That’s honestly not a very tough question to answer. The short answer is yes, but as that would make for the shortest blog in history, we thought we should give you some supporting evidence.
There are many factors to consider when determining whether or not you should incorporate your dental practice. If the cards are all in the right place, incorporating your practice can be not only a wise decision but a beneficial one as well.
Limited personal liability is the primary benefit you get from incorporating a dental practice. As a solo dentist, you are personally liable for all things in the practice. These can include vendor contracts, real estate, equipment leases, and the grounds if you own your building. As a shareholder of a corporation, you are not personally liable for the corporation’s debts. Most banks circumvent the debt side by having a personal guaranty and/or life insurance assigned, but those still limit things substantially for you. Keep in mind, though, that this does not protect you from professional malpractice. If you make a mistake while performing dentistry, that’s still on you.
As expected, incorporating your practice costs time and money. Corporations have to pay franchise taxes and require legal and accounting costs. Speak with an advisor for more information on costs that you will incur and how to incorporate as this does allow for a separation of “church and state”.
Another benefit to incorporating is tax management and cash flow delineations. Separating money into different buckets and paying yourself a W2 allows your CPA to lower tax surprises by having a much clearer picture of the true cash and profitability. Most sole owners complain about never knowing their tax situation. Your entity is why!
At the end of the day, this is up to you. Should you incorporate? Absolutely! That said, it’s highly suggested to speak with dental-specific professionals including CPAs, financial planners, lawyers, and more to find out the specifics of how this will apply to your situation.