Some thoughts on Profit Sharing

So, as part of our comprehensive accounting and wealth management package, we help our clients to set up and manage retirement plans. These enable the doctors to put away money for retirement and at the same time offer a great benefit to their employees.

While dentists and physicians may have different types of plans (many physicians are parts of groups, while more dentists have solo practices), the principles are the same.

Some doctors may shy away from setting up full-blown retirement plans because they think the employee contributions will be too costly. If you can create the right plan, and you have enough income as the doctor, this is not the case. I would suggest that the cost of not doing it is even greater.

Let me explain through an example:

Let's say that by implementing a retirement plan doctor is able to contribute $50,000 for herself and her staff. If her staff cost is $15,000 then she's actually getting a pretty good deal. You may think that $15,000 out of $50,000 seems pretty high.

How about this? Let's say the doctor didn't set up the plan at all and didn't get this $50,000 deduction... Now she is going to owe at least another $15,000 to $20,000 in taxes and her staff is bummed that they don't have a 401k plan. So would she rather give $15,000 to the government or to her staff?

Obviously, giving it to her staff helps them feel appreciated and happy... a much better thing than simply giving the money to Uncle Sam. Plus, she gets to put $35,000 in a tax deferred retirement plan.

Retirement Plan = WIN WIN Situation!

While it is great to give this great benefit to your staff, you do want to be sure that it is cost effective, too. In our pension firm (Pension One Advisors) we specialize in designing and administering plans that provide this excellent benefit to doctors and their staff.

Dental Practice Transitions

This always has been and continues to be a hot topic among dentists and their professional advisors. I have recently been involved in a lot of these transitions. I typically represent the buyer. In representing them, there are two major issues we deal with.

1. Ensuring that the asking price is reasonable and can be substantiated by a certain amount of documentation. This is important for obvious reasons. Plus, I do a quick little cash flow analysis to make sure the cash flow pans out.

2. Trying to get a fair allocation of the purchase price between the assets that are purchased -- mainly Goodwill and Equipment. These are the two major asset classes. This is an important point because the two types of assets are taxed differently from the seller's side and they are depreciated (or expensed) differently on the buyer's side.

The allocation is a little more subjective than the actual price, and because the interests of the buyer and seller are usually oposite, this is a point where the buyer needs some support.