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LLC rules, S corp math and locum tenens taxes, answered with 2026 figures and the source behind each one. Then a published-fee path if you want our team to set it up.
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Sole proprietor or medical corporation, modeled on your numbers. If the answer is "not yet," you stop there with the answer in writing.
Not to practice medicine. California Corporations Code section 17701.04(e) says nothing in the LLC Act permits a domestic or foreign LLC to render professional services in California, as defined in section 13401. Medicine is a licensed professional service, and California has no PLLC.
Physicians practice through a professional medical corporation instead (Business and Professions Code section 2406). Corporations Code section 13401.5 allows certain other licensed health professionals to hold a minority stake, with physicians owning a majority.
Why do so many physicians say they have an LLC? Most practice in a state that allows physician PLLCs, use the LLC for real estate or investments, or are describing a medical corporation. A filing the Secretary of State accepted is not proof the structure is allowed.
No entity. Schedule C and self-employment tax. Often right for small, new or uncertain 1099 income.
Salary through payroll, remaining profit as distributions. California taxes S corps at 1.5% of net income, with an $800 minimum waived for the first taxable year.
Rarely the right fit for a solo physician.
Your attorney forms the medical corporation. Our team handles the tax election, payroll and filings, and works alongside your counsel.
It depends mostly on your W-2 income. Social Security tax stops at the wage base, $184,500 in 2026. A sole proprietor's Social Security tax is reduced by W-2 wages already taxed. An S corp is a separate employer, so its salary triggers a new 6.2% employer Social Security tax that is never refunded. Only the employee share comes back as an excess Social Security credit.
Illustration: federal payroll and self-employment tax on $100,000 of 1099 profit, 2026, married filing jointly, spouse with no wages
The S corp costs about $2,491 more before its other costs.
The S corp saves about $4,950 before its other costs.
Sole proprietor figures apply self-employment tax to $92,350 of net earnings. S corp figures apply employer and employee Social Security and Medicare, plus Additional Medicare where it applies, to the $60,000 salary; in the first case the employee Social Security share is assumed refunded. Not included: income tax effects, QBI, California's 1.5% S corp tax, California SDI (no wage cap), unemployment taxes, payroll and filing fees, and the PTE elective tax. Illustrative only; a defensible physician salary is often higher than $60,000.
Those excluded items can move the answer either way, which is why we model them together before recommending a structure, and why our answer is sometimes "not yet."
Primary sources for these figures are listed at the end of this page.
| Item | 2026 figure | Source |
|---|---|---|
| Social Security wage base | $184,500 | SSA |
| Additional Medicare Tax | 0.9% above $250,000 joint, $200,000 single | IRS |
| QBI threshold for medicine | $403,500 joint, $201,750 single; phased out at $553,500 / $276,750 | Rev. Proc. 2025-32 |
| SALT deduction cap | $40,400, reduced by 30% of MAGI over $505,000, floor $10,000 | IRC 164(b), as amended in 2025 |
| 401(k) and 403(b) employee deferral | $24,500, shared across 401(k) and 403(b) plans; a governmental 457(b) has its own separate limit | IRS Notice 2025-67 |
| Catch-up deferral | $8,000 at age 50+; $11,250 at ages 60 to 63; must be Roth if 2025 FICA wages from that employer exceeded $150,000 | IRS Notice 2025-67 |
| Total annual additions limit | $72,000 per unrelated employer; a 403(b) is combined with a solo 401(k) of a business you control | IRS Notice 2025-67; Treas. Reg. 1.415(f)-1 |
| California S corp tax | 1.5% of net income, $800 minimum (waived first year) | FTB |
| California PTE elective tax | 9.3%; June 15 payment of the greater of 50% of prior-year PTE tax or $1,000 | FTB, SB 132 |
| S corp election deadline | 2 months and 15 days after the start of the tax year | IRS Form 2553 instructions |
Yes, below the threshold. Health is a specified service business. In 2026 the full 20% deduction applies under $403,500 of joint taxable income ($201,750 single) and phases out completely at $553,500 ($276,750).
Every dollar of S corp salary leaves QBI. Under the threshold, the lost deduction can offset much of the payroll tax the S corp saves.
