Key Takeaways
Electing S corp status lets you pay yourself two ways, a salary and distributions, and distributions are free of self-employment tax. Heard recommends the S corp structure only for practices earning $100,000 or more a year, because franchise tax, payroll services, and higher accounting fees add to the cost of running one. You need an LLC or PLLC before you can elect, and the deadline to elect for the previous tax year is March 15.
Is S corp election right for your therapy practice?
Once you elect S corp status for your therapy practice, you control how your personal income is taxed. That can mean major tax savings, but it comes at a price.
Franchise tax, payroll services, and higher accounting fees all make an S corp more costly to run than a sole proprietorship or even an LLC. Heard recommends the S corp structure only for practices with an annual revenue of $100,000 or more.
How do S corp tax savings for therapists work?
There are two ways to pay yourself when your practice is an S corp: a salary, and distributions.
Your salary is what you earn as an employee of your practice. It’s subject to income tax plus self-employment tax (15.3% of taxable income).
Distributions are what you earn as a shareholder in your S corporation. They’re subject to income tax, but not self-employment tax.
By minimizing the amount you earn as salary and maximizing the amount you earn as distributions, you can significantly reduce what you pay in self-employment tax.
Essential resources:
Heard recommends S corps for practices earning $100,000 or more
Franchise tax, payroll services, and higher accounting fees all make an S corp more costly to run than a sole proprietorship or even an LLC. If your annual revenue is under $100,000, the cost of running an S corp outweighs potential tax savings. Above $100,000, tax savings offset the cost and start to grow your bottom line.
S corporation timing and deadlines
The deadline to elect S corp status for the previous year is March 15th. That is, to elect S corp status for the 2026 tax year, you must file Form 2553 (the S corp election form) no later than March 15th, 2027.
In many cases, if you miss the election deadline you can file a late election. For a step-by-step guide, see What Happens If You Miss the S Corp Election Deadline.
S corp filing deadlines for therapists
| Form | Deadline |
|---|---|
| Form 1120S (S corporation tax return) | March 15 |
| Form 2553 (S corporation election) | March 15 (to elect for previous year) |
| Form 7004 (application for S corporation tax extension) | March 15 |
| Schedule K-1 (information return for S corp shareholders) | March 15 |
| Quarterly tax filing | Q1: April 15, Q2: June 15, Q3: September 15, Q4: January 15 |
Sole prop vs. LLC vs. S corp: Which is right for you?
Many therapists in private practice believe they have to choose between the sole proprietorship, LLC, and S corp business structures.
In truth, these are different steps on the path to forming an S corp.
| Tax status | Business entity | |
|---|---|---|
| Sole proprietorship | Your person and your sole proprietorship are identical for legal and tax purposes. You file your business taxes with Schedule C of Form 1040 (your personal tax return). | As a sole proprietor, your business and your person are one and the same. Your business is not a separate legal entity. |
| LLC | Your LLC can elect to be taxed as either a disregarded entity (sole proprietorship), partnership, S corp, or C corp. | An LLC is a separate business entity from its owners. Provided it remains financially distinct, the liabilities of the LLC do not pass on to its owners. |
| S corp | An S corporation is a tax status you elect. Income passes through it to its owners, whose income tax obligations correspond with their ownership shares in the business. | An S corp is already an LLC. Only LLCs, PLLCs, and (in some states) professional corporations (PCs) can elect S corp tax status. |
Ready to set up your S corp therapy practice?
Heard runs the numbers, files your S corp election, and handles bookkeeping, payroll, and taxes for your practice in one place. Book a free consult to find out whether an S corp makes sense for you and what it would save.
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