When you are ready to form an entity for your practice you have two primary initial decisions, which type of entity and, what type of tax election will you make. A professional limited liability company could be taxed in the following manners – as pass-through, a partnership, an s-corporation, or as a corporation.
What Is an S-Corp
An S-Corp is a type of tax election. The benefit of the S-Corp election or “S-Election” is creating flexibility to pay yourself a reasonable salary and, in return, avoid a portion of your FICA tax for Social Security and Medicare. If you are currently practicing and not utilizing S-Corp taxation or starting a practice, you should consider this approach and you qualify so long as:
- You have less than 100 owners
- Only individual, US residents own interests
- One class of owners exists —no preferred members