If you want a short answer, dentist S-Corp tax structures can help you pay yourself in a way that respects both tax law and basic fairness, so you keep more of what you earn without pushing the burden onto lower paid staff or patients. A smart plan splits income between a reasonable wage and profit distributions, tracks it carefully, and treats everyone in the practice with the same basic rules. If you want a deeper look, especially with an eye on fairness and discrimination concerns, that is what this whole article is about. You can see a practical example of this kind of planning at dentist S-Corp tax optimization, but here I want to slow down and think through the ideas behind it.
Why S-Corp tax planning even matters for fairness
When people talk about S-Corps for dentists, they usually just talk about “saving taxes” for the owner. That topic gets repeated everywhere. But you do not often hear questions like:
- Is the tax strategy fair to hygienists, assistants, and front desk staff?
- Does it make pay gaps worse or better?
- Does it build a workplace where bias, including racial or gender bias, is less likely to hide inside money decisions?
S-Corp planning is not only about tax savings. It shapes pay, benefits, who gets equity, and who feels included in financial decisions. Money systems are often where discrimination hides, quietly.
A practice can be “compliant” on taxes and still be unfair in how people are paid, promoted, and included in ownership.
So if you are a dentist or a partner in a practice, you can aim for tax savings and ask at the same time: “Is this structure fair to the people who make this practice work?” Those two goals are not opposites. Sometimes they push in different directions, but often they can fit together if you are willing to look carefully.
Quick refresher: what an S-Corp actually does for a dentist
I will not turn this into a tax textbook, but we do need a simple base.
Basic idea
When your dental practice is an S-Corp (or an LLC taxed as an S-Corp), you are usually both:
- An employee who earns W-2 wages.
- A shareholder who receives profit distributions.
Wages are subject to payroll taxes (Social Security and Medicare). Profit distributions usually are not. So if you lower wages a bit and increase distributions, the total tax bill goes down. But there is a big condition: the IRS expects your wages to be “reasonable”. That word is vague on purpose, which is where both planning and abuse can creep in.
The gray area between “reasonable wage” and “lowballing your own salary” is where fairness questions and IRS risk sit side by side.
Typical tax benefits for dentists
For a dentist earning strong income, especially above, say, 300k, an S-Corp can:
- Lower payroll taxes by shifting some income from wages to distributions.
- Create clean records that separate ownership profit from pay for clinical work.
- Help with retirement plans by structuring wages at the right level for contributions.
This sounds nice. But there is a flip side. If the dentist owner pays themselves very low W-2 wages while staff are stuck at or near the local minimums, that creates a strange picture. On paper it might be “legal”, but it can deepen economic gaps in the practice, and often those gaps will fall on lines that already carry bias: gender, race, age, immigration status, and so on.
How money structures quietly carry discrimination
Discrimination is not always someone saying something hateful. Sometimes it is a set of rules that pretend to be neutral but always seem to benefit the same group.
In a dental practice, some common patterns show up:
- Owners (often older, often male, often from one racial group) getting most of the upside through profit distributions.
- Support staff (often women, often people of color) stuck on hourly pay with weak or no benefits.
- Associates on production-only contracts that give them risk but not ownership voice.
An S-Corp by itself does not cause that. But it can lock in those patterns if no one questions how decisions are made.
If you never ask who shares in profits and who only gets wages, you can accidentally turn a tax decision into a long term inequality machine.
So when we talk about S-Corp planning for dentists, and this is where some tax pros may disagree with me, we should talk not just about “what saves the most tax” but “who gets access to those savings and on what terms”.
Reasonable compensation: not just an IRS line, but an equity line
Most S-Corp discussion starts with “set a reasonable salary.” That phrase hides a lot of judgment. What is “reasonable” pay for a dentist-owner who:
- Does full time clinical work
- Runs the business side
- Builds the brand and trains staff
One tax advisor might say 40 percent of profit should be wages. Another might say 60 percent. People guess. Some use surveys. Some use practice benchmarks.
Here is where fairness can enter.
