When Therapists Should Switch From an LLC to an S-Corp: 3 Clear Signs to Look For In Your Practice

Starting and growing a therapy practice brings so many decisions, and choosing the right business structure is one of the most confusing. Most therapists begin as an LLC because it feels simple and safe, and that’s usually the right place to start. But as your practice grows, your needs grow too, and there comes a point where remaining an LLC may no longer be the best option.

If you’ve been wondering whether it’s time to move from an LLC to an S-Corp, it can help to know what to look for. So to make things simple, here are three signs that can guide you in deciding whether an S-Corp might be the next supportive step for your therapy practice.

What Therapists Need to know first

Before we go deeper, here’s a simple way to understand these terms without the jargon.

An LLC (Limited Liability Company) gives you legal protection by separating your business from your personal assets. Most therapists start here because it’s flexible, straightforward, and offers the liability protection you need.

An S-Corp, on the other hand, isn’t a different type of business. It’s simply a tax election that your LLC can choose. Electing S-Corp status changes how your practice income is taxed and opens the door for new benefits, like paying yourself through payroll.

Both offer value, just at different stages of your practice.

3 signs it might be time to switch from an llc to an s-corp

1.Your Net Income Is Consistently Above $100,000

One of the biggest signs therapists should consider an S-Corp is reaching a higher, stable income level. Once your practice is clearing around $100,000 in net profit, the S-Corp structure can help you save substantially on self-employment tax.

With an LLC, all your profit is taxed as self-employment income.

With an S-Corp, you can pay yourself a salary and then treat the rest as profit distributions—which are taxed differently.

2. You Want the Option to Pay Yourself Through Payroll

As your practice grows, paying yourself through payroll starts to become less of a formality and more of a smart, supportive step for your practice. With an LLC taxed as a sole proprietor, you can’t legally run payroll for yourself. With an S-Corp, you can.

Running payroll allows your business to pay a portion of your employment taxes, which becomes a business deduction. This helps lower your taxable income and can create long-term stability in how money flows through your practice.

3. You’re Ready for a More Strategic Tax Setup

Every practice reaches a point where it needs a little more structure behind the scenes. When your system starts to feel too simple for the size of your practice—or you’re paying more in taxes than you expected—an S-Corp often provides the stability you’re looking for.

Therapists who elect S-Corp status often gain:

• More predictable payroll

• Clearer bookkeeping categories

• Better long-term tax planning

• Smoother year-end reporting

Your structure should make your practice easier, not harder. When done intentionally, the switch can give you greater clarity, more savings, and steadier income.

Gentle Reminder

Choosing whether to stay an LLC or move into an S-Corp isn’t about doing things “the right way.” It’s about honoring the season your practice is in. You’re growing. Your needs are shifting. And you deserve a structure that supports that growth with clarity and calm. If you’re not sure what the difference between the two are, read my previous blog post where I outline the differences between an LLC and S-Corp, and what therapists should know before choosing. 

If you’re starting to see signs that an S-Corp might be the right next step, reach out when you’re ready. I provide accounting support for therapists every day, and together we can find the option that feels steady, intentional, and sustainable for your practice.

Be well. 🌿

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💚 You can watch my latest video here, where I walk through the differences between an LLC and an S-Corp and help you understand which structure may be the best fit for your practice.