April 2016 | Jonathan Harris
There are 5 essential things that dentists must check (with their lawyer) before starting a new practice:
1. Does the ‘business structure’ maximise benefits for me?
- Do I have adequate protection against risk?
- Who has control of the business and, if relevant, how is it shared?
- Is the structure tax effective (for instance a simple partnership may not be sufficient to allow for income splitting, maximising available deductions and allowances)?
2. Does the business own and control all ‘intangible’ assets?
- Who owns the practice name, logo, (and any slogan)?
- Who owns the practice marketing materials including website content, website hosting, email URL’s and practice management software?
- Who owns the client base and goodwill of the practice?
- If a dentist leaves the practice, are there enforceable contractual restrictions on their ability to compete with the practice?
3. Is it better to have employees or contractors, and should we have detailed written arrangements with partners?
- You need to understand how the obligations and entitlements of employees and contractors are different and carry different legal responsibilities and consequences for the business;
- Who will be liable for past actions after the person departs – the practice’s professional indemnity insurance may not cover all the claim;
- Check whether a contractor is truly free to work elsewhere (or are they effectively an employee) – look at your business and make sure these arrangements are written and protect the interests of the business, not the individual.
4. Is my income and the value of my share of the practice protected if I die or cannot work?
The value of your practice will suffer unless appropriate arrangements are in place. These include:
- personal estate planning;
- tax-effective business succession plans that deal with the expectations of both your family and your business partners;
- suitable insurance tied in to those plans.
5. Do I have a clear picture of the key ‘risk areas’ for the business that can affect its value?
Don’t put off dealing with problems that will be created from:
- an inefficient business structure
- not appropriately restricting competition from departing partners or employees / contractors
- not controlling intellectual property
- not dealing with business succession
Investing your time and effort in a new practice is one of the biggest challenges you will tackle. Make sure you have experienced advice to help you get it right, first time.
Written by Jonathan Harris
(02) 9231 2466
Contact Jonathan Harris by email firstname.lastname@example.org or call the number above to discuss how to set up your new dental practice.