> ## Documentation Index
> Fetch the complete documentation index at: https://www.practiceownersguide.com/llms.txt
> Use this file to discover all available pages before exploring further.

# PC vs. PLLC, and the S-corp election

> The entity decision in two layers: what state law makes you form, and how you elect to be taxed.

<Note>
  Not legal or tax advice. Confirm the choice with a healthcare attorney and a
  CPA; the right answer depends on your state and your numbers.
</Note>

The entity question is really two separate decisions that people mash
together.

## Layer 1: the legal wrapper (state law decides)

Licensed professionals usually can't use a plain LLC or corporation for the
practice. States push you into a **PC** (professional corporation) or **PLLC**
(professional limited liability company), and some allow only one of them for
physicians. California, for example, requires a professional corporation for
medical practices. Ownership of the wrapper must be licensed
([CPOM](/concepts/cpom-and-the-pc)); non-physician builders use the
[MSO/PC structure](/guides/own-a-practice-without-a-license), where the MSO
itself is a normal LLC or corporation.

One thing the wrapper never does: protect you from your own malpractice. It
shields you from the business's debts and from a partner's malpractice, not
your own. That's what [insurance](/guides/malpractice-and-insurance) is for.

## Layer 2: the tax treatment (you elect)

| Treatment                                  | How profit is taxed                                                    | When it wins                                                                                                                   |
| ------------------------------------------ | ---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ |
| Sole prop / partnership (default for PLLC) | Flows to your 1040; all of it hits self-employment tax                 | Simplest; fine at low profit                                                                                                   |
| S-corp election                            | Salary is payroll-taxed; remaining profit is a distribution, no SE tax | The common winner once profit clears roughly \$75-100k+ over a fair salary                                                     |
| C-corp (default for PC without election)   | 21% corporate rate, then tax again on dividends                        | Rarely right for a practice; a PC stuck as a C-corp is a **personal service corporation** taxed at a flat rate with no benefit |

The practical pattern: form the PC or PLLC your state requires, then **file
the S-corp election (Form 2553) in time** (within 2 months and 15 days of
formation, or of the tax year it should start). The classic error is forming
a PC and never electing, landing in personal-service-corporation tax
treatment by accident.

The S-corp trade: you must run payroll and pay yourself a **reasonable
salary** (the IRS's word) before taking distributions, which adds cost and
scrutiny. Run the math with your CPA at your expected profit.

## Decide once, early

The entity and EIN feed everything downstream (NPI, bank accounts, payer
contracts, [CAQH](/guides/caqh-setup)), and changing entities later means
re-enrolling with every payer. Spend the week to get it right:
[Choose your legal entity](/guides/choose-your-entity) has the broader
walkthrough.

## Related

* [Choose your legal entity](/guides/choose-your-entity)
* [The PC and corporate practice of medicine](/concepts/cpom-and-the-pc)
* [Ownership paperwork](/guides/ownership-agreements)
* [Owning a practice when you're not a physician](/guides/own-a-practice-without-a-license)
* [Malpractice and business insurance](/guides/malpractice-and-insurance)