adminIf you’re a dental professional contemplating opening your own dental practice, you’ll need to carefully consider which type of entity structure you choose. The right one can save you several thousand dollars in taxes every month, while the wrong one can cost you dearly.
Enabling you to keep more of what you earn and positioning your practice for sustainable, profitable growth, strategic entity structuring and specialist tax planning for dentists in Coral Gables, can protect your assets and reduce your tax bill.
Let’s take a closer look at your options as a dental practice owner:
Sole proprietorship – selecting this entity type means that you and your business are classed as being the same entity from a legal perspective. Whatever you earn is then subject to self-employment tax of 15.3%, and your personal assets are exposed to practice liabilities.
Limited Liability Company (LLC) – protecting your personal assets, an LLC gives you more operational and tax flexibility.
But when you elect S-Corporation tax treatment for your LLC, you benefit from:
- Asset protection
- Self-employment tax savings
- Operational flexibility
- Easy accommodation for multiple partners or locations
Tax planning opportunities
With the right entity structure, you can build wealth for when you retire, and create a practice that’s more valuable when the time comes to sell it.
- Maximizing self-employment tax savings – splitting your practice income between salary (subject to payroll taxes) and distributions (free from self-employment tax), S-Corporation election provides dental practices with immediate tax relief. However, setting a salary becomes a strategic concern, as if you don’t pay yourself enough, you may be questioned by the IRS, but pay yourself too much and you might miss out on tax-saving opportunities.
- Pass-through tax benefits – helping practice owners avoid double taxation, S-Corporations and LLCs qualify for pass-through taxation.
- Retirement planning – S-Corporations enable retirement plans that are more sophisticated thanks to their higher contribution limits. The benefits of SEP-IRAs or defined benefit plans should be talked through in detail with a dental tax specialist.
- Partnership and multi-location structures – if you plan to grow your practice, you’ll need an entity structure that allows for expansion while still protecting your assets and being tax-efficient.
- Keeping real estate separate – separating your practice operations from any real estate you own provides tax benefits and liability protection.
- Practice succession – stock sales offer favorable tax treatment for sellers, but may not appeal so much to buyers, while asset sales provide more favorable depreciation opportunities, but often mean higher taxes for sellers.
OSHA compliance
Whatever entity structure you choose for your dental practice, you must comply with federal OSHA requirements, such as:
- Yearly training in infection control for all staff
- Control plans for bloodborne pathogen exposure
- Hazard communication programs for safety around chemicals
- Comprehensive record keeping
The importance of strategy and timing
To maximize the benefits and keep practice disruptions to a minimum, owners should consult with accountants for dental practises in Coral Gables from the very outset, to ensure that entity structuring is carefully timed and implemented.
With the right approach, you can protect your practice during any periods of transition, and set yourself and your practice up for sustainable, long-term success.
Your chosen entity structure should put your practice in a prime position for growth and profitability, as well as succession, whether you plan to sell it, grow it, or transition to associates. With guidance from experienced dental industry tax and accounting experts, you can make a smart, strategic entity choice that works for you and your hard-earned wealth, not against it.
