Independent CRNAs can practice as a sole proprietor, through an LLC, or through an entity taxed as an S corporation. The entity changes your liability shield for business debts, how self-employment tax applies, and how much paperwork you carry. It does not reduce your malpractice exposure.
Here is what each structure actually is and what it changes. This is general information; entity choice depends on your state and numbers, so confirm with a CPA and an attorney before filing anything.
Key points
- No entity shields you from your own malpractice.
- A default LLC changes nothing about your taxes.
- S corp savings come from SE tax on distributions, minus payroll costs.
- Many states require a professional entity (PLLC) for licensed clinicians.
Sole proprietor
This is the default. You work under your own name and Social Security number or EIN, report income on Schedule C with your Form 1040, and pay self-employment tax on net earnings.
- Liability: none beyond what you already have. You and the business are the same legal person.
- Taxes: all net profit is subject to SE tax (15.3 percent up to the Social Security wage base, Medicare portion above it).
- Paperwork: minimal. No state entity filing, no separate tax return.
Many 1099 CRNAs start here and never need more.
LLC
A limited liability company is a state-law entity. You form it with your state, get an EIN, and run business income and expenses through it.
- Liability: the LLC can shield your personal assets from business debts and contracts, such as a lease or a vendor dispute, if you keep the entity formalities and separate finances.
- Taxes: nothing changes by default. A single-member LLC is disregarded for federal tax, so you still file Schedule C and pay SE tax exactly as a sole proprietor.
- Paperwork: state formation fee, annual reports or franchise fees in many states, a separate bank account.
Important state wrinkle: many states require licensed professionals to use a professional entity (PLLC or professional corporation) instead of a standard LLC, and some restrict who may own it. California, for example, does not let most licensed professionals operate through an LLC at all. Check your state's rules before forming anything.
S corporation election
An S corp is not a different entity type; it is a tax election. An LLC or corporation files IRS Form 2553 to be taxed under Subchapter S. The entity then pays you a salary as a W-2 employee of your own company, and remaining profit passes through as a distribution.
What it changes:
- Taxes: only your W-2 salary is subject to Social Security and Medicare taxes. Distributions above the salary are not subject to SE tax. The IRS requires the salary to be reasonable compensation for the work performed, and unreasonably low salaries are a known audit issue.
- Paperwork: real payroll (payroll service, quarterly filings, W-2), a separate corporate tax return (Form 1120-S with a K-1 to you), state payroll registrations, and higher accounting costs.
- Other effects: salary level interacts with retirement plan contribution room, the qualified business income deduction, and state taxes. These interactions are exactly why the decision needs a CPA running your numbers.
The potential saving is the Medicare tax (and below the wage base, Social Security tax) on the distribution slice, weighed against payroll and compliance costs. Whether that nets out positive depends on your income level and state.
What no entity changes
- Malpractice exposure. You are personally liable for your own clinical negligence no matter the entity. Entities do not replace malpractice insurance.
- Licensure and scope. Your practice authority comes from your license and state law, not your entity.
- Payer enrollment. You still credential and enroll in Medicare as an individual, then reassign billing rights to your entity if it bills.
Quick comparison
| Sole proprietor | LLC (default tax) | S corp election | |
|---|---|---|---|
| Personal shield from business debts | No | Yes | Yes |
| Shield from your own malpractice | No | No | No |
| SE tax on all net profit | Yes | Yes | Salary only (reasonable comp required) |
| Separate tax return | No | No | Yes (1120-S) |
| Payroll required | No | No | Yes |
| State professional entity rules apply | n/a | Often (PLLC) | Often |
If you are building a group rather than a solo practice, entity design gets more involved: ownership rules, multiple owners, and payer contracting. Start with how to start a CRNA group and the practice owners hub.
One line to act on: have a CPA model the S corp math with your real income, and have an attorney confirm your state's professional entity rules, before you form or elect anything.
Quick answers
Does an LLC save taxes by itself?
No. A single-member LLC is taxed exactly like a sole proprietorship unless it elects S corp (or C corp) treatment.
At what income does an S corp make sense?
There is no universal threshold. The saving depends on the gap between a defensible reasonable salary and your total profit, minus payroll and accounting costs. A CPA can model it in an hour.
Can I switch later?
Yes. Many CRNAs start as sole proprietors, form an LLC when they sign bigger contracts, and elect S corp status once income justifies it. Elections have deadlines, so plan with your CPA.
Do facilities care what entity I use?
Some facilities and agencies prefer contracting with an entity rather than an individual, and some require it. It varies by contract.