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Tax-Smart Strategies for New Dentists

Learn tax strategies, practice purchase steps, and importance of a trusted advisor for new family dentists and specialists. Incorporation, income splitting, structuring practice purchase, benefits of a trusted advisor covered.

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Tax-Smart Strategies for New Dentists

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  1. Andrea Chan, CPA, CA May 10, 2014 Putting You on the Right Track to Success Tax-Smart Strategies for New Family Dentists & Specialists

  2. Agenda Learning Objectives: • Tax Strategies • Practice Purchase • Benefits of a Trusted Advisor

  3. Tax Strategies - Associate

  4. Tax Strategies – Practice Owner

  5. Tax Strategies – Income Splitting • Pay spouse or adult child an appropriate salary • Higher-taxed spouse pays all bills • Lower-taxed spouse invests savings • Valid loan of funds

  6. Tax Strategies - Incorporation

  7. Tax Strategies - Incorporation

  8. Tax Strategies - Incorporation Scenario 1: no income splitting, salary only

  9. Tax Strategies - Incorporation Scenario 2: no income splitting, dividends ONLY

  10. Tax Strategies - Incorporation Scenario 3: Spouse + Child > 18 (in university), both without income

  11. Practice Purchase - Steps • Choose your advisory team • Accountant • Lawyer • Financial planner • Banker • Get on broker lists and visit practices • Review valuation with an accountant • LOI / Purchase & Sale Agreement

  12. Practice Purchase - Agreement • Accounting items in purchase/sale agreement • Deposit • Closing date • Due diligence • Allocation of selling price • Associate agreement • HST and PST on sale • Debt retirement • Share vs. assets

  13. Practice Purchase – Structure • Share sale vs • Asset sale

  14. Practice Purchase – Share Sale • Seller normally wants to sell shares: • Tax on gain @ 23.2% (consider AMT) • Potential elimination of tax through Capital Gains Exemption ($800,000 per shareholder) [Value of $186,000] • Selling shares is simple [for seller] • Buyer will need to incorporate and continue to use a Professional Corporation

  15. Practice Purchase – Asset Sale Generally, purchasers will want to buy assets • No hidden liabilities • Increase cost of assets for tax write offs Bad for seller because: • Cannot take advantage of CGE • More time consuming and complicated

  16. Benefits of a Trusted Advisor

  17. Benefits of a Trusted Advisor • Your accountant can help you: • Save taxes • Buy the right practice • Optimize performance • Support business growth • Meet bank/CRA filings • Plan for retirement • Protect/build personal assets

  18. Summary • PC is an easy way to save taxes. • Build the right team to help you buy your practice. • Find the right accountant (trusted advisor).

  19. Comments To learn more about the topics discussed, please contact:

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