S-Corp vs. Sole Proprietor for CRNAs: Which Business Structure Saves You the Most Money?

As a Certified Registered Nurse Anesthetist (CRNA) working as a 1099 independent contractor, one of the most important financial decisions you’ll make is choosing the right business structure. Many CRNAs start as sole proprietors because it’s the default option, but forming an S-Corporation (S-Corp) can lead to significant tax savings—especially as your income grows.

The choice between S-Corp and Sole Proprietor can directly impact how much you pay in taxes, your ability to save for retirement, and how you protect your assets. In this guide, we’ll break down the differences between these two structures and how each affects your bottom line.

1. Understanding Business Structures for 1099 CRNAs

When you work as a 1099 CRNA, you’re considered self-employed, meaning you must choose a business structure for tax and legal purposes.

What is a Sole Proprietorship?

✔ The default structure when you work as a 1099 contractor.
✔ You report business income on Schedule C of your personal tax return.
✔ Easy setup, minimal paperwork, and no formal registration required.
✔ No separation between business and personal finances (unlimited personal liability).

What is an S-Corporation (S-Corp)?

✔ A formal business entity that provides tax advantages and liability protection.
✔ Requires filing Form 2553 with the IRS to elect S-Corp tax status.
✔ You pay yourself a reasonable salary, and the rest of your income is distributed as dividends (which are not subject to self-employment tax).
✔ Provides better tax savings for high-income CRNAs.

2. Tax Differences: Sole Proprietor vs. S-Corp

The biggest difference between these two structures is how you pay self-employment taxes.

Self-Employment Taxes for Sole Proprietors

As a sole proprietor, you pay self-employment tax (15.3%) on 100% of your income, which includes:
✅ 12.4% Social Security tax
✅ 2.9% Medicare tax

Self-Employment Taxes for S-Corp Owners

With an S-Corp, your income is divided into:
1️⃣ A salary (subject to self-employment tax)
2️⃣ Distributions (NOT subject to self-employment tax)

💡 This is where the tax savings happen!

3. Tax Savings Example: S-Corp vs. Sole Proprietor

CRNA Earning $250,000 as a Sole Proprietor

IncomeTax RateTax Owed$250,00015.3% self-employment tax$38,250

CRNA Earning $250,000 with an S-Corp (Salary: $120K, Distributions: $130K)

Income TypeTax RateTax OwedSalary ($120,000)15.3% self-employment tax$18,360Distributions ($130,000)0% self-employment tax$0Total Self-Employment Tax$18,360

Tax Savings by Using an S-Corp: $19,890

✔ Sole Proprietor Pays: $38,250 in self-employment tax
✔ S-Corp Pays: $18,360 in self-employment tax
✔ Total Tax Savings: $19,890

💡 Key Takeaway: If you’re making over $100,000 per year, switching to an S-Corp could save you thousands in taxes.

4. Advantages and Disadvantages of Each Business Structure

Pros and Cons of a Sole Proprietorship

✅ Pros:
✔ Simple to set up and manage.
✔ No need for payroll or corporate filings.
✔ All income is personal income—no need to separate distributions and salary.

❌ Cons:
✖ Higher self-employment taxes (15.3% on 100% of earnings).
✖ No liability protection—your personal assets are at risk.
✖ Limited ability to take advantage of tax planning strategies.

Pros and Cons of an S-Corporation

✅ Pros:
✔ Lower self-employment taxes—pay payroll taxes only on your salary, not distributions.
✔ Legal separation between business and personal finances (liability protection).
✔ More tax planning opportunities, including retirement contributions.

❌ Cons:
✖ Requires payroll setup (must pay yourself a “reasonable salary”).
✖ More administrative work (corporate filings, bookkeeping).
✖ Not always worth it for CRNAs making under $100K per year.

5. When Should a CRNA Choose an S-Corp?

✔ If you earn more than $100,000 annually, an S-Corp can provide major tax savings.
✔ If you want to protect your personal assets, an S-Corp offers limited liability.
✔ If you plan to grow your business, an S-Corp provides long-term tax and retirement benefits.

💡 Tip: If you’re making under $100,000, the tax savings may not justify the administrative costs of an S-Corp. However, as your income grows, switching can save you thousands per year.

6. How to Transition from Sole Proprietor to S-Corp

If you’re currently operating as a sole proprietor and want to switch to an S-Corp, follow these steps:

✔ Step 1: Register your business as an LLC (Limited Liability Company) in your state.
✔ Step 2: File Form 2553 with the IRS to elect S-Corp tax status.
✔ Step 3: Set up a business bank account to separate personal and business finances.
✔ Step 4: Establish payroll and pay yourself a reasonable salary.
✔ Step 5: Work with a CRNA-focused CPA to ensure proper compliance and maximize savings.

💡 Tip: Many CRNAs delay switching to an S-Corp and overpay in taxes—working with a tax expert can help determine the right time to switch.

Final Thoughts: Which Business Structure Saves You the Most Money?

✔ If you’re making under $100K, a sole proprietorship is simpler and requires less paperwork.
✔ If you’re making over $100K, an S-Corp can save you thousands by reducing self-employment taxes.
✔ If you want legal protection, an S-Corp offers limited liability benefits.
✔ If you plan to maximize tax-advantaged retirement contributions, an S-Corp is a better long-term strategy.

At Commission Based Financial Consulting (CBFC), we specialize in helping CRNAs optimize their business structure, reduce self-employment taxes, and keep more of their earnings.

💰 Want to switch to an S-Corp and start saving money? Contact us today for a personalized CRNA tax strategy!