more on non-incorporated entities

[Guest guest]

From Medical Economics:

Sole proprietorships. This is the simplest, cheapest way to get started in

practice. Setting up a sole proprietorship involves minimal paperwork. When you

die, so does the proprietorship. You and your business are treated as a single

entity for tax purposes, so you simply report your practice's profits on

Schedule C of your Form 1040. You also pay its debts from your own bank account.

The downside—and it's a biggie—is that your personal assets can be claimed to

settle any lawsuit against the business.

" I almost hate to see someone practice as a sole proprietorship or partnership

nowadays, " says S. Goodman, of The Goodman CPA Group in Staten Island,

NY. " Anyone who has become even the least bit successful should have a business

structure that affords more liability protection. "

A sole proprietorship can convert to an S corp or C corp—or, depending on the

state you live in, to a limited liability partnership (LLP) or a limited

liability company (LLC)—without triggering any taxes, says Goodman. The amount

of paperwork needed varies widely, depending on where you live. So does the

cost, which can typically run anywhere from $1,000 to $5,000. " Whatever the

cost, though, " he says, " it won't be substantial compared with the benefits

gained. "

General partnerships. This is much like a sole proprietorship in structure and

simplicity, though having multiple partners does necessitate a bit more

paperwork. More important, each doctor is personally liable for any claim

against the partnership collectively, or against one of the partners

individually, regardless of who's to blame. This is known as " joint and several

liability. " As with a sole proprietorship, if the judgment overshoots the

coverage, you'll be responsible for paying the difference out of pocket.

General partnerships are starting to die out, largely because of the greater

protections that corporations afford. In addition, most states are allowing

physicians' practices to operate as LLPs or LLCs, both of which provide a better

legal shield.

If you're currently in a general partnership, it's high time to switch to an

LLP, an LLC, or a corporate structure. (More on these options later.) " That's a

prudent move, " Goodman says, " given the litigious society we live in. "

As can be seen, this is another attorney that is not a fan of sole

proprietorships and partnerships. Actually, the FPM article truly is the only

time I have ever heard these entities recommended. I'll stick to my nice simple

LLC.