that’s conservative.
For physicians earning $600,000–$800,000, annual savings from S-Corp election frequently reach $20,000–$35,000.
Key Differences to Understand
Administrative Complexity
A PLLC alone is simple — one tax return, no payroll. An S-Corp election requires running payroll for yourself and filing quarterly returns. A virtual accountant handles this entirely.
Reasonable Salary Requirement
The IRS requires S-Corp owners to pay a “reasonable salary” — typically $150,000–$220,000 for physicians depending on specialty. Setting this correctly avoids audit risk.
State Considerations
Some states impose additional franchise taxes on S-Corps — California being the most notable. Always evaluate both federal and state implications for your location.
Income Threshold
S-Corp election generally makes sense once net practice income exceeds $150,000. Below that, the administrative costs may outweigh the tax savings.
So Which Is Better?
The answer: Use both together.
For most physicians earning above $150,000 in net practice income — S-Corp election inside a PLLC is the superior structure. The PLLC provides liability protection and state compliance. The S-Corp election provides tax efficiency. You don’t choose between them — you use both.
The only exceptions are physicians in very early practice stages with low net income, those in states with punishing S-Corp franchise taxes, or those with specific circumstances where the administrative complexity doesn’t justify the savings at their current income level.
Entity structure is not a set-it-and-forget-it decision. As your income grows, your optimal structure may change. An annual review with a virtual accountant who specializes in medical practices is one of the highest-ROI financial habits a physician can build.
Find Out Which Structure Is Right for Your Practice
Book a free Practice X-Ray — we’ll review your current entity structure and estimate your potential tax savings.
Book Your FREE Practice X-RayThis article is for informational purposes only and does not constitute legal, tax, or financial advice. Tax laws change frequently and vary by state. Consult with a qualified tax professional for advice specific to your situation.
