Financial Planning for Doctors in Private Practice

Running a private medical practice means wearing more than just a white coat. You’re not only a physician—you’re also a business owner, team leader, and financial decision-maker. And while treating patients might be second nature, navigating taxes, retirement planning, and liability protections? That’s a different kind of pressure.



At Andrea Ward CPA, we work with medical professionals who have built their own practices from the ground up. And we’ve seen the financial wins—and pitfalls—that come with it. Doctors face unique challenges, from high student loan debt to complex compensation structures and the ever-looming risk of liability. That’s why a tailored financial strategy is so critical.

Whether you’re just starting your practice or are years into running it, here are the most important financial moves to consider.

Choose the Right Business Structure

One of the first decisions for any doctor in private practice is how to structure the business. Your entity type impacts everything—taxes, liability, and how you pay yourself.

Common structures for physicians include:

• S Corporation (S Corp): Offers pass-through taxation and potential self-employment tax savings
• Limited Liability Company (LLC): Flexible with good liability protection
• Professional Corporation (PC): Common in healthcare, offers legal separation



Real-world example: We helped a solo physician convert from a sole proprietorship to an S Corp. By doing so, she saved nearly $18,000 in self-employment taxes over two years. The right setup pays off.

Separate Personal and Business Finances

This might sound obvious, but it’s worth saying: keep your business and personal finances completely separate. That means separate bank accounts, credit cards, and accounting systems.



Why it matters:

• Easier bookkeeping
• Better tax compliance
• Stronger liability protection

And if you ever face an audit or lawsuit, this separation helps reinforce that your business is its own entity—not an extension of your personal assets.

Maximize Tax Deductions (The Smart Way)

Doctors have access to a wide range of business deductions, but it takes smart planning to capture them fully and accurately.

Tax-saving deductions may include:

• Equipment and medical supplies
• Office rent and utilities
• Continuing education and conferences
• Business insurance and malpractice premiums
• Salaries and benefits for staff
• Marketing and technology expenses

Pro tip: Don’t overlook smaller deductions like scrubs, lab coats, or licensing fees. They add up over time.

We also advise high-income earners to consider Section 179 deductions for equipment purchases, and to explore bonus depreciation opportunities when buying big-ticket items.

Plan for Retirement Early (and Aggressively)

Retirement planning isn’t just about saving—it’s a key tax strategy. Doctors in private practice often earn too much to contribute to Roth IRAs directly, but there are powerful workarounds.



Top retirement plan options for private practice owners:

• Solo 401(k): Great for doctors without employees
• SEP IRA: Easy to set up, allows higher contributions
• Cash Balance Pension Plan: Excellent for high earners looking to defer significant income

Example: A cardiologist in our network implemented a cash balance plan alongside her 401(k). She was able to contribute over $150,000 annually—significantly lowering her taxable income and turbocharging retirement savings.

Set Up Liability Protection Strategies

Even the best doctors face lawsuits. That’s why protecting your personal assets is a non-negotiable part of financial planning.



Key strategies include:

• Adequate malpractice insurance (yes, even if you’ve never needed it)
• Umbrella liability coverage to supplement existing policies
• Asset titling (e.g., holding property in a trust or in your spouse's name)
• Retirement accounts (protected from creditors under federal law in many cases)

Also, consider forming separate entities for owning the real estate your practice uses. It can add a layer of liability protection and offer tax planning advantages.

Create a Plan for Managing Student Loan Debt

Most doctors carry six figures of student loan debt. And depending on your income, some repayment strategies are more efficient than others.

Strategies to consider:

• Refinancing for lower interest rates if you're not pursuing forgiveness
• Income-Driven Repayment (IDR) if eligible for forgiveness or managing cash flow
• Employer repayment assistance programs

Personal story: One pediatrician we worked with had the option to refinance but chose to stay on an IDR plan to maintain lower monthly payments while investing more into her practice. The key is aligning your debt strategy with your larger goals.

Build an Emergency Fund (Yes, You Still Need One)

Even with steady revenue, practices can hit dry spells. A sudden drop in patient volume or an unexpected legal issue can be financially destabilizing.



Aim for:

• 3 to 6 months of business expenses for practice continuity
• 6 months to 1 year of personal living expenses (especially if you’re the primary breadwinner)

This cushion gives you breathing room—and options.

Don’t Skip Regular Financial Checkups

You wouldn’t let a patient go years without a physical, right? Same goes for your finances. Set a schedule to regularly review your financials with your CPA and/or financial advisor.



Review items include:

• Profit and loss statements
• Budget vs. actuals
• Upcoming tax liabilities
• Investment and retirement plan performance

Having an ongoing relationship with a CPA means you're not scrambling during tax season—you’re making smart moves all year long.

Final Thoughts: Focus on What You Do Best—and Let Us Handle the Rest

Running a private practice takes passion, discipline, and grit. But financial planning doesn’t have to weigh you down. With the right strategies, you can protect your assets, reduce your tax burden, and build real, lasting wealth.



At Andrea Ward CPA, we specialize in helping doctors and medical professionals make informed, confident decisions about their financial futures. From entity formation to retirement design and everything in between, we’re here to make sure your practice is healthy—on paper and in practice.

You take care of your patients. Let us help take care of your financial wellbeing.