Updated May 2026 · Florida Plan Finder · Licensed Florida Health Insurance Producer

S-Corp vs. LLC Tax Advantages for Dental Practices in Orlando, FL

The single most consequential tax question for an Orlando dental practice owner is whether to operate as a single-member LLC (taxed as a sole proprietor by default) or to elect S-corporation status. The answer is rarely "always one or the other" — it depends on net practice income and whether you can support a defensible reasonable compensation. This page lays out the math for typical Orlando GP and specialty practices.

The Default vs. the Election

By default, a single-member LLC is "disregarded" for federal tax purposes — the dentist owner reports practice income on Schedule C and pays self-employment (SE) tax of 15.3% on the entire net profit (12.4% Social Security up to the wage base + 2.9% Medicare uncapped, plus 0.9% additional Medicare above $200K single / $250K MFJ).

An S-corporation election (Form 2553) splits the practice's net income into two parts: (1) reasonable compensation paid to the owner-dentist as W-2 wages, subject to FICA at 15.3%; and (2) remaining profit distributed as a shareholder distribution, NOT subject to SE/FICA. The savings come from paying self-employment tax on a smaller base.

The Math at $300K Net Practice Income

At $300K net income, the S-corp election saves roughly $11,900 in employment tax annually. After accounting for additional payroll administration cost ($800–$1,500/year for a payroll service like Gusto or ADP), the net savings is around $10,500.

The Math at $500K Net Practice Income

At $500K, the SE tax savings is much smaller because Social Security caps at the wage base ($168,600 for 2024, ~$176K for 2026). The bulk of the savings is in Medicare and the additional Medicare 0.9%. Still positive but the magnitude depends on reasonable comp choice.

Reasonable Compensation — The IRS Audit Trigger

The IRS scrutinizes S-corp dental practices specifically because the incentive to underpay W-2 wages and overpay distributions is obvious. Reasonable compensation must reflect what the practice would pay an unrelated dentist with the owner's qualifications and workload. Benchmarks for Orlando GP dentists working full-time:

• Associate dentist market rate: $130,000–$200,000 in Central Florida (2026)
• Practice owner doing both clinical work AND administrative/management: typically $180,000–$280,000 W-2 reasonable
• Specialty (endo, oral surgery, periodontics): $250,000–$450,000 W-2 reasonable

Setting reasonable compensation below market exposes the practice to audit and reclassification. A common audit outcome: IRS recharacterizes excess distributions as wages, assesses back FICA + interest + penalties. Better to err slightly high than aggressively low.

When the LLC (No S-Corp Election) Is Right

• Net practice income below ~$80K — payroll administration cost outweighs SE tax savings.
• The owner is also W-2 employed elsewhere with high wages already exceeding the Social Security wage base — Soc Sec savings is largely redundant.
• The practice is in startup phase with negative or marginal income.

When the S-Corp Election Is Right

• Net practice income above $150K and growing.
• The dentist has bandwidth to handle quarterly payroll, payroll tax filings, and an annual 1120-S filing (or has a CPA who does).
• The practice has stable income — not heavily seasonal or cyclical (which makes reasonable comp harder to set).

Other Differences That Matter

Switching Mid-Year

To elect S-corp status, file Form 2553 within 75 days of the start of the tax year you want it effective for, OR within 75 days of forming the entity. Late elections are sometimes accepted under Rev. Proc. 2013-30 if reasonable cause exists. Most Orlando dental practices that miss the March 15 deadline either elect for the following year or pay a $200–$500 fee for a late election.

Common Mistakes

• Setting reasonable comp too low: A $60K W-2 for a $400K-net practice is an audit invitation.
• Missing the QBI phase-out: Dental is an SSTB. Above income thresholds, QBI disappears entirely. Don't ignore this in tax planning.
• Forgetting health insurance W-2 add-back: Forgetting to add owner premium to W-2 Box 1 means losing the personal deduction.
• Electing S-corp before the math works: Below ~$80K net income, the savings don't cover the administrative overhead.