Incorporation has advantages and drawbacks

August 25, 2011

Learn the pros and cons of incorporating.

Q: Our four-person practice is trying to decide whether to incorporate. What are the pros and cons of doing so?

A: The main benefit of incorporating is to limit your malpractice liability for the actions of the other physicians in the practice. If you are not incorporated, you are personally liable for the malpractice claims against your partners and associates. Conversely, if you are incorporated, you are responsible only for your own actions.

In addition, you probably run less risk of being subjected to an Internal Revenue Service (IRS) audit as a corporation. For tax purposes, you are a small fish in a large pond, and the IRS has had less success auditing small corporations than it has with sole proprietors or unincorporated businesses.

Send your money management questions to medec@advanstar.comAnswer to our reader's question was provided by David Schiller, JD, Schiller Law Associates, Norristown, Pennsylvania.