Does your dental practice keep more of the dollars that it generates? Many dentists in Michigan will only contact an MI Dental CPA after a large tax bill arrives. At this time, the best options might have been taken. The smart setup saves your income, your assets, and your future sale. Each visit with a patient is hard work. So should your tax plan. Titan Tax Solutions can assist dentists in selecting and optimising the proper setup. This guide discusses entity types, the S corporation election, and building ownership. Read on, then call us to book an appointment.

Why Your Structure Matters

Your dental business structure influences three things. It determines the manner in which the IRS taxes your profit. It determines the level of personal risk you’re willing to take. It also has an impact on the amount of money the buyer pays when you sell. When most owners choose a setup, it is during initial startup and is never reviewed. The bottom line, however, continues to fluctuate, as do staff and the tax laws. Your plan is current through an annual review.

Your Entity Options

There are a handful of legal structures that dentists typically opt for. Often, state regulations determine which can be used.

• Many states may require a licensed professional to use a PLLC or PC.
• A flexible and simple structure, if it is allowed under state law, is an LLC.
• Partnership: Two or more owners of a practice.
• Sole proprietorship: Easy, but lacking any liability protection for the business.

The legality and tax treatment are two decisions. Both LLCs and PCs can choose the S corporation tax treatment. An attorney will prepare the legal structure. We manage the tax aspect and work with your lawyer.

The S Corporation Election

Choosing to be an S corporation can reduce self-employment tax. You pay yourself a reasonable wage on payroll. The remaining profit is distributed to you. Distributions are not subject to self-employment tax. Compensation is a closely guarded area of the IRS’s eyes. This is a red flag if the salary is significantly lower than what an associate dentist gets paid. The cost also comes from payroll, additional filings, and accounting. The election is best when there is regular and sufficient profit to be had. We do the calculations first, so you don’t have to.

Multi-Owner Practices and Associates

Practices with partners need more care. Select an MI Dental CPA who understands buy-ins, partner pay, and associate tracks. A hybrid structure can provide flexibility and tax advantages for each owner. Written agreements ensure all parties are on the same page. Associates add another layer, so determine upfront whether they will be employees or owners. Your structure should support that path while accounting for tax deadlines, including when does IRS begin accepting returns.

Own Your Building Separately

Do you have a Business Property Tax filing? Keep it in a separate real estate LLC. A written lease between the LLC and your practice makes things clear! This arrangement provides liability coverage and benefits if you’re selling the practice. The building owner can also claim depreciation of the property. If the building is already in the practice entity, consult before moving. The transfer will cause tax to be paid.

Layer On More Savings

Structure creates more opportunities to save on dental practice CPA taxes. Retirement plans reduce income in the current year. The federal tax is reduced by the qualified business income deduction, but dentistry has income restrictions. There is a flow-through entity tax election in Michigan that allows for some entities to report state tax at the entity level. Each strategy is based on your structure. There are additional options available when equipment is written off. We preview each one before you decide.

How Titan Tax Solutions Helps

Titan Tax Solutions has a wealth of experience and 30+ years of service to every client. You have clear pricing, quick turnaround, and a 100% satisfaction guarantee. Our tax planning and dental practice tax-saving services are for your practice and your personal tax return. Our dental clinical controller services ensure your books are accurate throughout the year. Looking for help with something other than taxes? Our fractional CFO services are here to guide you in planning for growth, hiring, and a future sale. One team’s eye is on your numbers all year long. You can always rely on the person you know.

Serving Dentists in Troy and Across Michigan

Titan Tax & Accounting Services provides tax and accounting services to the dentist community in our Troy, MI office. Services are available for practices throughout Oakland County and Metro Detroit. We also work remotely with clients nationwide. Our certified specialists are familiar with IRS guidelines and shifting tax legislation.

Final words| Take Control of Your Practice Structure

With a smart setup, you can help safeguard your earnings and reduce your tax liability. An annual review of your entity, salary, and building ownership is recommended. An MI Dental CPA can help you do that review with ease. Titan Tax Solutions will assist you in making a comparison with real numbers. The information in this post is general information and not personal tax or legal advice.

Frequently Asked Questions

If the dentist is an LLC, PLLC, or S corp, what should he do?

The choice of legal structure and tax treatment are distinct. Some of the State’s regulations may require a PLLC or PC. Many dentists then choose the S corporation tax treatment if there is a profit for it.

What is the dentist’s reasonable salary if he is a corporate entity (S Corp)?

The IRS has reasonable expectations of compensation for your services. A great deal of advisors make comparisons with the pay of an associate dentist. The number should be recorded annually by your tax preparer.

When does a dentist want to become an S corp?

Don’t do it unless profits are regular and substantial enough to cover additional payroll and filing expenses. Run the numbers first, then the programs. Deadlines may apply – plan.

Should my dental practice and building be in separate entities?

Often, yes. Liability protection and flexibility can be provided through a separate real estate LLC with a written lease. Get advice from your lawyer and tax expert before relocating an existing building.

May I shift my practice configuration at a later time?

Yes, but the changes can result in tax or legal problems. Mitigate the impact first. An annual check equals smaller surprises!

Talk to Our Experts Today

Looking to take a look at your practice model? Contact Titan Tax Solutions today for a free consultation on your tax questions at (248) 524-5240. Let’s create a plan that’s right for your practice.

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