Should You Form an LLC or S-Corp as a New Doctor? What It Means for Your Taxes

Aug 11
2 min read

Starting your medical career often comes with important financial decisions. One of the first questions many new doctors face is whether to form an LLC or elect S-Corp taxation—and how that choice will impact your taxes. At ISTAXPro, we handle bookkeeping and tax return preparation for doctors, ensuring your chosen structure aligns with your filings so you avoid overpaying and stay compliant while focusing on your patients.

Understanding LLC vs. S-Corp

LLC (Limited Liability Company)

● Offers legal liability protection, separating business from personal assets.

● By default, a single-member LLC is taxed as a sole proprietorship, meaning all profits are subject to self-employment tax.

S-Corp (S-Corporation)

● An S-Corp is a tax election, not a separate entity type.

● Allows you to pay yourself a reasonable salary (subject to payroll taxes) and take remaining profits as distributions, which are not subject to self-employment tax.

● Requires payroll processing, clean bookkeeping, and annual filings to remain compliant.

How This Impacts Your Taxes

With an LLC taxed as a sole proprietorship, all net income is subject to self-employment tax, which can add up quickly for high-earning doctors. Electing S-Corp status may reduce your overall tax burden by splitting income between salary and distributions, but this requires maintaining clear payroll records and accurate books. For many new doctors, starting with an LLC can simplify initial operations. As your income grows, considering the S-Corp election may provide tax savings if your practice is organized to support it.

How ISTAXPro Supports New Doctors

We maintain organized, accurate bookkeeping using QuickBooks, ensuring all income and expenses are properly tracked. We handle payroll setup and processing if you elect S-Corp status, ensuring salaries are managed and reported accurately. We prepare your tax returns using your organized records so your chosen structure benefits you without causing compliance

issues.

Take the Guesswork Out of Your Business Structure

Choosing between an LLC and an S-Corp is a significant step in your financial journey as a doctor. Let ISTAXPro handle your bookkeeping, payroll, and tax filings so your structure supports your goals while protecting your time and income.