This article is part two of the series Jump-Starting Your Dental Career. The first one covers top tips as you enter into your first practice.
As a young dental practitioner, owning your own dental practice should be more than just a far-off goal. By becoming familiar with the issues you’ll face now, you’ll be much better prepared to address them when the time comes to make important decisions. Here are a few considerations.
Choosing the Type of Entity
One of the first determinations you’ll need to make when establishing your dental practice is which type of business entity to form. There are four main types of entities.
- Sole Proprietor
- Limited Liability Corporation
- S Corporation
- C Corporation
The type of entity you choose will have legal and tax consequences. Each can be advantageous depending on your goals. Be sure to have an in-depth discussion of the advantages and disadvantages of each business entity with your attorney and accountant.
Plan to start early to consolidate your loans – preferably before you graduate – to gain the best interest rates. Traditionally, dentists pay off their school debt over a long period of time. The bad news regarding financing for new graduates is that until you have established a track record, traditional bank financing for a new practice typically doesn’t happen. The good news is that once you’ve been working and established good credit, banks like to finance dental practices because they tend to have a low default rate.
Taxes, taxes, taxes. Your tax considerations will depend on several things. Your state and local tax issues will depend on where you work and where you live. The types of forms you’ll need to file will depend on the type of entity you select. When you get in a position to pay others, you’ll want to hire a payroll service or accountant to perform this function. Your time is too valuable, and the penalty is too high to risk doing it incorrectly.
Practice Management Software
Even if you’re not currently in a position to take over a practice, you’ll want to get familiar with the practice software programs that are available. The leading software products include Med Dent and Dentrix. Both provide an all-inclusive structure that includes the patient database, charts, billing records and accounts payable. These companies have representatives who can demonstrate the benefits of their products.
Accounting software programs today are very user-friendly. Basically, if you can write a check, you can use the software. The software captures a considerable amount of financial information that can help your accounting professional advise you on the health of your business. The leading software in the industry is QuickBooks.
Retirement benefits aren’t something you may want to think about as a young professional. However, it’s never too early to start your retirement planning. As you begin to build your practice, you’ll also want to be sure to establish a retirement plan that will be attractive to employees and also helps you maximize your own contribution.
How you set up your retirement plan, and how your plan is invested, will not only affect you, but also your employees. Begin early to develop a relationship with a financial advisor. Doing so will help you avoid making mistakes that could be difficult to make up in future years.
Many, but not all, benefits are tax-deductible for the practice. The benefits you offer can vary greatly, but ideally you want to provide a series of benefits that are attractive to employees. Since most dental practices have a small number of employees, health insurance premiums have fewer people to spread the risk among, and therefore premiums can often be higher than for larger groups. Medical insurance is constantly changing, and should be examined often. Other benefits to consider include vacation time, licensing or education payments, vision and group life insurance. By researching prevailing market trends, you can ensure your practice offers attractive but cost-effective benefits to employees.
There are many issues to consider as you begin to plan the second phase of your professional career. By familiarizing yourself with them early, you’ll be better prepared to make important decisions when the time comes to take charge of your own practice. Good luck!
This article was originally published in ODA Today, January 2010 issue.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.