Healthcare Practice Business Structures: PLLC vs PC vs S-Corp Explained
- Justin Marti
- Oct 20
- 6 min read
Congratulations! Your healthcare practice ownership journey begins. Starting a healthcare practice–whether dental, medical, veterinary, optometry, aesthetic, or other–requires both clinical skill and strategic business planning.
One of the most critical decisions you’ll make is selecting your business structure, which will affect your personal liability, taxes, management responsibilities, and ability to grow or sell your practice.
Below, we break down the seven most common business structures, emphasizing the true pros, cons, and liabilities that healthcare providers face when forming a practice.
Breaking Down Types of Healthcare Business Structures
1. Sole Proprietorship
A sole proprietorship is the simplest business form, where a single individual owns and operates the practice.
Pros:
Quick and inexpensive to start.
Complete control over practice decisions.
Simple tax reporting (income is reported on personal tax return).
Cons & Liabilities:
High personal liability: The owner is personally responsible for all business debts, malpractice claims, and lawsuits. Personal assets—home, savings, retirement accounts—are at risk.
Difficult to scale: Adding associates, partners, or investors is complicated.
Perceived professionalism: Insurance companies, lenders, and potential buyers may view sole proprietorships as less formal or stable.
Reality Check for Healthcare Providers:
For a healthcare provider planning to see patients under their own license, a sole proprietorship is not recommended. The personal liability exposure, especially with malpractice risk, makes it impractical for most practices. Most solo providers choose an LLC or S-Corp instead.
2. General Partnership
A general partnership is formed when two or more providers co-own a practice.
Pros:
Combines resources, skills, and capital from multiple providers.
Shared management responsibilities.
Less formal than corporations, easier to set up than LLCs or corporations.
Cons & Liabilities:
Joint personal liability: Each partner is personally responsible for the partnership’s debts, malpractice claims, and legal issues—even if another partner caused them.
Tax reporting complexity: Each partner reports their share of income and losses individually, which can get complicated with multiple providers.
Risk of disputes: Without a detailed partnership agreement, conflicts can arise over profit sharing, decision-making, and exit strategies.
Is this a good fit for healthcare?
General partnerships are rarely ideal for healthcare practices unless all partners fully understand and accept personal liability. Most multi-provider practices instead form an LLC or S-Corp to protect personal assets.
3. Limited Liability Company (LLC)
An LLC is one of the most popular structures for healthcare practices. It combines personal liability protection with flexible management and pass-through taxation.
Pros:
Personal asset protection: Members are generally not personally liable for business debts or malpractice claims (although liability insurance is still essential).
Flexible management structure: single-owner or multiple-provider practices can adapt easily.
Pass-through taxation avoids double taxation.
Cons & Liabilities:
Requires state filings and fees; some states require annual reports.
Operating Agreements are essential: Without proper formalities, courts can “pierce the LLC veil,” exposing members to liability.
Cannot issue stock, which can limit investor or partner options for larger growth.
What healthcare practice owners should know:
Many healthcare providers—especially solo and small multi-provider practices—choose an LLC. It balances liability protection with administrative flexibility and works well for scaling a practice gradually. However, for licensed healthcare providers, many states require a PLLC instead of a standard LLC.
4. Professional Limited Liability Company (PLLC)
A PLLC is a special type of LLC for licensed healthcare providers.
Pros:
Protects personal assets from non-malpractice business liabilities (rent, contracts, loans).
Pass-through taxation with flexibility for S-Corp election.
Can include multiple licensed providers under one entity.
Cons & Liabilities:
Does NOT shield members from malpractice claims—each provider remains personally liable for their own professional errors. It is imperative that providers obtain a professional liability insurance policy as well.
Formation requirements are stricter: members must be licensed professionals, and states often require proof of licenses.
Administrative filings, Operating Agreements, and compliance requirements still apply.
LLC or PLLC?
Most healthcare practices form a PLLC rather than a standard LLC when state law requires it. It allows for legal compliance while protecting personal assets outside of professional liability. Consult your attorney to determine what’s best for your practice.
