You can watch the video below if you'd like - otherwise enjoy the read

Sole Proprietor vs LLC vs S-Corp: What's Best for Physical Therapists?

If you're making over $60,000 a year in profit as a physical therapist — and you're still operating as a sole proprietor — you're leaving thousands on the table.

The structure of your business determines how much you pay in taxes, how you can scale, and how well you're legally protected. Here's a breakdown of the three most common business structures for PTs, and when it’s time to switch.

Sole Proprietor (Default for most PTs)

What it is: Doing business under your own name or a DBA, without forming a legal entity.

Pros:

• Easiest and cheapest to start

• No separate tax return (you file using Schedule C)

Cons:

• You pay self-employment tax (15.3%) on 100% of your net profit (IRC §1401)

• No legal separation between you and your business (no liability protection)

Best for: Brand new PTs testing an idea, or earning under ~$30K/year with little overhead.

LLC (Limited Liability Company)

What it is: A legal entity that protects your personal assets from business liabilities. By default, it’s still taxed like a sole prop — unless you elect otherwise.

Pros:

• Easy to form, protects your personal assets

• Flexible: can be taxed as a sole prop, partnership, or S-Corp

Cons:

• Still subject to full self-employment tax unless you elect S-Corp status

Best for: Solo PTs who want protection but aren’t earning enough yet to justify S-Corp compliance costs.

S-Corp (Tax Election)

What it is: Not a type of business, but a tax election your LLC (or C-Corp) makes using IRS Form 2553. You pay yourself a salary, and the rest of your income is taxed differently.

Pros:

• Avoid self-employment tax on profits beyond your salary

• Significant tax savings for PTs earning over $60,000 in profit

• Can deduct payroll, retirement contributions, and more

Cons:

• Requires payroll setup and quarterly filings

• More complex compliance (Forms 941, 940, W-2, etc.)

Best for: Cash-pay, home health, or online PTs earning $60K+ in net profit per year who want to scale and reduce their tax burden.

When Should You Switch to an S-Corp?

If you're consistently earning over $60,000/year in net profit, the tax savings from an S-Corp usually outweigh the extra admin costs.

Example: If your net profit is $100,000 — as a sole prop or LLC, you’d owe ~$15,300 in self-employment tax.
As an S-Corp, you could pay yourself a $50K salary and take $50K in distributions, saving ~$7K+ legally.

It’s not just about saving taxes — it’s about building your business like a real CEO.

Final Thoughts

Most PTs don’t get taught this in school. I didn’t either — until I paid a massive tax bill and realized I needed to play by a smarter set of rules.

If you're earning more, it's time to structure smarter. And if you're not sure when to switch, get help from someone who’s done it — not just someone who files taxes.

📥 Want Help Setting This Up?

Grab my free S-Corp checklist, CPA email script, and payroll guide here: 👉 https://go.dptpreneur.com/widget/form/MoZ8jre209ierFufVi9F

P.S. You can also listen on Spotify and Apple Podcasts

https://open.spotify.com/episode/44Vqy3B0k7EWqq78ssPo8F?si=TMkuquVbSTW98y30k_GN2Q&nd=1&dlsi=5bbaad2bc63a4a13

https://podcasts.apple.com/us/podcast/outside-the-box-income-and-investing/id1589628313

Brandon Smith JD, DPT, MPH
Founder, DPT Preneur
Helping physical therapists scale, automate, and build wealth the legal way