Often, at higher incomes. An S corp pays 9.3% at the entity level, the federal return deducts it outside the SALT cap, and you take a California credit. It is extended through 2030.
Sole proprietors cannot elect it. For 2026 and later, missing the June 15 payment no longer voids the election, but it cuts your credit by 12.5% of your share of the shortfall.
Two limits work differently. The $24,500 employee deferral is shared between your hospital 401(k) or 403(b) and a solo 401(k). A governmental 457(b) has its own separate limit.
The $72,000 total limit is the trap. If your hospital plan is a 401(k), a solo 401(k) at your own unrelated practice generally gets its own $72,000. If it is a 403(b), the 403(b) and your solo 401(k) share one $72,000 limit, because a 403(b) is combined with plans of a business you control.
Your tax home is the general area of your main place of work. Travel to a temporary 1099 assignment is deductible; one expected to last more than a year is not. If you have no regular main place of work, the IRS may treat you as itinerant, and travel is not deductible at all. Business meals are generally 50% deductible.
Income is generally taxed where the work is performed, so shifts in other states can mean nonresident returns there. California residents then claim a credit for tax paid to the other state where allowed.
Federal estimates are due in four equal parts. California's are 30%, 40%, 0% and 30%. Above $150,000 of prior-year AGI, the federal safe harbor is 110% of last year's tax; California requires current-year estimates once AGI reaches $1 million.
Structure belongs before the first 1099 payment. A July start means planning in spring.
W-2 plus contract shifts, often across states, with estimates kept current.
A PLLC that works in Texas or Florida does not work here. We map what changes and when.
Dual-status years, FBAR and treaty positions, in English, Turkish or Spanish. Visa work authorization is a question for immigration counsel.
What it costs
Starting fees, published. Your final fixed fee is confirmed in writing before any work begins.
A typical first year as a medical corporation starts at $5,093: the review, the setup bundle and the full S corp year.
Step 1 · Decide
A written recommendation using your contract, W-2 income and household picture.
Step 2 · Set up
After your attorney forms the corporation: EIN, S corp election and the first year of registered agent service, as one engagement.
Step 3 · Run the year
1120-S with the California return and reasonable-compensation memo, your joint 1040, four quarters of payroll and a planning session.
Moonlighting income still small or uncertain? Staying a sole proprietor is often right: Schedule C returns start at $850, with QBI analysis included. S corp owners can add an accountable plan from $499. Full price list
Prepared, second-reviewed, then reviewed with you before filing.
Enrolled Agents hold unlimited practice rights before the IRS, so our team can represent you in audits, appeals and collections wherever you live.
Work runs through an encrypted client portal under a written information security plan aligned with the FTC Safeguards Rule.
Scope and price agreed before work starts. No percentage or contingent fees.
Form 2553 is due no more than 2 months and 15 days after the start of the tax year it should apply to. A new corporation's first tax year starts on the earliest of when it has shareholders, acquires assets or begins doing business. Late-election relief exists, but planning ahead is cheaper.
The entity review starts at $399, the setup bundle at $699 and S-Corp Owner Complete at $3,995 per year or $369 per month, so a typical first year as a medical corporation starts at $5,093. Sole proprietor Schedule C returns start at $850. Your final fixed fee is confirmed in writing before work begins.
Yes. The restriction covers rendering professional services. An LLC can hold real estate or investments, subject to California's annual LLC tax and fee.
Not on your federal return. California still allows unreimbursed employee business expenses as an itemized deduction on your state return. Travel tied to 1099 work is a business expense if the assignment is temporary and you have a tax home.
No. Formation is legal work for a California attorney. Our team handles the tax side and coordinates with your counsel.
No. Engagements run through our secure portal, and IRS representation is federal, so it applies wherever you live. Our physician practice focuses on California structure.
No. Arc & Ledger is an Enrolled Agent-led firm. Tax preparation, planning and IRS representation do not require a California CPA license.
Request availability and tell us your start date. We confirm fit and timing in writing before any fee is charged.
Disclaimer: this page is general information, not tax or legal advice, and does not create a practitioner-client relationship. Entity formation and immigration questions belong with licensed attorneys. Figures reflect law as of October 13, 2026.