Finance32: Dental School’s Missing Curriculum
Finance32: Dental School’s Missing Curriculum
Great clinical skills simply are not enough for dentists to achieve financial success. Let Buckingham Strategic Wealth's Practice Integration Advisors share what else you need to know to realize your lifetime goals and obtain financial peace of mind.
Buckingham Strategic Wealth

Advantages and Disadvantages of Operating as a Sole Proprietorship

Advantages and Disadvantages of Operating as a Sole Proprietorship

7/31/2019 8:00:00 AM   |   Comments: 0   |   Views: 15

Katie Collins, a Practice Integration Advisor with Buckingham Strategic Wealth, helps dentists order their financial lives and reach financial peace of mind so they can better focus on what truly brings them joy.

As you graduate dental school, you typically must think about becoming an associate or purchasing your own practice. Whichever road you choose, various advisors most likely will bombard you with information concerning all the things you need to do to prepare to travel it.

One decision you do need to make rather quickly involves which tax entity you will choose. A taxable entity is an individual or business that, as the name implies, must file a tax return and pay income tax on earnings. Individuals and corporations are subject to income tax and both are considered taxable entities. My colleague, Mike McAninch, recently addressed three types of tax entities popular among dentists.

Why do you need to make your entity selection so quickly? Well, you may need a tax ID number, either to provide to your employer in certain cases or, if you’re purchasing a practice, to the bank. You can’t obtain a tax ID number without first selecting which entity type you’ll be.

Let’s take the time to explore one of your options – becoming a sole proprietor. As a sole proprietor, you will capture your income and expenses on Schedule C of IRS Form 1040 (your personal tax return). Typically, your tax ID number will be your Social Security number.

Here are some advantages to selecting a sole proprietorship as your tax entity:

1) Sole proprietorships are the easiest entity to form.

2) Because your income and expenses are reported on Schedule C of IRS Form 1040, you only need to pay to prepare and file one federal tax return.

3) Unlike with C Corporations, you are only taxed once on the profits from your business, when you file your personal tax return.

4) If you are an associate and paid as an independent contractor, any unreimbursed business expenses are deductible on Schedule C. Such tax-deductible expenses may include CE, travel and association dues (again, as long as your employer doesn’t cover them).

Here are some disadvantages to selecting a sole proprietor as your tax entity:

1) There is unlimited personal liability because there is no legal separation between you and your business.

2) There can only be one owner of a sole proprietorship.

3) A
s a sole proprietorship, you will need to pay self-employment tax in addition to your personal income tax. This is calculated based upon your Schedule C income and represents both the employer and employee share of payroll tax.

These are just a few of the advantages and disadvantages of operating as a sole proprietorship, so consult your attorney and your accountant before settling on an entity. However, you still should have an understanding of the ins and outs of your options in order to make an informed decision.

In our next post on entity selection, my colleague, Tom Bodin, will discuss advantages and disadvantages of operating as an S Corporation. As always, if there are specific topics you’d like us to tackle in Finance32, please send us an email!

More Like This

Total Blog Activity

754
Total Bloggers
8,127
Total Blog Posts
2,826
Total Podcasts
1,259
Total Videos

Sponsors

Townie Perks

Townie® Poll

What do you use to take routine X-rays?


  

Site Help

Sally Gross, Member Services
Phone: +1-480-445-9710
Email: sally@farranmedia.com

Follow Dentaltown

Mobile App

WITH DENTALTOWN . . . NO DENTIST WILL EVER HAVE TO PRACTICE SOLO AGAIN®

WWW.DENTALTOWN.COM - WHERE THE DENTAL COMMUNITY LIVES®

9633 S. 48th Street Suite 200 • Phoenix, AZ 85044 · Phone: +1-480-598-0001 · Fax: +1-480-598-3450
©1999-2019 Dentaltown, L.L.C., a division of Farran Media, L.L.C. · All Rights Reserved