Business setup · Guide
LLC vs. S-Corp for a PT Practice: What to Know Before Deciding
How a sole proprietorship, an LLC, and an S-corp election are each taxed, and the questions that point to the right fit.
Important: tax information only
This guide is limited to tax considerations. It is not legal advice. Whether to form an LLC or another entity, how to form it, and how to structure ownership are legal decisions. Please consult an attorney licensed in your state before deciding, and use us for the tax side.
“LLC or S-corp?” is one of the first questions new practice owners ask. It's also one of the most common sources of confusion, because the two aren't really alternatives. Understanding how each is taxed makes the decision much clearer.
An LLC is not a tax classification
An LLC is an entity that you form under state rules. The IRS doesn't tax “LLCs” as such. It taxes them as one of several things, depending on how many owners there are and what you elect. That classification is what affects your tax bill.
Sole proprietor or single-member LLC
This is the default for a solo practice. Income and expenses are reported on Schedule C of your personal return, and all net profit is subject to self-employment tax. It's the simplest setup: you take owner's draws, keep clean books, and pay estimated taxes quarterly.
LLC with more than one owner
By default, a multi-member LLC is taxed as a partnership. The practice files its own return (Form 1065) and issues each owner a Schedule K-1. Owners may also receive guaranteed payments for their work. Partnerships have more moving parts, so agreeing on how profits and pay are handled early is helpful.
An LLC that elects S-corp tax treatment
An eligible LLC can elect to be taxed as an S-corporation. You then pay yourself a reasonable salary through payroll and take the remaining profit as distributions. This can reduce self-employment taxes when profit is high enough. Our S-corp election guide covers how that works.
Key takeaway
Starting as a single-member LLC and adding the S-corp election later, when your profit supports it, is a common path for PT practices.
What changes day to day
- How you're paid. Draws for a sole proprietor or single-member LLC; payroll plus distributions under the S-corp election.
- Returns filed. Schedule C on your personal return, versus a separate business return as well.
- Bookkeeping. Needs more discipline as soon as payroll and distributions enter the picture.
- Retirement plans. Contribution limits are based on different income measures depending on structure.
Questions to ask before deciding
- How much is the practice netting, and how steady is that?
- Do you expect to add partners or owners?
- How much administrative work are you ready to take on, or hand off?
- Does your state add taxes or fees at the business level?
- What are your plans for retirement savings and hiring over the next few years?
Revisit it each year
The right structure at launch may not be the right one when revenue doubles. A yearly review of your numbers keeps your setup matched to your practice.
Want this applied to your numbers?
We can walk through your structure and show how each option would be taxed. Book a 30-minute call and we'll look at your situation together.
Book a 30-minute callThis guide contains tax-related thoughts only and is not legal advice or individualized tax advice. We are not attorneys. Please consult an attorney about forming or structuring your entity. Rules change and your situation may differ. Figures reflect 2026 rules at the time of writing.