Whether multi or individual practitioner practices, there are a range of unique tax considerations for business owners, as well as legal and asset protection issues to consider. The structure of a multi practitioner practice should fundamentally reflect the way in which the practitioners wish to work and share responsibilities and the structure should provide flexibility for succession planning. Tax planning is a secondary issue and at WLM we always consider the cost versus benefit of adding any layers of complexity.
Incorporation and the use of Service trusts
There are very few benefits of incorporation for individual practitioner medical practices, as medical service practitioners are not permitted to hold profits from personal services income within a medical practice company. The main disadvantages of incorporation include the obligation for workers compensation insurance, potential risk of payroll tax and division 7A loan issues. There are however advantages of incorporation when the medical practitioner is also in receipt of employment income, could benefit from the statutory rate for motor vehicle fringe benefits, does significant business travel or is going to join with other practitioners.
Service trusts can be a great way of sharing costs for Medical Service Partners and provide a profit share for family members.
At WLM, we advise on and implement the appropriate structures for all our clients.