Linking owner pay to staff pay in a conscious way
Instead of only looking at external benchmarks, you can anchor your own “reasonable wage” to internal pay structures. For example, you might say:
- Your W-2 wage as the owner dentist should be at least some multiple of the highest paid hygienist or associate, not 10 times higher with no reason.
- Raises for the owner should, over time, move in the same rough direction as raises for staff.
- Benefits that you get through the S-Corp, like health insurance or retirement plans, should be designed so staff have meaningful access too.
This will not be clean in every practice. Sometimes legacy issues and debt and buy-ins make it messy. But if you never think about these ratios, you can end up with a structure where the owner claims a very low wage on paper, large distributions for themselves, and then asks staff to accept “tight budgets” for their own pay.
Checking for hidden bias in wage decisions
When you decide on your W-2 wage as an owner, you also shape things like:
- How bonuses are structured
- How retirement contributions are shared
- Who feels valued enough to stay long term
If every financial decision is made by people who share the same background, it is easy for bias to slide in. Not always on purpose. Sometimes just by habit.
A simple step is to document why you picked a certain wage and profit split and keep that reasoning consistent each year, with actual numbers. That way you can review it and ask:
- Would I make this same decision if the owner were a woman? Or an immigrant? Or a younger dentist of a different background?
- Do the same rules apply when more than one dentist becomes an owner?
If the answer feels shaky, that is a sign you might be mixing tax planning with some unconscious bias.
How S-Corp planning affects different people in the practice
It helps to lay out who gains what from S-Corp choices. A simple table can help you see the gap.
| Role | How income is paid | Who shares in S-Corp profits | Common impact |
|---|---|---|---|
| Dentist owner | W-2 wage + S-Corp distributions | Yes, as shareholder | Lower payroll tax, larger share of upside |
| Associate dentist (no equity) | W-2 wage and/or production bonus | No | Possible good income, but no ownership wealth or distributions |
| Hygienist / assistant | Hourly or salary wages | No | Stable pay, but no access to profit growth |
| Front desk / admin | Hourly or salary wages | No | Often the lowest paid, most distant from decisions |
Look at the last column. That is where you can ask fairness questions:
- Does anyone who is not already in the owner group get a path into that second income stream?
- Is there any way to share profits or bonuses in a structured way?
- Do people in roles that are heavily held by women or minorities have less access to long term financial growth?
S-Corp tax planning is usually sold to the owner. But the effects ripple across all these roles. Recognizing that does not force you to hand out equity randomly. It just nudges you to think about structure, not just savings.
Designing a “fair play” S-Corp plan for a dental practice
Let me walk through a more balanced version of S-Corp planning. Not perfect, but at least thoughtful.
1. Set a transparent method for your own wage
Instead of picking a number that “feels low enough to save taxes”, pick a method you would be willing to explain to your staff and to an IRS agent. For example, you might:
- Use regional data for dentist salaries doing similar clinical hours.
- Add a modest amount for administrative duties.
- Write down the source and the math each year.
Then stay roughly consistent. This protects you on audit risk. It also sends a signal that you are not gaming the system for yourself while claiming poverty when people ask for raises.
2. Build staff pay reviews into the same yearly cycle
When you review your S-Corp payroll and distributions, review staff pay bands at the same time. Ask simple questions:
- Are pay gaps by gender or race growing?
- Has the gap between my compensation and staff pay widened while profits went up?
- Are raises proportional to contribution, or just random and based on who negotiates better?
This can feel awkward if no one ever did it before. But money silence is often where discrimination grows, because no one is tracking the patterns.
3. Consider profit sharing or bonus pools tied to practice success
You do not need to share equity with everyone to share some upside. A practice can set a clear formula where a small percentage of profit each year funds a team bonus pool. Criteria can include:
- Practice wide goals that everyone supports, like patient satisfaction scores, re-care rates, or cancellation reductions.
- Hours worked and role, so part-time staff are not left out entirely, but full-time contribution is recognized.
This avoids the feeling that all the benefits of S-Corp planning float to the top while staff are stuck on fixed wages. Even a modest profit sharing plan can show that everyone has some stake in the success created by smarter tax and business planning.
