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.
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.
| Single-Member LLC (Schedule C) | S-Corp Election | |
|---|---|---|
| Net practice income | $300,000 | $300,000 |
| SE tax base / W-2 wages | $300,000 (×0.9235) | $160,000 (reasonable comp) |
| SE tax / payroll FICA | ~$36,400 | ~$24,500 |
| Distribution (no SE tax) | n/a | $140,000 |
| FICA/SE savings | — | ~$11,900 |
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.
| Single-Member LLC | S-Corp Election | |
|---|---|---|
| Net practice income | $500,000 | $500,000 |
| SE tax base / W-2 wages | $500,000 (×0.9235) | $220,000 (reasonable comp) |
| SE/FICA tax | ~$33,600 (Soc Sec capped, but Medicare on full) | ~$32,500 |
| Additional Medicare 0.9% on wages above $200K | Applied to all SE income | Applied only to W-2 wages above $200K |
| FICA savings | — | ~$1,100 + reduced Medicare 0.9% |
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.
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:
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.
| Issue | Single-Member LLC | S-Corp |
|---|---|---|
| Owner health insurance | Schedule 1 deduction | W-2 add-back, then Schedule 1 |
| Retirement contributions | Based on net SE earnings × 0.9235 | Based on W-2 wages |
| QBI deduction | Available if under SSTB phase-out | Same — dental is SSTB, same phase-out applies |
| State filings (FL) | None (FL no income tax) | Annual report ($150) |
| Complexity | Schedule C — simple | 1120-S — moderate |
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.
Generally above $150K net practice income. Below ~$80K, payroll administration costs outweigh SE tax savings. Between $80K and $150K, the math is marginal and depends on the dentist's other income and willingness to manage payroll. Above $150K, the S-corp election is usually clearly favorable.
At $300K net income, typical savings are $10,000–$12,000/year. At $500K net income, savings shrink because Social Security caps at the wage base — typically $1,000–$3,000/year plus additional Medicare 0.9% reductions. Savings depend heavily on the reasonable compensation set.
Market data for Central Florida GP dentists owning their practice: $180,000–$280,000 W-2 wages (full-time clinical + management). Specialty dentists run higher. The reasonable comp should reflect what the practice would pay an unrelated dentist with the same role.
Not in the favorable direction. Dental is a 'specified service trade or business' (SSTB), so the QBI deduction phases out at higher income regardless of entity type. Both LLC and S-corp dentists face the same SSTB phase-out around $241K single / $483K MFJ.
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