14
Note: This article
is intended to be
general in nature and
should not be relied
upon by any person
without seeking advice
concerning their own
circumstances.
Julie Smith is a Director
at William Buck.
ACCOUNTANCY
As tax advisors, one of the most common
questions we hear at William Buck from our
medical clients is: "Should I carry on my
practice through a company?"
In the past, many medical professionals
incorporated their practices for a number
of reasons, including the perceived benefits
of limited liability and the belief that
the company can retain profits and that
companies have access to better deductions
for superannuation contributions.
Are these still good reasons to
incorporate in today's business and
taxation environment? And what are the
benefits of incorporating versus operating
through an unincorporated structure
(sole trader)?
PROS & CONS
Listed below are some of the benefits and
disadvantages of operating a medical practice
through a company and as a sole trader:
Well Structured
Will incorporating your medical practice bring benefits, or is setting up as a sole
trader the way to go?
Julie Smith offers some expert advice.
Incorporated practice
Sole trader
Benefits
· Some level of limited liability may be
available, but would depend on the
nature of the claim.
· Ability to pay tax on income
monthly, which can ease the strain
on cashflow.
Benefits
· Inexpensive to establish.
· Sole trader profits are not subject
to payroll tax.
· Equal access to superannuation
deductions as a company.
Disadvantages
· All profits must be paid to the
doctor by way of wages or
superannuation.
· Exposure to payroll tax in relation
to salaries and superannuation paid
to staff (including those paid to
the doctor).
· Cost of establishment and annual
compliance and regulatory
costs apply.
· We understand that corporate
limited liability usually does not
apply where there is a failing on
a professional level.
Disadvantages
· No access to corporate limited
liability your personal assets may
be accessed by creditors to pay
business debts.
· Your tax bills are less regular, so
you need discipline in saving for
your tax as you earn your money.
As you can see, there is no great tax
benefit in structuring through a company.
On this basis, it is often our advice to
structure your practice through a sole trader
it's the simplest and most cost-effective
structure. This will not apply to everyone
however, and you should discuss your own
particular circumstances with a tax advisor
before deciding how best to structure
your practice.