Buying S-Corp Dental Office - How to Handle the Entity Questions

I purchased an existing practice with an existing S-corp in place. I'm getting a lot of different messages from what to do as far as creating a new S-corp under me. I want to reuse the practice name. The person at the secretary of state's office said all I would need to do is change officer name to my name. Is that normally what you do? Or do I have to file a new entity, then have the old one dissolve somehow and then change my new entity name to the old one?

Thanks.

I'm surprised you didn't create your entity at LEAST 2-4 weeks prior to settlement. When you create this new entity, have you planned for the processing of notifying all the appropriate people? Landlord? Lender? Vendor? Insurance companies? Payroll service? etc., etc., etc.

Getting that DBA name sounds like the tip of the iceberg for you.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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When Should Dental Tax Planning be Done?

I recently took up several part-time positions, with some paying me as an independent contractor. I think one of the positions is paying me as a W2. I may have an idea of how to file taxes using W2, but I am totally clueless about how to do it as an IC.

You better KNOW!

When exactly should I go to accountant to get my IC taxes done?

Done? Sometime between Jan-Mar of 2011.

To plan properly to get them done? NOW!

My yearly income taxes were done by a local accountant for $100/yr in a NYC area. How much more expensive will it be if I were to seek out accountant services for filing my IC taxes?

It depends on who's doing them and whether or not you want to PLAN NOW, AND get them done later. Just to get them done, maybe the person that did them for $100 will do them for $150. You have to ask.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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How Should the Purchase Price for Dental Practice be Allocated?

Hi,

Is this a good allocation of $ for the buyer for tax advantage?

PURCHASE PRICE $475,000.00

Furniture and Equipment $ 110,000.00

Covenant Not to Compete $ 1,000.00

Patient Records $ 179,000.00

Goodwill $ 185,000.00

TOTAL $475,000.00

Tuscon Dr.

I would switch patient records and covenant not to compete. It has nothing to do with taxes. I just wouldn't feel comfortable in a transaction where the covenant not to compete is so low. What happens if it is violated? Is it worth more than $1,000 if you have to sue for it. Whereas, patient records are just paper and x-rays and pertain more to goodwill.

Try and keep the equipment allocation as high as possible for taxes, you should negotiate over this amount.


Tim Lott

I agree, though possibly for a different reason.

IF Nevada has a sales tax on furniture and equipment, they may also tax patient records. IF NV has an annual property tax on furniture and equipment, that could also be costly over the years. So please be careful to consider other taxes, and not just income tax.

Here in MD, with that allocation, the buyer would really be getting the short end of the stick when you consider ALL the tax issues, and not just income tax.

What has your tax advisor advised?

Jason Patrick Wood

As long as there is language stipulating that the allocations are for tax purposes and is not meant to be a damage award, etc. then the amount is irrelevant, however I like to have a slightly higher covenant just so it passes the IRS smell test and therefore usually use an arbitrary figure of $10,000. NV has a peculiar law on sales tax on equipment that has not truly been settled yet. Therefore, to avoid it I would recommend an allocation of a consulting agreement and a supply allocation.

Tim Lott

How about this allocation?

                                           Original                                         Suggested

Equipment and furnishings     $6,000                                         $50,000

Dental Supplies                    $1,000                                         $5,000 (including hand pieces, small tools)

Goodwill                              $20,000                                       $21,000 (including patient records)

Covenant Not to Compete   $46,883                                        $10,000

Leasehold Improvements     $16,117                                        $0

Patient Records                   $20,000

Consulting                                                                                $24,000

                                                            Total $110,000

Thanks Tim. Is consulting deductible? Why does it help the seller to minimize the equipment value?

Probably because their tax basis is zero so any allocation will be ordinary income.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com

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