DBA vs. LLC vs. S-Corp: How to Structure a Functional Medicine Practice

Launching or expanding a functional medicine practice involves more than clinical decision-making. Choosing the right business structure is a high-impact operational decision that affects taxes, liability, and administration.

A poorly aligned structure can add administrative burden, increase taxes, or create regulatory friction.

Three common options are DBA (Doing Business As), LLC (Limited Liability Company), and S-Corp (S corporation tax election). Each has its own advantages and limitations.

This guide provides a provider-focused comparison to help you align your business entity with your professional goals and long-term growth strategy.

What are your options?: Business structure fundamentals

Before diving into tax optimization or compliance rules, it’s important to grasp the core distinctions between common entity types.

DBA (Doing Business As): Branding without separation

A DBA is essentially a trade (fictitious) name. It allows you to operate your practice under a different name than your legal one, which can be useful for building patient recognition. 

However, a DBA doesn’t create a separate legal entity or liability protection. Taxes and liability are handled through the underlying sole proprietorship, partnership, LLC, or corporation.

Healthcare providers sometimes use DBAs under existing LLCs or corporations for branding flexibility, but a DBA alone provides no liability protection.

LLC (Limited Liability Company): The versatile default

An LLC offers greater security by creating a separate legal entity. This structure helps separate personal and business assets for most debts and obligations, but doesn’t protect against malpractice claims. 

It’s a common choice for solo providers and small group practices due to its relative simplicity and flexibility.

From a tax perspective, an LLC is a pass-through entity by default, meaning profits flow directly to the owner’s personal return and are subject to self-employment tax. 

An LLC may also elect to be taxed as an S corporation (S-Corp) using the Internal Revenue Service (IRS) Form 2553, which can provide tax flexibility as the practice grows.

S-Corp (S Corporation): A strategic tax election

Unlike a DBA or LLC, an S-Corp isn’t a standalone entity type but a federal tax designation.

It allows owners to divide income into two categories:

• Salary (W-2 wages): subject to payroll taxes
• Profit distributions: not subject to self-employment tax, but must follow IRS rules

This structure may reduce overall self-employment taxes when profits are consistent, but it should be modeled with a Certified Public Accountant (CPA) to ensure compliance.

S-Corp owners are required to pay themselves a reasonable salary before taking distributions. The structure also requires payroll systems, quarterly filings, and recordkeeping. For profitable practices, the administrative investment may yield tax savings, but not universally.

Regulatory and legal considerations for clinical practices

In healthcare, entity selection isn’t purely a business decision. Licensing boards and state laws add unique requirements for providers.

LLC vs. PLLC in healthcare

In many states, licensed medical providers can’t form a standard LLC and must instead register as a Professional Limited Liability Company (PLLC). This ensures that only licensed professionals can hold ownership and that the entity complies with oversight from the state’s medical or professional licensing boards.

PC vs. PLLC explained

Some states, such as California, prohibit LLCs for licensed healthcare providers altogether, requiring a Professional Corporation (PC) instead. PCs typically require stricter governance, including shareholder agreements and formal board structures. 

Ownership is often restricted to licensed providers in the same discipline, which can limit opportunities for mixed-credential partnerships.

Malpractice and liability distinctions

No entity structure can shield a provider from personal malpractice liability. LLCs, PCs, and S-Corps protect against business-related obligations such as leases or vendor disputes, but not against professional negligence. Malpractice insurance remains a necessity regardless of entity choice.

Entity type can also affect payer enrollment, electronic health record (EHR) licensing, and insurance contracting, so providers should review compliance requirements before finalizing their structure.

Practical impacts: Taxation, liability, and administrative overhead

The real-world impact of each structure emerges in taxation, liability coverage, and operational complexity.

Liability protection and legal distinction

• DBA: No separation of assets and high personal risk
• LLC: Provides liability protection for business obligations
• S-Corp: Liability protection flows from the underlying LLC or corporation

Taxation mechanics and optimization

• DBA: Income flows directly to the owner, taxed as personal income
• LLC: Pass-through taxation by default, and all net income subject to self-employment tax
• S-Corp: Divides income into salary (payroll taxed) and distributions (not payroll taxed). May reduce overall self-employment taxes depending on salary levels, profits, and CPA guidance.