4. Design benefits with inclusiveness in mind
Many S-Corp strategies involve benefits like:
- Health insurance paid through the practice
- Retirement plans like a 401(k) or cash balance plan
- Continuing education reimbursements
These can be great. But they can also be unfair if they only really help the highest earners. For example, a 401(k) that requires high contributions from lower paid staff in order for them to get any match might not be realistic for someone living paycheck to paycheck.
Instead, you can:
- Use safe harbor retirement designs that do not penalize lower paid staff.
- Make sure benefits are communicated clearly in plain language.
- Check participation rates. If most of the people using a benefit are in one demographic group, ask why.
If only higher paid, majority group employees can afford to use a benefit, the policy might be technically neutral but practically biased.
S-Corp tax planning across diverse owners and associates
Many practices now have multiple dentists with different backgrounds, genders, and ages. Some are owners, some are associates, some are on track to buy in later. This is where S-Corp planning can become a test of whether the group really cares about fairness.
Buy-ins and equity opportunities
Suppose you have a senior dentist owner and a younger associate dentist who is a woman or from a racial minority. The associate wants a path to equity. The owner uses S-Corp distributions to reduce taxes and build wealth.
Questions to ask honestly:
- Is the buy-in price realistic, or inflated, making equity harder for anyone without family wealth?
- Does the associate have access to information about the S-Corp finances needed to make an informed decision?
- Are all associates, not just those who “feel familiar” to the current owners, given the same chance to discuss ownership?
If the only people who receive real offers or mentoring toward ownership share the same race, gender, or social background as current owners, that is not just a business choice. It is a discrimination pattern hiding behind tax and finance language.
Production bonuses vs profit distributions
There is a tension here. Many associates get paid based on production or collections. Owners get S-Corp profits. Someone might say, “That is just how it works.” But when you break it down, it can feel as if owners capture the compounding benefits of practice growth, while associates, who may be from less represented groups, sit on a treadmill.
You could experiment with hybrid structures where long serving associates gain a small profit interest, even before a full buy-in, if they commit to the practice. This is not simple from a legal or tax view, and it is not always suitable, but it answers a fairness question: is there any serious path to shared wealth, not just wages?
Respecting patients and community while using tax strategies
There is one more layer that rarely gets discussed in S-Corp talk: patients. Many dental practices serve communities that already live with inequality. If S-Corp planning keeps more money in the practice, what happens next?
A practice could use part of its tax savings to:
- Offer sliding scale care for low income patients.
- Support community dental health programs.
- Invest in training staff from local underrepresented communities.
This is not required by law. Some will say it is not “necessary” for good tax planning. I think that is too narrow. If public systems are limited, and private practices gain extra after tax profit through careful S-Corp planning, there is at least a moral question about how some of that benefit is used.
Working with tax professionals without losing your values
Many dentists rely on CPAs and planners to set up and maintain S-Corp structures. Some advisors are very technical and focus only on what is legal and what reduces taxes. That is their job, in a way. But you still set the values.
You can say to your tax advisor:
- “I want to stay compliant and save taxes, but I also care about pay fairness in my practice.”
- “Can we document my reasonable wage in a way that makes sense if staff saw it?”
- “Can we design retirement and benefit plans that are workable for lower paid employees too?”
If your advisor pushes back and says none of that matters, you might not be wrong to question that. They are looking at one part of the picture. You live with the workplace every day.
Sometimes, tax professionals are open to this angle but have never been asked. They may actually enjoy thinking about it. It can make their work feel less like pure number games and more like supporting better workplaces.
Common mistakes dentists make with S-Corps that also hurt fairness
A few patterns show up again and again in dental S-Corp setups. They are not just technical mistakes, they can also carry fairness problems.
Paying the owner far below market wages
This is risky with the IRS. It also lets the owner say, “Our payroll is high, we cannot raise staff pay” while quietly paying themselves large distributions. Staff never see the K-1 but they feel the squeeze.
Better approach: set owner wages at a level that is defensible and meaningful, then share honest financial snapshots with key staff so they understand where money is going.
Using tax planning as an excuse to freeze staff pay
Sometimes a practice invests in new tax strategies and then acts as if money is tighter while smoothing cash flow changes. Staff get the message that “the practice cannot afford raises” right when owners are actually increasing after tax income. That might not be illegal, but it is not exactly fair.
