Should You Incorporate Your Dental Practice? Top 5 Reasons To Form A Corporation

If you’ve just begun plans to start your own dental practice, you may be wondering if you should form a corporation for your practice, such as an LLC. Is it worth it to incorporate your dental practice?

The answer is “yes.” While incorporating a practice does cost some money and lead to a little more paperwork, it’s well worth it, especially if you have a dental accounting firm like Tooth & Coin on your side to help you with the process. Here are the top five reasons that you should form a corporation for your dental practice.

1. Asset Protection

When you incorporate a business, it’s legally separate from you. This is not the case if you’re operating as a sole proprietor. This legal separation means that you can divide your personal and business assets. And, if a situation ever arises where someone sues your business or creditors come after you, your business assets are the only thing that are at risk.

It is important to note that forming a corporation won’t necessarily protect you from medical malpractice lawsuits. However, it will provide you with a layer of protection against other legal action. And for medical malpractice, you can purchase insurance coverage that will provide the protection you need.

2. Tax Savings

The exact tax savings differ between LLCs, S Corps, and other types of corporations. However, in general, forming a corporation provides you with a lot more tax flexibility compared to sole proprietorships and partnerships. 

For example, if you form an LLC, you’ll be able to get tax breaks for startup expenses for your practice, which could include expenses like business cell phones, meals, accounting fees, internet costs, and more.

3. Build (And Protect) Your Brand

If you’re planning on opening more than one dental office or you want to sell your practice later down the line, incorporating your business is a good idea. Because corporations are legally distinct entities, it’s much easier to build and protect your practice’s brand. You’re not just protecting your business name when you incorporate your business, either. You can also protect your brand colors, slogans, trademarks, and other valuable intellectual property.

4. Simplify The Transfer Of Your Business

If your dental practice is incorporated, it’s much simpler to sell it and transfer ownership to someone else in the future, especially when compared to a sole proprietorship. Because a business is its own entity, it’s a lot easier to sell it or pass it on to another dentist, a family member, or anyone else who you may want to transfer your business to in the future.

5. Requires Stronger Record Keeping 

This may seem like a drawback, but it’s not. When you form a corporation, you will need to follow some specific regulations about record keeping and filing taxes. But this is actually a good thing.

Because you may need to work with a dental accounting firm like Tooth & Coin, you’ll be able to develop a much better overall picture of the health of your practice. You’ll have detailed records about the overall performance and health of your business. Not only does this help with business strategy, but it can also help you get loans when you need them, acquire other practices, and much more.

Interested In Incorporating Your Practice? Learn More From Tooth & Coin!

At Tooth & Coin, dental accounting is our specialty, but we also offer a wide variety of other advisory services for dentists. If you have questions about incorporating your practice, our team is here to help. Schedule a consultation with Jonathan VanHorn today.