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Smart Structure Choices for Dental Practices: S-Corp vs LLC

Introduction: You treat teeth, not tax forms

Running a dental practice already means juggling patient care, staff, and equipment schedules. Choosing the wrong business entity can quietly cost you thousands in taxes each year. This post breaks down LLCs and S‑Corporations in straightforward terms so you can decide which structure helps keep more of your practice revenue where it belongs—your business and your family.

LLC: Simple setup, straightforward taxes

Most dentists start with an LLC because it’s easy to form and offers liability protection. For tax purposes a single‑member LLC is treated like a sole proprietorship by default, meaning net earnings flow to your personal return and are subject to self‑employment tax (roughly 15.3%). That’s easy to manage but becomes expensive as profits grow.

S-Corp: Split income, potentially lower payroll taxes

An S‑Corporation isn’t a different type of business entity so much as a tax election (Form 2553). With an S‑Corp you pay yourself a reasonable salary (subject to payroll taxes) and can take additional profit as distributions, which are not subject to self‑employment tax. That split can produce meaningful tax savings, but it requires running payroll, filing Form 1120‑S, issuing W‑2s, and documenting a reasonable salary.

Side‑by‑side comparison

  • Tax treatment: LLC (default) — all net income subject to self‑employment tax. S‑Corp — salary taxed for FICA; distributions not subject to self‑employment tax.
  • Payroll: LLC — optional payroll if you’re an employee of your own company. S‑Corp — required payroll with proper withholdings and employer tax filings.
  • Compliance: LLC — minimal ongoing filings. S‑Corp — higher compliance (payroll, 1120‑S, K‑1s, state filings).
  • When it makes sense: S‑Corp often pays off when a dentist has consistent net profits (commonly $100K+), but the right threshold varies by practice.

Discussing financial graphs

A short story: Two dentists, same revenue, different outcomes

Dr. Kim operates as an LLC and nets $200,000. With LLC default taxation, roughly $30,600 goes to self‑employment taxes (about 15.3%). Dr. Rivera elects S‑Corp status and pays a $120,000 reasonable salary and takes $80,000 as distributions. Payroll taxes apply to the $120,000 (about $18,360 total), and the $80,000 distribution avoids self‑employment tax. That difference is roughly $12,240 in annual tax savings — real money that can buy equipment, fund CE, or improve staff benefits.

Practical steps and timing

If you’re considering an S‑Corp election, timing matters (Form 2553 deadlines) and documentation matters (reasonable salary, payroll records). Work with a CPA familiar with dental practices to model scenarios, set up payroll correctly, and maintain compliance so savings aren’t wiped out by errors or audits.

Next step: run the numbers together

Entity choice is strategy, not paperwork. We help dentists run clear, conservative projections and pick the structure that fits practice goals and risk tolerance. Book a consultation and we’ll run a custom scenario for your practice, cover timing and implementation, and help you decide whether an S‑Corp shift makes sense this year.

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