Common Business Issues Facing Doctors
A doctor setting up a medical practice faces the same challenges that any business faces, including tax and investment implications of their chosen business structure, and employment issues such as the need for partnership and employee agreements.
Setting up a Medical Practice
Medical practice entities typically include sole proprietorships, general partnerships, limited liability companies, limited liability partnerships, and professional corporations - either C or S corporations.
Which business structure is chosen for a medical practice can impact the business now and in the future.
For example, only some business entities allow the distribution of stock, a mandatory requirement for a medical practice that is to be funded by shareholding investors.
How a medical practice is taxed at the federal level is dependent largely on its type of business entity.
For example, with a C corporation, in order to avoid 35% flat tax on income, the practice must pay out bonuses at the end of the year, passing the tax liability on to the individuals receiving the payments.
When selling a practice, an S corporation or LLC - among others - will eliminate the risk of a double tax upon the sale of the practice.
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Right at the formation of a new medical practice, it is best to have all partners sign a partnership agreement.
For a medical practice, a partnership agreement can outline the various roles that each partner, whether practicing doctor or otherwise, is to take in the day-to-day operations of the practice. The agreement will usually outline ownership percentages of the practice, and even how disputes among owners will be handled.
The more a medical practice grows, the more imperative it becomes that all employees have signed an employment agreement.
An employment agreement can help make certain that each employee in a doctor's office understands the responsibilities of the job, which codes of conduct to obey, and which actions can lead to termination. Without one, a medical practice may leave itself open to complicated employment law matters, such as wrongful termination.