If S-Corp planning gives you extra cash each year, consider earmarking a portion for structured staff pay improvements, or at least for benefit enhancements that matter to lower paid employees.
Keeping all financial data behind a curtain
Some owners fear sharing anything about profit or income, worried that staff will judge them. That fear is understandable. But complete secrecy breeds suspicion and makes it easier for discrimination to hide. When no one knows the numbers, it becomes hard to see patterns of unequal treatment.
Full transparency is not required. Yet some level of regular, simple reporting about practice health and pay policy can build trust and hold you accountable to your own stated values.
How anti-discrimination values can guide specific tax decisions
This might all still feel abstract. So here are some concrete decisions inside S-Corp planning where equity thinking applies.
Decision: How low to push your own W-2 wage
Pure tax lens: “As low as we can get away with.”
Fairness lens: “Set it within normal market ranges so I am not claiming hardship while benefiting privately from large distributions.”
Decision: Which retirement plan type to use
Pure tax lens: “Pick the one that lets the owner shelter the most, even if staff contributions are minimal.”
Fairness lens: “Pick a plan where everyone who stays with the practice and participates gets a meaningful benefit, even if it means the owner shelters a little less.”
Decision: Whether to create a structured associate buy-in path
Pure tax lens: “Keep equity concentrated to avoid complexity.”
Fairness lens: “If I want a diverse group of long term colleagues, I need to give them a real path to ownership, not just long term production-only roles.”
A short example of a more equitable S-Corp approach
Let me sketch a very simplified example. Numbers are rough, but they show the flow.
Assume:
- Practice net income before owner pay: 900,000
- Single owner dentist, with 8 staff members
Traditional aggressive approach:
- Owner wage: 160,000
- S-Corp distributions: 740,000
- No formal profit sharing for staff
- Basic retirement plan with minimal staff benefit
More balanced approach:
- Owner wage: 260,000 (closer to market for full time dentist + admin)
- S-Corp distributions: 640,000
- Set aside 3 percent of profit for staff profit sharing: about 27,000
- Use a retirement plan where staff get, say, a 3 percent employer contribution if they meet simple criteria
Owner still gets large distributions and meaningful tax savings. Staff gain some share in success and a real retirement boost. The gap is still big, but at least the system is not structured so that the owner alone captures every extra dollar from tax planning.
Questions you can ask yourself about your current S-Corp
If you already have an S-Corp in place, you do not need to scrap it. You can start by asking a few basic questions and, if you feel a bit uneasy with the answers, take small steps to adjust.
- Is my reported wage, as an owner, something I would feel comfortable explaining to my team if they saw the full picture?
- Do staff at different pay levels have realistic access to benefits like retirement plans, or are they mostly theoretical for them?
- Is there a clear path, even if it is a long one, for diverse associates to move into ownership if they want to?
- When tax savings rise, does any of that gain show up in staff pay, benefits, or better patient access, or only in owner distributions?
- Are my financial and tax decisions made with any input from people whose lives are affected by pay gaps and discrimination, or is it just me and my accountant behind closed doors?
These are not easy questions. But they are practical. They do not require a new law or a big policy statement. They just require some willingness to see tax planning and justice as connected topics.
Ending with a small Q&A
Q: If I pay more tax by being “fairer,” am I failing my business?
A: Not always. Sometimes fair structures still give strong savings, just not the absolute maximum on paper. The tradeoff is more trust, less risk of resentment, and a culture where people feel respected. Many practices find that this leads to better retention and better care, which matters as much as a bit more money in distributions.
Q: Are there legal rules that force me to share S-Corp benefits with staff?
A: Some retirement and health plan rules already limit how uneven benefits can be. Outside that, most sharing is voluntary. But if you care about discrimination, you do not need to wait for a regulation. You can build sharing into your own practice rules.
Q: What is one simple step I can take this year?
A: Document how you set your own wage and compare it to staff pay and to a neutral survey of dentist compensation. If the gaps feel hard to justify in plain language, adjust part of the structure and talk honestly with your team about how you are trying to handle both tax planning and fairness more carefully.