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S-corp vs Sole Proprietorship in CA

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  • S-corp vs Sole Proprietorship in CA

    I'm likely going to be starting independent practice in CA. I know many people think practicing in CA isn't a great idea, but it's where my family is. I had a potential job in a much, much lower cost of living area and the salary would have been almost the same, but I am prioritizing being near family.

    I plan to meet with a lawyer and CPA in the coming weeks/months, but wanted to see if anyone had any insight. In CA physicians cannot form an LLC, so the only options are sole proprietorship or s corp. CA taxes s corps 1.5% of earnings, so this partially negates a lot of the medicare savings I would get if I paid myself partly in dividends (maybe I'd save a total of $2-3k per year in taxes overall). My understanding is s corps entail more work/cost/complexity to maintain than a sole proprietorship.

    My question is if there's any reason to not go the sole proprietorship route? I won't have any employees or any property that could cause liability. Aside from waiting to see how QBI is calculated from the new tax law (which could alone be enough reason to chose one business structure over the other), the only thing I can potentially think of that might argue in favor of an s corp is if I were driving between hospitals (on the job) and caused a car accident. I'm wondering if an s corp provides any additional asset protection, though my guess is a plaintiff could sue both me and the business, correct?

    Any input is greatly appreciated. Thank you.

  • #2
    The car wreck is a remote possibility but you need a good umbrella policy to cover the car wreck. Most of our CA clients are sole proprietors unless they are part of a larger network that mandates they form an S-corp. There are no "trick deductions" available only to an S-corp (except for the extra CPA fees you'll pay   ) and the CA tax structure is just not conducive for a professional with no employees.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      Yes, regardless of what structure I use I will make sure to have good malpractice coverage and a good umbrella policy (currently I have $1mil of umbrella, but I plan to increase that).