From a $210K surprise tax bill to a fully-funded retirement plan and a real exit runway.

The situation

The physician bought into her practice in her late 30s and was the sole owner by her mid 40s. Collections had grown from roughly $2.4M to just under $5M by the time she came to us. She had a bookkeeper, a payroll service, and a CPA who filed the returns on extension every October.

The pattern each year was the same: a phone call in September, a stack of QuickBooks reports, a tax bill in October, and no time to do anything about it. She had written a check for six figures every April for four straight years. She assumed that was just the price of a profitable practice.

The trigger for the call to us was not the tax bill. It was a conversation with a colleague who was seven years ahead of her, already planning a phased exit, and asked her what her own plan looked like. She did not have one, and realized she did not know who did.

What we found

In the first working session we did three things: pulled three years of returns, mapped the actual ownership and entity structure, and modeled her taxable income against what a proactive plan would have produced.

The gaps were significant:

• Entity structure. She was operating as a single-member LLC taxed as a disregarded entity. Every dollar of profit was hitting her personal return at ordinary rates plus self-employment tax. A conversation about S-Corp election had never happened.
• Retirement plan. She had a SEP-IRA with modest contributions. No defined benefit plan, no cash balance plan, no 401(k) with profit sharing, despite consistent seven-figure income from the practice.
• Real estate. She owned the medical office building the practice operated out of, personally. Rent was being paid, but no cost segregation study had ever been done. The building had been fully depreciated on a 39-year straight line.
• Estate. No trust. No buy-sell agreement with the associate physicians she was starting to bring on. No documented succession plan.

What we did

We did not try to fix everything in year one. We sequenced it.

Year 1. Structure and immediate savings. We elected S-Corporation status for the operating entity effective January 1 and set a reasonable salary supported by physician compensation data. We commissioned a cost segregation study on the medical office building, which reclassified roughly 28% of the basis into 5, 7, and 15 year property, freeing up a large first-year depreciation deduction. We stood up a 401(k) with profit sharing and made the maximum employer contribution before year end.

First-year federal and California tax reduction: over $210,000 compared to the prior year's return on comparable income.

Year 2. Retirement and the holding company. We layered in a cash balance plan alongside the 401(k), pushing pre-tax retirement contributions well into six figures annually. We formed a holding LLC to own the medical office building and, over time, other assets, separating clinical liability from long-term wealth.

Year 3. Estate and the exit conversation. We coordinated with her estate attorney to establish a revocable trust and a spousal lifetime access trust for a portion of the practice interest, using valuation discounts on the operating entity to move meaningful value outside the estate before a sale.

We also opened the exit conversation seriously for the first time. She was not ready to sell to a hospital system or private equity roll-up. One of her associates was interested in eventually buying in as a partner. We modeled a phased internal buy-in against a third-party sale and gave her a seven-year runway to decide.

Where she is now

• Effective federal tax rate reduced by roughly 11 percentage points versus the pre-engagement baseline.
• Retirement plan assets funded at a level that meaningfully changes her post-exit picture, not the SEP contributions of the prior CPA relationship.
• A documented seven-year exit plan with two viable structures modeled, and the estate work already in place to support either one.
• Monthly working sessions with our team, quarterly full advisory reviews, and a year-end planning meeting where the tax bill is a decision, not a surprise.

What we would say to another physician in the same seat

The compliance work, the return, the extension, the estimate, is table stakes. It is what every CPA does. The reason her old CPA never brought up the S-Corp, the cost seg, the cash balance plan, or the exit structure is not because those things are exotic. It is because the relationship was scoped to filing the return, and filing the return does not leave room for the other conversation.

If you are a physician or professional services owner writing six-figure tax checks and your CPA has not sat down with you to model what a different structure would look like, that is the gap. That is the conversation worth having.