LLC, PLLC, or S-Corp: Choosing Your Therapy Practice Structure

By Lisa Reidsema, LMHC • Craft Your Practice™

Sole proprietor, LLC, PLLC, or an S-corp election. The business structure decision arrives right when you have the least energy for it, wrapped in jargon, and it quietly shapes your taxes and your liability for years. Most therapists either freeze on it or default to whatever a friend chose, which is not the same as choosing.

You do not need to become a tax expert. You need to understand the options well enough to walk into your accountant's office already knowing the questions. Here is the plain-language version.

Sole proprietor

This is the default. If you start seeing clients and do nothing else, you are a sole proprietor. It is simple and free, and it is also the option with the least protection. Legally, there is no separation between you and the business, so the business's liabilities are your personal liabilities. Many therapists start here and formalize later, which is reasonable, as long as it is a decision and not just inertia.

LLC and PLLC

An LLC, or a PLLC in states that require licensed professionals to use the professional version, creates a legal separation between you and your practice. That separation is the main reason therapists form one. It does not replace malpractice insurance, and it will not protect you from your own clinical liability, but it can help shield your personal assets from certain business liabilities.

Whether your state requires a PLLC specifically for licensed clinicians is one of the first things to check, because the rules vary and getting the wrong entity means redoing it.

The S-corp election

Here is the piece that confuses everyone. An S-corp is not a separate kind of entity you form instead of an LLC. It is a tax election you can make on top of an LLC. Once your practice earns enough, electing S-corp status can reduce how much you pay in self-employment tax, because you split your income into a salary and a distribution that is taxed differently.

The catch is that it only pays off above a certain income, and it comes with real costs: payroll, more complex bookkeeping, and a tax preparer who knows what they are doing. Below that threshold, the added cost and hassle outweigh the savings. This is precisely the decision worth paying an accountant to run the numbers on for your specific income.

What to actually do

You do not have to solve this alone or perfectly on day one. Understand the four options, check whether your state requires a PLLC for clinicians, and then take specific questions to an accountant: which structure fits my liability comfort, and at what income does an S-corp election start to save me money. Walking in with those questions turns an expensive, confusing meeting into a short, useful one.

Walk in prepared

If you want the whole launch mapped out in the order that actually works, my free Private Practice Starter Kit is the place to start. Grab it here.

If you want the options laid out plainly so you know exactly what to ask your accountant, the Practice Entity Guide in my Practice Library does that. See it here.

If you want your whole first ninety days in order, my Private Practice Foundations course walks you through it. See it here.

This is educational material about a business decision and it is not legal or tax advice.