CPA for Dental and Medical Practices in Los Angeles

Situations We Handle

Forming the professional corporation and choosing S or C status. California law does not permit a limited liability company to render professional services, so a practice that incorporates files Articles of Incorporation of a Professional Corporation, Form ARTS-PC, with the Secretary of State for a $100 fee. A dental corporation's name must include the words "dental corporation" or wording or abbreviations denoting corporate existence, and shares are held by licensed persons, with the other licensees the statute lists limited to 49 percent of the shares. As an S corporation the practice pays California 1.5 percent of its net income with an $800 minimum; as a C corporation, 8.84 percent; neither pays the $800 minimum in its first taxable year. We compare the two with the owner's expected collections and salary before Form 2553 is filed, no more than 2 months and 15 days after the start of the tax year it is to take effect. Setting up the corporation and the election starts from $950 plus state fees. See Business Formation.

The practice's name. A dentist practicing under a name other than the licensee's own holds a fictitious name permit from the Dental Board of California: the application fee is $650 and the permit is renewed every two years for $325, and a corporation submits its Articles of Incorporation with the application. A physician, medical group or medical corporation practicing under another name holds the Medical Board's fictitious name permit, a $70 application renewed every two years for $50. These are the board's filings rather than tax filings; we list their renewal dates alongside the state and city tax dates in the practice's calendar.

Staff payroll and the owner's salary. Hygienists, dental assistants, medical assistants and front-desk staff are paid through payroll with federal and California withholding. For 2026 the employer and the employee each pay 6.2 percent for Social Security on wages up to $184,500 and 1.45 percent for Medicare; California State Disability Insurance is withheld at 1.3 percent with no wage ceiling, and the employer pays unemployment insurance on the first $7,000 of each employee's wages, 3.4 percent for a new employer, plus the 0.1 percent employment training tax. The owner of an S corporation is paid reasonable compensation through the same payroll before any distributions, and health insurance premiums the corporation pays for a shareholder who owns more than 2 percent are deductible by the corporation, reported as wages on the owner's Form W-2 subject to income tax withholding but not to Social Security and Medicare taxes when the premiums are paid under a plan that covers employees or a class of employees, and claimed as the self-employed health insurance deduction on the owner's return when the owner is eligible. See Payroll.

Associates and contract physicians. Whether an associate is an employee or an independent contractor is a legal question; California Labor Code section 2783 provides that a physician and surgeon, dentist, podiatrist, psychologist or veterinarian licensed by the state and performing professional or medical services for a health care entity, including a sole proprietorship, partnership or professional corporation, is judged under the Borello test rather than the ABC test. We report the outcome: wages on Form W-2, or Form 1099-NEC for a contractor paid $2,000 or more in 2026. For the associate, an individual return with W-2 income and the California return is $650–$900, and a return with Schedule C income $1,100–$1,800. See Individual Tax Preparation.

Equipment and build-outs. Federally, the section 179 deduction for 2026 is limited to $2,560,000 and is reduced once more than $4,090,000 of section 179 property is placed in service in the year; qualified improvement property, meaning interior improvements to a nonresidential building, and off-the-shelf software qualify, and the 100 percent special depreciation allowance applies to qualified property acquired and placed in service after January 19, 2025. California allows a maximum section 179 deduction of $25,000, reduced when section 179 property placed in service exceeds $200,000, and does not conform to the special depreciation allowance. Chairs, imaging equipment and exam-room build-outs therefore sit on a federal depreciation schedule and a separate California schedule, and the difference carries into the owner's California return each year. See Business Tax Preparation.

Buying or selling a practice. The buyer and the seller each file Form 8594 when a group of assets that makes up a trade or business changes hands, allocating the price across seven classes under the residual method, with goodwill and going concern value in Class VII. Goodwill, covenants not to compete and patient lists are section 197 intangibles, amortized over 15 years, and a seller-financed sale with at least one payment after the year of sale is reported on Form 6252. We prepare Form 8594 from the purchase agreement, set up the amortization schedule, and bring the books current before a sale or a loan when they are behind. See Bookkeeping.

Supplies, lab work and use tax. Under California's sales tax regulation, dentists are consumers of the materials, supplies, dental laboratory products and other property they use in performing their services, so the laboratory charges tax to the dentist rather than the dentist to the patient. Equipment and supplies bought from out-of-state sellers without California tax owe use tax, reported on the income tax return or, for a practice with more than $10,000 of such purchases a year through December 31, 2028, on a registration with the CDTFA as a qualified purchaser. When we keep the books, untaxed purchases are flagged during the year so the use tax is reported.