Because if you are netting $280k, you can’t pay yourself $120k in salary and $160k in dividends. Unless you would like a visit from the IRS.
No private practice owner is paying themselves $100-140k when they actually make $300k. The spread isn’t that large. Someone who is claiming to make $120k for tax (and survey) purposes might be making $200k. But that just puts them in line with Pediatricians in the world of real doctors. Meaning, you’re still at the bottom…
You can do it any way you choose, but for S-corp (the way most docs structure) it's generally advised by CPAs that it's done about 50/50 or 60/40 (salary / owner draws aka divi).
It all gets taxed as ordinary income regardless (whether I do 100k salary + 200k draws or 200k salary + 100k draws).
So, yes, an owner of PP could be "paying themselves $100k-140k when they actually make $300k" ($160k-200k owner draws in addition to the salary), but it just doesn't matter very much. They are making $300k regardless for taxation.
It definitely does raise chances of audit if you have an owner salary way below "reasonable salary" for one's profession, so it's best to do at least a six figure salary for owner doc as soon as that is viable based on revenue of the office consistently supporting that. It is not a huge deal as to what the exact figure is, though... they will pay taxes on money the get from their payroll/salary plus their draws regardless. Even if highly profitable, many owners just use Bureau of Labor and Statistics for their profession, pay themselves a payroll figure on the low end of that, and take the rest of their income as draws.
Early on, you can take a $0 or very low salary (roughly $35k is federal minimum for salary employees)... and that might be smart if the office is a startup expected to be minimally or not profitable due to startup (buyout) debt, equipment, marketing, construction, legal fees, low volume, etc. I have friends who are docs, CRNA, tradesmen, various entrepreneurs who did that for a year or two (weren't sure of what salary could be... just took draws). Many still take under $100k in salary from their LLC. Owner will still do have to take all profits as draws or reinvest them by year end, but it gives flexibility with low salary so you have less chance of getting crunched for bills or payroll or unexpected expenses or slow stretches early on.
...in the end, you will pay taxes on all profits the owner gets. Salary (payroll) and draws (dividend) is all going to the same tax bucket (for S-corp).
The huuuge strength to setting up PP that way is just that you can deduct anything reasonably related to the business
before deciding how much the biz made (aka what draws or taxable biz savings amounts will have to be). This is where the company car, company meals, company supplies, uniforms, subscriptions, travel, etc etc come in. For those who are employed, you don't have those avenues... those things all get bought with post-tax monies. It is not free for owner to do them pre-tax, but is sure doesn't hurt... and it can effectively lower tax bracket (but owners will be in highest tax brackets 30% and above fairly fast regardless).