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S-Corporation
Tax, Planning & Advisory Services
S-corporations offer meaningful tax and ownership advantages to many California medical and healthcare practices, service and related owner - operated businesses - but only when structured and operated correctly under California law.
Our s-corporation services are designed to support strategy, planning and compliance including:
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Entity selection and formation
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Tax strategy and planning to minimize tax liabilities
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Federal and state s-corporation tax return preparation
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Reasonable compensation, distribution and benefits planning
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QBI and PTET evaluation
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Estimated tax and cash-flow planning
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Ongoing advisory support as the business evolves
Work with us and take advantage of our extensive expertise assisting new and existing S-corporations and their shareholders understand and comply with the s-corporation regulations, efficiently financially manage and control the business, make decisions to minimize tax liabilities, file accurate and efficient tax returns and optimize the benefits of s-corporation business ownership.
Business that Benefit from
an S-corporation election
Business that Benefit from
an S-corporation Election
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Professional services business
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Closely held or family owned
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1 or more shareholder - owner / operator - employees
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Interest in limited liability protection
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Active owner - employees
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Consistently Profitable
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30k + Net Profit annually
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Interest in pass-through business ownership
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Interest in avoiding double taxation & self-employment tax
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Interest in receiving reasonable compensation on payroll
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Flexible retirement plan strategies
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Interest in taking advantage of special elections not available to Sched C business or corporation
Attributes that Indicate an S-Corporation May Not Be a Good Fit
❌ Low or Inconsistent Profit Businesses
❌ High variable or unpredictable earnings
❌ Early-stage businesses still stabilizing cash flow
❌Low net income
❌Rental real estate (unless part of a larger operating structure)
❌Investment income without active owner participation
❌Businesses where owners do not materially participate
S-corporation Planning
Areas
S-Corporations allow for multiple tax planning levers. Choosing — and coordinating — the right methods is critical.
Common S-Corporation Key Planning Areas Include:
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Reasonable compensation analysis
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Wage vs. distribution optimization
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Retirement plan integration (Solo 401(k), profit sharing, cash balance plans)
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Timing of income and expenses
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State-specific strategies (including California considerations)
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Coordination with other income sources (W-2, K-1s, investments, real estate)
Each strategy must be evaluated in the context of your full financial picture, not in isolation.
Specialized Expertise
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S-corporation entity election analysis, set-up and formation
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S-corporation tax strategies & planning
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S-corporation federal and state tax returns
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QBI and PTET Planning & Analysis
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Reasonable Compensation
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Retirement-plan Strategies
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K-1 planning
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Optimizing the benefits of S-corporation business ownership
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S-corporation federal and state tax returns
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S-corporation accounting & bookkeeping
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Late filing elections
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and more
Example 1
Physician — Hospital Employment + Locums
S-Corp Solo 401(k) with Profit Sharing + CA PTET
Hospital Employer
Hospital Income Type
Example Hospital Income
Outside Income Type
Potential QBI Deduction
Example 1099 Income
S-Corp Reasonable Salary
S-Corp Distributions
Self-Employment Tax
CA PTET Election
UCSD 403(b)
UCSD 457(b)
UC Pension
Solo 401(k) – Employee Deferral
Solo 401(k) – Employer Profit Sharing
Total S-Corp Retirement Contribution
Estimated Total Annual Benefit
University of California San Diego
W-2 wages
$300,000
1099 locums / moonlighting
TBD
$200,000
$120,000
$80,000
Avoided on S-Corp distributions
~$7,400 California tax credit
Available on hospital income
Available on hospital income
Employer-funded
~$23,500 from S-Corp W-2
~$30,000 (25% of S-Corp W-2 salary)
Up to ~$53,500
~$35,000–$40,000
💡Important for UCSD Physicians:
Participation in UCSD’s 403(b), 457(b), and pension does not limit Solo 401(k) profit-sharing through an S-Corporation. Hospital W-2 income cannot be used for Solo 401(k) contributions — only S-Corp wages qualify.
Example 2
Private Practice Owner
Cash balance + Solo 401 + PTET
SE Tax Optimization
CA PTET Election
Potential QBI deduction
Solo 401(k)
Cash Balance Plan
Auto & Depreciation
Estimated Total Annual Benefit
$100,000 +/- tax savings & deferral
$350,000 distributions
—
TBD
$66,000
$120,000–$200,000+
$18,000–$25,000
S~$26,000 payroll tax savings
~$30,000 CA tax credit
Up to 20% QB Income
Tax-deferred retirement
Large current-year deduction
Accelerated depreciation
💡Note:
* Results vary based on income level, reasonable salary, and plan design.
All strategies require CPA-led coordination and California compliance.
Example 3
Professional Service Provider
S-corp + Solo 401 + Cash Balance + PTET
SE Tax Optimization
Qualified Business Income (QBI)
Home Office (Accountable Plan)
CA PTET Election
Solo 401(k)
S-corp salary
Estimated Total Annual Benefit
$15,000 - $30,000 +/- tax savings & dedection
$45,000 distributions
Up to 20% of QBI
$8,000–$12,000 +/-
—
$25,000–$40,000 +/-
$75,000 +/-
S~$26,000 payroll tax savings
~$30,000 CA tax credit
Tax-deferred retirement
Large current-year deduction
Accelerated depreciation
💡Note:
* Results vary based on income level, reasonable salary, and plan design.
All strategies require CPA-led coordination and California compliance.
S-corporation
Frequently Asked Questions
How do I choose between an LLC, S-Corporation, or partnership?
Because income flows through regardless of cash movement. Distributions affect liquidity, not taxable income. Without tax distributions, owners face cash strain. Planning aligns distributions with liability.
Why do S-Corp owners owe tax without taking distributions?
Entity selection depends on income type, payroll exposure, ownership structure, and exit plans. No structure is universally best. The wrong choice increases tax or audit risk. The right choice balances efficiency and defensibility.
When should a California SMLLC elect S-Corporation status?
When net income is high enough to justify payroll and reasonable compensation rules. Payroll tax savings must exceed compliance costs and risk. Low or volatile income rarely qualifies. This decision should be modeled before electing.
How is reasonable compensation determined?
It reflects what you would pay someone else to perform your role. The IRS focuses here because underpaid wages are common in an attempt to limit payroll taxes and receive income from distributions that are not subject to payroll tax. Market data, responsibilities, and time commitment are essential factors. Income taken as distributions are subject to reclassification as wages when reasonable compensation is not taken.
Related Pages
Services | Individuals & High-Income Earners | Businesses | Services for Businesses | Reviews
San Diego CPA Tax Advisor for S-corporations | La Jolla CPA Tax Advisor for S-corporations
S-corporation Set-up and Formation | S-corporation Tax Strategies | S-corporation Tax Preparation
S-corporation Late Filing Election | S-corporation Reasonable Salary | S-corporation Shareholder Benefits
S-corporation QBI and PTET Tax Planning | S-corporation Retirement Strategies
S-Corporation Tax CPA near Me