Published by AE Tax Advisors Team • 2025-12-05

Medical Practice Restructuring Across 3 Entities Saves $120,000

The Client

Dr. Michael Osei, an interventional cardiologist in Chicago, Illinois, operated his medical practice as a single-member PLLC. His practice generated $1.1 million in annual revenue with net income of $680,000 after staff, rent, and supplies. He also earned $85,000 from medical consulting.

The Problem

As a single PLLC, Dr. Osei was paying self-employment tax on his entire net income and had limited ability to shift income, shelter earnings, or create deductible expenses between entities. His total annual tax burden exceeded $265,000.

Our Strategy

We restructured Dr. Osei's operations into three entities. Entity 1: a medical practice PLLC (S-Corp election) for clinical operations with a reasonable salary of $320,000. Entity 2: a management company LLC (C-Corp election) that provided billing, administrative, and management services to the practice at market rates, retaining $180,000 annually at the 21% corporate rate. Entity 3: a real estate LLC that owned the office building and leased it back to the practice at fair market rent of $96,000 per year, with a cost segregation study applied.

The Results

The three-entity structure reduced Dr. Osei's self-employment tax exposure, shifted $180,000 into the 21% C-Corp rate, and created additional deductions through the real estate lease and cost segregation. Combined annual savings reached $120,000 -- a 45% reduction in his prior tax burden.

Key Takeaway

High-income medical professionals operating as single entities are prime candidates for multi-entity restructuring. Splitting operations into practice, management, and real estate entities creates legitimate tax optimization opportunities that a single entity cannot achieve.