Administrative and compliance burdens

DBAs generally involve minimal filing requirements and little ongoing maintenance. LLCs require additional steps, such as formation documents, an operating agreement, and annual renewals. S-Corps add further layers of administration, including payroll systems, IRS Form 2553 filings, and quarterly tax submissions.

The compliance and accounting costs for an S-Corp are higher, and benefits vary based on profitability and CPA review.

Ownership structure and growth flexibility

A DBA is typically used by sole proprietors or partnerships and doesn’t create a separate legal entity. 

An LLC can be structured with one or multiple members, making it more flexible for growth and changes in ownership. 

An S-Corp offers potential tax advantages but places restrictions on ownership, such as limiting shareholders to 100 U.S. citizens or residents, which may affect certain long-term expansion strategies.

Implementation pathways and long-term planning

Selecting an entity isn’t a one-time decision. Many practices evolve their structure as they grow.

Entity selection based on practice stage

A DBA may work for providers testing their business model or running a side practice with minimal liability risk. An LLC or PLLC is often the next step, offering liability protection without significant administrative overhead. Some CPAs suggest evaluating the S-Corp election once profits are consistent. There’s no universal threshold.

S-Corp election timing and deadlines

Clinics that want to be treated as an S-Corp generally file IRS Form 2553 within two months and 15 days of the beginning of the tax year. In some cases, late elections may still be accepted if there’s reasonable cause. Working with a CPA helps ensure the process is handled correctly, and deadlines aren’t missed.

Step-by-step formation checklists

Each entity type involves specific legal steps, including name registration, filing with the state, obtaining an Employer Identification Number (EIN), and setting up payroll for S-Corps. Careful adherence to deadlines and requirements ensures compliance and reduces audit risk.

Evolving your structure over time

Many providers begin with a DBA, transition to an LLC or PLLC as liability increases, and later elect S-Corp status to optimize taxes. For larger practices or those preparing for sale, a PC or advanced structure may be required. Growth often benefits from layered structures, such as separating clinical operations from real estate holdings or intellectual property.

Frequently asked questions (FAQs)

Here are some common questions providers ask when structuring their practice:

Should functional medicine practices operate as a PLLC or PC in restricted states?

Yes, in states that don’t allow standard LLCs for licensed providers, you must form a PLLC or PC. This ensures compliance with professional licensing requirements.

At what income threshold does an S-Corp election make financial sense?

There’s no fixed threshold. Model potential savings with a CPA to account for salary requirements, profits, and state tax rules.

Can I start as a DBA and transition to an LLC later?

Yes, many providers begin as a DBA for simplicity and later form an LLC or PLLC. Assets and contracts may need to be reassigned during the transition.

How does an S-Corp impact how I pay myself as a provider-owner?

S-Corp owners must pay themselves a reasonable W-2 salary, with additional income taken as distributions. This balance determines potential tax savings.

What’s the operational difference between an LLC and a PLLC?

An LLC is open to any business, while a PLLC is reserved for licensed professionals. A PLLC is required in certain states for medical, dental, or chiropractic practices.

When is the deadline to file Form 2553 for S-Corp status?

The IRS requires the form within two months and 15 days of the beginning of the tax year. Extensions may be granted for reasonable cause.

Can I revoke S-Corp status and return to LLC taxation?

Yes, you can revoke an S-Corp election, but the process requires IRS approval and may restrict re-election for several years.

Key takeaways

• A DBA provides naming flexibility but doesn’t offer liability protection or tax advantages, making it most appropriate for very early-stage practices.
• An LLC or PLLC is a common choice, as it provides personal asset protection, pass-through taxation, and adaptability for growth.
• An S-Corp isn’t a separate entity but a tax election that may reduce self-employment taxes when a practice generates consistent profits.
• State laws may require certain healthcare practices to register as PLLCs or PCs, particularly in jurisdictions such as California that restrict LLCs for medical providers.
• No entity shields against malpractice liability, which highlights the importance of maintaining professional insurance regardless of structure.
• Entity selection should align with the practice stage, financial objectives, and regulatory requirements, and is best done in consultation with qualified legal and tax professionals.

Disclaimer:

This article is for educational purposes only and is not intended as legal, tax, or financial advice. Regulations vary by state and practice type. Functional medicine providers should consult a qualified attorney or CPA before making business structure decisions.