Perhaps you have been thinking about restructuring your company or dental practice lately. However, if you do decide to restructure, it is important that you do it properly and that you don’t use it as a half-measure to fix your issues. Let’s take a look at the benefits of restructuring your dental office and some tips on doing it properly.
Why You May Want to Restructure
There are huge benefits to tax planning for small businesses and many dentists are restructuring their practices to maximize the tax benefits that come with a customized business structure. One of the most popular ways to restructure is to establish a management company that helps with the
operations side of your practice. A management company can be very beneficial, especially if you have multiple offices.
Throwing Caution to the Wind
If you decide to restructure to establish a management company for your dental practice, it is extremely important that you do it correctly. In January 2016, the U.S. Court of Appeals for the Ninth Circuit decided against a dentist who sought to claim fees charged by his management company as expenses to be deducted from his federal income taxes. While his management company was performing services vital to the operation of the practice, they decided against this dentist because he made some key mistakes when establishing his management company.
Tips to Properly Establishing a Management Company
When you establish a management company, be sure that the company has functioning employees. Do not make anyone a “co-employee” and do not have your office manager be the booker. It is important that the functioning employees of your management company be separate; in other words, they should not be employees of the dental practice, but employees of the management company.
Have it On Record
There needs to be records of what services the management company actually provides. Having sound procedures in place will help your office staff keep appropriate records that are not only vital to your practice’s operation, but are also required under numerous federal laws like HIPAA.
The management company needs to issue monthly invoices for the services provided and those charges should be paid on a monthly basis. Do not pay the management company one lump sum at the end of the year. Also, the dentist who owns the practice should not be the one calculating how much the management company is owed. This work should be done by an accountant of the management company. These invoices are also part of the documentation needed to prove expenses of the management company.
If you decide to create a management company, it is important that you do it properly in order to take full advantage of the benefits that restructuring offers. Having separate employees, documenting and invoicing are very important to the success of your restructure. If you think this option is for you, be sure to work with experienced dental professionals that can help you properly and fully integrate your new business structure into your practice. Think of it this way, you wouldn’t buy a new piece of dental equipment and then plan to use it improperly or not at all. So it also makes sense that when you restructure, you do it properly in order to receive all the benefits!