Having been asked this question many a times, we always say – the best way to structure your private medical practice depends on your personal and business objectives and circumstances.
The most common different business structures – legal entities to choose from include
- Hybrid trusts
- Self managed super funds (SMSF)
Most people are aware of the first three options; however, not many are familiar with the SMSF business structure, which can be highly effective in minimizing exposure of your personal assets such as your family home or business assets such as trademarks to the associated risks of running a medical practice.
Having said that, we can help you choose from a variety of business structures, even combination of legal entities like hybrid trusts, family trusts, companies, etc. with tailor-made contractual agreements – service agreements, equity holders agreements and shareholders agreements, to help you achieve your business objectives in the most optimal manner.
Our principal aim in designing your business structure is to minimise your and your medical business’s exposure to any unnecessary risk.
The important Considerations include:
- The cost of designing, establishing and administering a business structure
- Business income distribution and tax
- Application of tax concessions – tax deductions, CGT discounts, tax losses
- The capacity to borrow and attract capital investment
- The level of exposure to debts and liabilities;
- Ability to transfer ownership
- Protection against insolvency.
Each of the business structures has it’s pros and cons, which is why we carefully weigh all our options, taking into account all the important considerations, discussing all the options in close consultations with our clients and their business advisors.
We review every implication diligently, both in terms of business and your family, making sure it coexists with your existing financial plans and strategies.
As part of our review, it may be necessary to restructure distributions of assets, including family home, investment properties and shares; making sure arrangements are in place to protect you in case of separation or divorce (for example, prenuptial agreement); or death or disability (like income protection insurance or testamentary trust will).
If you are considering setting up a new private practice, it’s advisable you determine the most suitable business structure from the beginning itself.
However, if you’re currently operating an established private medical practice, we can review your current business structure, taking into account all the important considerations and advising you on how to minimise your legal exposure.
Finally, we recommend to all our clients that they seek our advice from the start of negotiations when buying into, merging or exiting a private medical practice to avoid unnecessary costs and delay.
Disclaimer: * DPM communications are intended to provide commentary and general information. They should not be relied on as legal or financial advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication.