Reducing corporate taxes

November 19, 2010

Learn how to avoid or minimize corporate taxes if you sell your medical practice.

A: From the seller's perspective, the best way to minimize taxes is to sell the stock of your corporation so that you pay capital gains rates, which are lower than corporate rates. In reality, most buyers don't wish to assume the liabilities associated with purchasing the legal entity, such as claims of third-party payers or potential malpractice lawsuits. Consequently, it is far more common for a practice to sell its assets, (equipment, patient contact information, goodwill, etc.) rather than as a stock sale.

Due to recent law changes, starting in 2011 your practice should be an S-Corporation for at least 5 years before the sale of assets to avoid most corporate taxes. Although you will still pay individual taxes on gain over your tax basis, you won't be taxed both as a corporation and individual as you would as a C-corporation.

Send your money management questions to medec@advanstar.com
. Answers to our readers' questions were provided by Medical Economics adviser David J. Schiller, JD, Schiller Law Associates, Norristown, Pennsylvania.