Whether you're a dentist about to start your own dental practice or you’re considering joining up with another dentist (or practice), you might be wondering about the most financially prudent path forward. After all, launching a dental business can be an expensive proposition.
Fortunately, there are ways to significantly reduce these costs. Read on for some logistical and financial considerations dentists should make when moving forward with a business plan.
Structuring Your Dental Business
There are many ways to structure a dental practice, and there's no one-size-fits-all solution—the right answer for your dental practice will depend on everything from your personal net worth to the number of partners you'd like to have. Ideally, the corporate form of your dental practice will help protect you from personal liability for business debts
Some of the most common dental practice structures include:
- Sole proprietorship: A sole proprietorship requires no formal incorporation paperwork; the business is legally indistinguishable from the individual running it.
- Limited liability partnership (LLP): An LLP allows two or more dental professionals to partner together without being liable for other partners' actions.1
- Professional corporation (PC): A PC limits the business owner's (or owners') individual liability for corporate debts and is a good option for dentists who want more legal protection than a sole proprietorship provides.
Your financial professional can work with you to determine whether any of these options (or none of these options) will be the most advantageous for your dental practice.
Outfitting Your Dental Business
The equipment a dentist needs to run a thriving dental practice can be incredibly expensive. Few dentists buy this equipment outright; in most cases, dentists will enter lease agreements that allow them to use and house the equipment for a relatively low monthly fee.2
These lease or rent-to-own agreements are not only cheaper than buying the equipment outright, but they can also allow dentists to take advantage of advances in technology to upgrade to newer equipment for a reduced price. In other cases, dentists who are joining an existing dental practice may be asked to "buy in" to help cover the cost of the practice's existing dental equipment.
Depending on the circumstance, a dentist may be able to take out a personal loan to help cover the cost of dental equipment. Often, this expense can be deducted from the business's total income for the year, reducing the business's marginal tax rate (and total taxes paid).
No matter how you choose to structure your dental practice or finance the equipment you'll need, it's important to seek out professional advice before making any major decisions. Launching a new dental practice can be a costly endeavor; but with some proper planning, you can work to put yourself in a more advantageous financial position.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
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