Should Dentist Remain an S-Corp or Convert to Sole Proprietor?

Currently I am the only employee of my own S-Corp.

The only advantage I see being in a S-Corp is the limited liability? Is that right?

I’m considering dissolving the S-Corp and go back to the sole proprietor 1099? I’m paying my accountant about $2000 a year just to file the quarterly tax, monthly IRS tax, and the yearly corporation’s income tax.

I honestly do not know if I’m really benefiting from the s-corp. I work as an independent contractor to an office last year and the most write-offs for my personal equipment purchase, supply, etc was probably less than $5000 total.

This year I changed jobs and I’m probably going to end up only bringing home less than 60k before tax. If I can cut back on paying (the CPA) to maintain the corporation, is that better?

Purely from an INCOME tax perspective, generally there’s no difference between an S-Corp and a sole proprietor when it comes to business deductible expenses. An S-Corp can save you some Medicare tax; however, in my opinion, you have to NET at least $150,000 with an S-Corp for the Medicare tax savings to offset the additional costs of having an S-Corp. Therefore, purely from a tax savings perspective, an S-Corp would only make sense once you begin to NET more than $150,000…..again, in my opinion.

There was a time where corporations in general were less likely to be audited by the IRS and while that stat may still hold true, S-corps have been targeted more recently for reasonable compensation. Because of that, I’ve stopped using that as a reason to incorporate.

If it’s legal liability you are concerned about, see what our friend Jason Wood has to say below. In many other states, working as an LLC would accomplish that; however, I understand CA hasn’t caught up with the rest of the country on allowing LLC’s as a legal entity.

Jason Patrick Wood (Dental Attorney):


You are correct. CA will not allow dentists to be LLC’s. Unfortunately, many dentists in CA actually ARE in LLC’s. It is shocking.

I agree with Tim however, that based upon what you have told us, there is no real benefit to have an S-Corp in your current situation.

Even if your thought was to keep the corporation so that when you purchase a practice you will already have one, this isn’t a good rationale. Reason: I would not counsel you to continue using the corporation you currently have, because I don’t want you transferring any existing liabilities of your associateship into your new practice.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at

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