Physicians are innovative thinkers, but their formal education does not reveal the nuances between different corporate structures. These options, including limited liability corporations (LLCs), S corporations, and C corporations, provide physicians with a range of options when considering how to incorporate a medical practice.
The key is to consider what will work best for your practice now as well as laying the groundwork for future endeavors—and potentially save you hundreds of thousands of dollars over time.
Just as infection is prevented by sterilizing instruments, asset breaches are avoided by “wrapping” them in the gauze of impermeable trusts and proper estate planning. Physicians and their practices often have substantial assets at risk, and proper protection needs to be established early on. One key point, no matter what asset structure is used, is to know the importance of separate entities. If your practice, home, automobiles, summer home, rental properties, and other assets are part of the same company or trust, you hold liability for the sum total of all of these assets—thus any legal conflict (malpractice, divorce, battle with business partners, etc.) could make everything within the single structure vulnerable. We strongly advise against that.
So what structures are recommended to set up your medical practice, protect assets, and establish any new business endeavors?
An LLC is often favored by physicians, with good reason. An LLC offers tax benefits and can save a physician major headaches. However, it needs to be set up properly. There is no better method of keeping wealth untouched by creditors than by ensuring it remains untouchable. This is the essence of asset protection.
The consequences of incorporating improperly
Let’s take a look at the predicament of the fictitious “Dr. Stevens,” who learned the hard way.
He owned multiple assets including a speedboat, vacation home, an apartment building, a brokerage account, and a plot of undeveloped land.