S-Corp vs. LLC: Navigating Entity Choices for Dental Practices

Launching and growing a dental practice is no small feat. Beyond clinical excellence, you're suddenly faced with business decisions your dental school courses never covered—including the complex world of legal entity selection. For many dentists, the choice between operating as an LLC or electing S-Corp tax treatment is anything but straightforward. The decision shapes your take-home pay, tax responsibilities, and even your stress come tax season.

LLC and S-Corp: What Dentists Need to Know

An LLC (Limited Liability Company) is well-loved for its simplicity. It offers personal liability protection—your personal assets are safe from business mishaps—and is easy to establish and manage. However, an LLC’s default tax status poses a catch: all profits flow through directly to your personal tax return and typically trigger self-employment taxes. Those taxes—currently just over 15%—apply to every dollar of profit, and for high-earning dentists, that adds up quickly.

The S-Corp is different. Rather than taxing all business profit the same way, the S-Corp structure lets you pay yourself a reasonable salary—subject to payroll (Social Security and Medicare) taxes—and then take additional earnings as distributions. Distributions aren’t hit with self-employment taxes, which can keep significantly more income in your corner. S-Corps do require more paperwork: you’ll need a payroll system, more complex accounting, and separate tax filings every year. But the potential tax savings are often worth the extra steps for established dental practices.

Side-by-Side: LLC vs. S-Corp for Dentists

LLC: Straightforward setup, flexible management, profits fully subject to self-employment tax.
S-Corp: More administrative work, but lets you split income into salary (with payroll taxes) and distributions (not subject to self-employment tax), potentially lowering your overall tax bill.

Organized tax paperwork for dentists

A Tale of Two Dental Practices

Consider Dr. Morgan, who recently opened her office as an LLC. Her first year was a success, bringing in $180,000 in net income. Because she chose the default LLC route, every dollar—after normal deductions—was hit with the self-employment tax. It was a surprise come April when she saw the extra $27,000 bill just for those taxes.

Next door, Dr. Harris shifted his practice to an S-Corp as soon as he passed the $100,000 profit mark. He paid himself a $95,000 salary (with payroll taxes withheld), and took the remaining $65,000 as S-Corp distributions—free from self-employment taxes. His admin work increased a bit, but his yearly tax savings? Nearly $9,500. Those savings have gone right back into marketing and technology upgrades for his office.

Choosing What Fits Your Practice

There isn’t a universal answer for every dental office. If you’re just starting out or want maximum admin simplicity, an LLC might be a good fit. If your practice is scaling up—in profits and staff—it’s time to run the numbers on an S-Corp election. The key is evaluating the tax savings against the added responsibilities.

Entity choice shapes everything from your tax bill to how you pay yourself to future financial planning. Don’t let April 15th surprise you. Let Rekaby & Associates LLC help you choose the best path for your unique situation. Schedule a personalized entity assessment, and discover the structure that supports your growth and keeps your hard-earned revenue where it belongs—in your practice.

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