Page 35 - Layout 1
P. 35
BUSINESS OF
MEDICINE
Legal & Tax Strategies for
Healthcare Organizations and Professionals
By Dana A. Forgione, PhD, CPA, CMA, CFE
The hardest thing in the world to understand is the income tax.
—Albert Einstein
If you’re setting up a new company, you may be considering what were reasonable & necessary business expenses.
organizational type is most appropriate. Briefly, here are some op- Aggressive Business Practice—pushing the limits of inter-
tions.
• Sole Proprietorship pretation of the law, or trying to put legal form above economic sub-
• Partnership stance. For example, asserting an unusually short depreciable useful
• General Partnership lifetime for an asset, or shifting profits into a low-tax jurisdiction
• Limited Partnership (LP) through high transfer prices on items that are difficult to value, such
• Limited Liability Partnership (LLP) as trademark licensing fees, or intermediate electronic components.
• Limited Liability Company (LLC)
• Corporation (Inc., Ltd.) Fraud—intentional misrepresentation of a material fact that is
• Subchapter S Corporation reasonably relied upon by a victim who incurs consequent damage.
• Professional Corporation (PC) For example, a healthcare provider billing for services that were never
• Personal Services Corporation (PSC) rendered.
• Professional Limited Liability Company (PLLC)
• Non-profit Organization (35 different categories) S-Corporation
One common organizational type for small businesses is the S-
The main differences between them are: control, taxes, and legal
liability. Everyone wants control, but nobody wants taxes or legal li- Corporation. It generally maximizes control while reducing taxes
ability. like a proprietorship, and reduces legal liability like a corporation.
However, to qualify as an S-Corp., the organization must meet eight
Disclaimer: requirements:
Okay, before we start this discussion, here’s the disclaimer: the 1 It is a domestic corporation or entity.
2 It has no more than 100 shareholders (an individual & spouse
material contained herein is for informative purposes only, and does
not constitute legal, medical, accounting, financial, tax or other pro- can be one shareholder).
fessional advice. The issues and applicable laws are complex, and rel- 3 Shareholders must be an individual, estate, trust, tax-exempt or-
evant legal and tax counsel and/or other professional advice should
be sought regarding any particular situation(s), transaction(s) or ganization, or other S corp. A C-Corp. or partnership cannot be
arrangement(s). the shareholder of an S-Corp.
4 It has no nonresident alien shareholders.
So, first, let’s define some important terms. These are not formal 5 It has only one class of stock, all with identical rights to distribu-
legal definitions, but give you a sense of the issues. tion and liquidation proceeds.
6 It is not one of the ineligible corporations, such as a financial in-
Tax Avoidance—operating your business so that you do not stitution, insurance company, or domestic international sales cor-
incur a tax. For example, organizing as a tax-exempt, nonprofit en- poration (DISC), etc.
tity, or investing in tax-free municipal bonds. 7 It has or will adopt a: 12/31 tax year, natural business tax year,
ownership tax year, or 52–53 week tax year.
Tax Evasion—failing to pay a tax you properly owe. For exam- 8 It has each shareholder’s consent. If an individual and his or her
ple, taking cash from sales and failing to report the revenue on your spouse have a community interest in the corporation, both must
tax return, or deducting personal vacation travel expenses as if they sign the consent statement.
Continued on page 36
visit us at www.bcms.org 35
