How Many DPCs are Enough?
How many dentistry professional corporations (DPCs) does one dentist need?
The answer is: One for each practice that you own. For sure someone is going to tell you that it would be much cheaper if you just put all your practices into one DPC, however, that advice is awfully short-sighted.
It is undoubtedly cheaper to just set up one DPC versus multiple, and it is cheaper to maintain on an annual basis; so why do you need one for each individual practice? There are a couple of advantages that every dental practice owner should familiarize themselves with.
First and foremost, in order to properly analyze the operating results of each individual practice, it is totally necessary to have separate financial statements that have been properly prepared by a qualified accountant. Many of you will have internal financial statements that assist you with this task which you print from your Quick Books, Quicken or one of the other accounting packages. However, I would bet that when you give these internal statements to your accountant, he or she makes several adjustments. Nine times out of ten, the internal financial statements are not accurate and are often inconsistent from year to year. These deficiencies make interim financial statements a poor source of information to be used for management or assessment purposes.
The best way to comprehend the next and perhaps more significant advantage is to consider what happens when you go to sell one of your practices in a DPC that operates multiple offices. This will present a couple of challenges for you. To begin with, it can be a very tedious and lengthy task to carve out the true operating results of just one practice in your DPC if you have not been doing so all along. The more crucial issue is that even if you can carve out that one particular practice and have it valuated, it is incredibly difficult to satisfy a buyer and their professional advisors that those numbers are actually accurate.
Lastly, housing multiple practices in one DPC necessitates the sale of assets if you want to sell just one of the practices. Selling assets may not be the most tax-effective way to sell a practice, particularly if you want to use your Capital Gains Exemption. There is always the chance that you can use your Capital Gains Exemption someplace else, but that is assuming the government does not change the rules in the interim. If a bird in the hand is worth two in the bush, then you may just want to use any tax breaks you can sooner rather than later.
By way of summary, there are several benefits to having one DPC for each separate dental practice that you own. The additional costs to you will be relatively minimal in comparison to the advantages you will gain. If you have any questions about your current operating structure, please reach out to Derek Hill at firstname.lastname@example.org.