Should I form a company?
It’s a question many of our dental practice clients are starting to ask, and there are no easy answers.
A new opportunity
Since the end of July 2006 all dentists can practice through a limited company. The procedure is relatively straight forward and brings attractive benefits:
- You can stop paying personal tax at rates of over 40% on profits and instead you have your profits taxed at 19% if left in the company.
- You can realise the value of your goodwill (paying tax probably at 10% or less) by selling it to the company and then drawing these monies out tax free.
- You can have shareholders.
- You can raise non interest bearing capital from outside.
- You can bring other dental professionals into practice management thereby keeping ownership of the business separate from the management.
Would it be good for you to incorporate?
It is difficult to generalise but as a guide you are more likely to benefit if any of the following are true:
- You don’t need to draw out all the profits that you earn.
- You are thinking of retiring in the next 5 years.
- You have an associate that you want to buy in but they can not raise all of the capital.
- If you know someone who is interested in investing in your practice and receiving tax relief on their investment.
- You practise alone and not as part of an expense sharing arrangement.
The recent change to the law has opened up opportunities for the future of dental practices, but there are complex issues to consider.
Deciding whether or not to form a company is by no means clear-cut. At Chandlers we offer advice and guidance to help you make this important decision and we are happy to offer this as a stand alone service to non clients. Our charges are for consideration of incorporation.
- Detailed estimate of tax savings £600.
- Meeting to discuss this and commercial advantage £300.