S-Corp vs LLC for New Plastic Surgery Practices: Which Saves More on Taxes?

For a new plastic surgery practice, the choice between an S-Corp and an LLC can significantly impact your tax bill. The short answer: an S-Corp typically saves more on self-employment taxes once your net income exceeds about $40,000 to $50,000 per year. However, the savings come with added administrative costs and complexity. This guide breaks down the numbers, the trade-offs, and the steps to decide which structure is right for you.

How LLCs and S-Corps Are Taxed Differently

A single-member LLC is taxed as a sole proprietorship by default. You report business income on Schedule C, and you pay both income tax and self-employment tax (Social Security and Medicare) on the entire net profit. The self-employment tax rate is 15.3% (12.4% for Social Security up to the wage base, and 2.9% for Medicare with no cap).

An S-Corp is a corporation that elects pass-through taxation. As the owner-employee, you must pay yourself a “reasonable salary” (W-2 wages) and receive the remaining profits as distributions. You pay payroll taxes (Social Security and Medicare) on the salary, but distributions are not subject to self-employment tax. This can save you thousands in taxes, but you must run payroll and file additional forms.

The Tax Savings: Real Numbers for a Plastic Surgeon

Let’s compare the tax impact for a new plastic surgery practice with a net profit of $150,000 per year, a common figure for a practice in its first or second year. Assume you are single, and we ignore state taxes for simplicity.

LLC (sole proprietorship):

• Net profit: $150,000
• Self-employment tax: 15.3% of $150,000 = $22,950
• Income tax (approximate, using 2026 brackets): about $24,000
• Total federal tax: $46,950

S-Corp:

• Reasonable salary: $100,000 (a typical salary for a plastic surgeon in a new practice)
• Payroll taxes on salary: 15.3% of $100,000 = $15,300
• Distributions: $50,000 (no self-employment tax)
• Income tax on salary and distributions: about $24,000 (similar total income, but slightly lower due to deductions)
• Total federal tax: $39,300

Estimated savings: $7,650 per year (the self-employment tax on the $50,000 distribution).

However, the S-Corp has additional costs: payroll processing ($50 to $150 per month), unemployment insurance, and the cost of filing Form 1120-S (about $300 to $500 for a CPA). These costs reduce the net savings. At $150,000 profit, the S-Corp still comes out ahead by roughly $5,000 to $6,000 annually.

When an LLC Is the Better Choice

If your practice is just starting and your net income is below $40,000 to $50,000, the S-Corp savings may not justify the added costs. For example, at $40,000 profit, the self-employment tax savings on a reasonable salary of $30,000 would be about $1,530, but payroll costs could eat that up. In that case, an LLC is simpler and cheaper.

Also, if you plan to reinvest most of your profits into the practice (buying equipment, expanding), you might not take distributions, so the S-Corp advantage disappears. An LLC gives you more flexibility to take money out as needed without payroll requirements.

Comparison Table: LLC vs S-Corp for a New Practice

Factor	LLC (Sole Proprietor)	S-Corp
Tax on profits	Self-employment tax on all net income	Self-employment tax only on salary; distributions exempt
Savings at $100k profit	$0 (baseline)	$3,000 to $5,000 after costs
Savings at $150k profit	$0 (baseline)	$5,000 to $7,000 after costs
Payroll required	No	Yes, must run payroll and file quarterly
Administrative cost	$0 to $500 (annual filing)	$600 to $1,800 (payroll, CPA, filing)
Complexity	Low	Moderate to high
Retirement plan options	SEP-IRA, solo 401(k)	Same, but can contribute more with 401(k)
Qualified Business Income (QBI) deduction	Full deduction on net profit	Deduction on salary and distributions, but subject to wage limits

Steps to Decide and Implement This Week

1. Project your net income for the next 12 months. Use a conservative estimate. If it’s above $50,000, an S-Corp is likely worth it.
2. Consult a CPA who works with medical practices. Ask specifically: “What is a reasonable salary for a plastic surgeon in my area?” This is critical, as the IRS requires a fair salary.
3. If you choose S-Corp, file Form 2553 with the IRS. You must do this within 2 months and 15 days of the start of your business year, or you may have to wait until the next tax year.
4. Set up payroll using a service like Gusto or ADP. Budget $50 to $150 per month.
5. Open a separate business bank account if you haven’t already. This is essential for clean accounting.
6. If you choose LLC, you can start immediately as a sole proprietorship. You can elect S-Corp status later, but you’ll need to wait until the next tax year.

FAQ

Can I switch from LLC to S-Corp later? Yes, you can file Form 2553 to elect S-Corp status, but the election must be made by March 15 of the tax year you want it to take effect. If you miss the deadline, you may have to wait a year.

What is a “reasonable salary” for a plastic surgeon? The IRS doesn’t set a fixed number. It depends on your specialty, experience, and geographic area. For a plastic surgeon, a reasonable salary might range from $150,000 to $300,000, but in a new practice, it could be lower. Your CPA can help you determine a defensible amount.

Does an S-Corp reduce my QBI deduction? Yes, the QBI deduction is limited for S-Corps if your taxable income exceeds certain thresholds (around $182,100 for single filers in 2026). The deduction is capped at 50% of W-2 wages paid. This can reduce the benefit, but the self-employment tax savings often outweigh this.

What if I have partners? If you have multiple owners, you can form an LLC taxed as a partnership or elect S-Corp status. S-Corps have restrictions (max 100 shareholders, only certain types of shareholders), but for a small practice, it’s usually fine. Consult a CPA for the best structure.

The Bottom Line

For a new plastic surgery practice with projected profits above $50,000, an S-Corp will likely save you $5,000 to $7,000 per year in taxes, even after administrative costs. If your income is lower or you plan to reinvest heavily, an LLC is simpler and cheaper. The key is to project your income, consult a CPA, and make the election early. Don’t wait until tax season to decide, as retroactive elections are rarely allowed. Take action this week to set your practice up for maximum tax savings.

Related guides

• 7 Mistakes New Plastic Surgery Practices Make in Their First Year