Starting any business is no simple matter. Opening a medical or dental practice is no exception. As entrepreneurs such as Brendan Wetzel are well aware, there are many legal and financial complications to consider before you can start welcoming in clients or patients. One of the most important decisions you must make from the get-go is which legal structure your business will take. A good way to narrow down your options is to ask yourself a few key questions.
Do You Have Partners?
The organization your business takes may be very different depending on whether you are working alone or have partners. If you will be working alongside one or more other health care providers, you may wish to consider forming a general, limited or limited liability partnership.
A general partnership gives all of the partner’s decision-making power within the business, but it also leads to personal liability for each. In a limited partnership, some partners mostly serve as investors or advisors and aren’t able to make decisions that impact the business. One of the benefits of these two organizations is that, despite the increased liability, they allow you to spend less money on taxes.
How Comfortable Are You With Liability?
Each business structure comes along with a different amount of financial liability. This means that in higher-liability setups you could potentially lose personal assets should your business be unable to pay outstanding debts. If you are confident in your business plan and comfortable with taking on significant liability, you may wish to opt for a sole proprietorship or a general or limited partnership. These options come with increased liability but also create the opportunity for higher profits, as you include the earnings in your own personal tax return.
Health care providers who wish to avoid as much liability as possible may opt to create a C- or S-Corporation. Both of these options protect your personal assets in the case of outstanding debt within the company. The downside is that you will likely pay much more in taxes. Limited liability companies or partnerships provide a middle ground when it comes to liability and taxes owed.
How Much Control Do You Wish To Have?
One thing to be aware of as a business owner is that your taxes and legal issues can become quite complicated. Usually, business structures that reduce liability, such as C- and S-Corporations, also increase the complexity of how you handle all of these concerns. That being said, you may have to consider hiring an outside accountant or legal representative to ensure that you are adhering to relevant laws. This may be an added financial burden to you and any partners.
There are many benefits of opening your own private practice. Not only do you have increased control over your schedule and work environment, but you also have the potential to earn a much larger income. These advantages come along with added risks and complications, however. Be sure to consider all of your options when it comes to business structures, and remember that it is possible to reorganize and adopt a different structure later on if you find it to be necessary.