Know the advantages of being incorporated.
Q: I wish to go into private practice and establish a consulting firm. Can you tell me about the advantages of being incorporated?
A: The primary advantage of being incorporated is to limit one's liability based upon a partner's actions. For example, if Dr. A commits malpractice or negligence, Dr. B could also be sued if they are a partnership, but only Dr. A could be sued if the practice is incorporated.
The history of a corporation allowing one greater deductions is essentially over. There are some modest tax benefits of being incorporated like being able to get tax-free reimbursement of uninsured medical expenses. In addition, you can receive pre-tax uninsured medical expenses through a corporation, take loans from a retirement plan, etc. Also, dependent care plans, cafeteria plans, group term life insurance and some other fringe benefits are only available if you are incorporated. But again, the primary attraction of incorporation is limiting liability.
Send your money management questions to firstname.lastname@example.org (please include your regular postal address). Answer provided by David J. Schiller, JD, LLM, Schiller Law Associates, Norristown, Pennsylvania.