5. Professional Corporation (PC)
A Professional Corporation (PC), sometimes called a Professional Service Corporation (PSC), is a corporate version of a PLLC. It’s required in some states for licensed providers.
Pros:
Protects shareholders from personal liability for business debts and obligations
Can elect S-Corp taxation for self-employment tax savingsProvides a familiar corporate structure for lenders and investors
Cons & Liabilities:
No protection from malpractice claims—each shareholder remains liable for their own professional negligence
More complex setup and formalities (bylaws, annual meetings, board minutes)
Ownership often restricted to licensed professionals of the same field
Reality Check:
Some states, especially in healthcare, require practices to form PCs instead of PLLCs. A PC can operate as either a C-Corp or elect S-Corp taxation depending on goals. It’s often the best fit for dental, medical, and optometry groups that employ multiple providers.
6. S Corporation (S-Corp)
An S-Corp is an often misunderstood legal structure. It is a federal tax designation, as opposed to a state entity. As such both LLCs/PLLCs and corporations (discussed below) can make a federal “S” designation with the IRS. S-Corps combine liability protection with tax advantages and the ability to pay salaries to owners.
Pros:
Personal liability protection: Owners are generally not personally responsible for practice debts or malpractice claims.
Potential tax savings: owners may avoid some self-employment taxes by taking a reasonable salary plus distributions.Attractive for multi-provider practices: allows multiple shareholders and structured ownership.
Cons & Liabilities:
More complex governance: requires shareholders, board of directors, and corporate officers.
Mandatory compliance: Articles of Incorporation, corporate minutes, and proper payroll practices are required.
Shareholders must be paid a reasonable salary, even if the practice isn’t profitable.
Why choose an S-Corp?
S-Corps are particularly appealing for multi-provider healthcare practices that want tax efficiency and a formalized ownership structure. They are also favorable if providers plan to sell the practice in the future, as the structure is more familiar to buyers.
7. Corporation (C-Corp)
A C-Corp is a fully separate legal entity with formal governance, often used by larger practices, multi-location groups, or healthcare organizations seeking outside investment.
Pros:
Strong personal liability protection for all owners
Easier access to investors and potential for outside funding
Can accommodate multiple classes of stock, useful for complex ownership or equity arrangements
Cons & Liabilities:
Double taxation: the corporation pays tax on profits, and shareholders pay tax on salaries and dividends
Complex formalities: Articles of Incorporation, bylaws, corporate minutes, and annual meetings are required
Less flexibility: management is more rigid than an LLC or S-Corp
Reality Check:
C-Corps are rarely necessary for small healthcare practices. They are most appropriate for large, multi-location practices, or groups seeking outside investors or planning to go public.
Key Takeaways for Healthcare Providers
Liability and licensing drive the decision: Healthcare providers should never operate as a sole proprietorship or general partnership.
PLLCs and PCs are the most common, compliant structures for medical, dental, and veterinary practices.
S-Corp elections can offer meaningful tax savings.
C-Corps work best for larger practices seeking outside investment.
Always maintain malpractice insurance—no entity type protects against professional negligence.
Always consult a healthcare-focused attorney and CPA before finalizing your practice’s structure. State laws, licensing regulations, and insurance requirements can significantly affect your choice.
For healthcare practices in Connecticut or Massachusetts, the team at Marti Law Group can guide you in forming the structure that protects you and positions your practice for long-term success.
FAQs: Structuring Your Healthcare Practice
Q1: What’s the difference between a PLLC and a PC? A PLLC is an LLC for licensed professionals; a PC is a corporation for the same. Both protect personal assets from business debts but not from malpractice.
Q2: Which structure is best for a small solo provider? A PLLC or PC with an S-Corp election often provides the right balance of protection, compliance, and tax efficiency.
Q3: Can different licensed professionals form one PLLC or PC together? It depends on the state. Some allow multi-discipline PLLCs (e.g., a dentist and an orthodontist), while others require same-profession ownership.
Q4: Can I change my structure later? Yes. Practices often start as PLLCs or PCs and later elect S-Corp taxation or convert to a different structure as they grow.
Q5: Is a C-Corp ever necessary for a healthcare practice? Only for large, multi-location organizations seeking investor capital or private equity involvement.
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