Taking over father's medical practice

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neopsych12
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Taking over father's medical practice

Post by neopsych12 » Sun Apr 24, 2016 1:21 pm

Upon graduation from fellowship in June 2017, I will be taking over my father’s medical specialty practice in Florida. It is a clinical practice and also a site for clinical trials. He has two employees for the clinical practice and two employees for the clinical trial practice. He has been filing as a sole proprietor but we just got a new accountant and plan to form an S-Corporation(s). I have a few questions regarding this transition.

1) What are the pros/cons of forming two different S-corporations (clinical practice and clinical trials) vs. a single S-corp in regards to taxes and liability protection? Will this distinction affect my retirement account setup?

2) My parents own the office building and they plan to transfer this asset to me as he plans to shrink is estate. What is the best way to go about this?

3) The current retirement plan is SEP-IRA. Would I be eligible to open an individual 401k plan instead?

Other relevant details: My wife will be graduating from IM residency the same year as me and plans to work as a hospitalist. My father would like to see patients a few half days a week and continue to manage administrative roles until I get the hang of things.

Any recommendations of books/forums where I can learn more about medical practice tax planning would be appreciated!

Thank you in advance for your time.

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LadyGeek
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Re: Taking over father's medical practice

Post by LadyGeek » Sun Apr 24, 2016 8:17 pm

Here's a good blog: The White Coat Investor

It's run by Jim Dahle, who posts here as White Coat Investor.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

cheapindexer
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Re: Taking over father's medical practice

Post by cheapindexer » Mon Apr 25, 2016 9:57 am

boy, I'm in my mid forties after finishing fellowship in 2006. I've always been an employed physician, sorry I don't know how to answer your questions which are great questions. I just don't have the experience of running a practice!

Do your homework. Plus, boards are coming up? ( maybe two sets for you, hematology and medical oncology?)

It seems to me that the rules are always changing, making the private practices constantly adjust to the new rules. Congrats on winding down with your training! :sharebeer

solobuildingblogs
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Re: Taking over father's medical practice

Post by solobuildingblogs » Thu Aug 24, 2017 1:41 am

1. It probably doesn't make too much of a difference as long as you are properly insured but yes if something happened and the practice went under the accounts receivable for clinical trials would be protected. It won't affect your retirement plan setup because of controlled groups- if you own more than 80% of a business they are "lumped together" by the IRS.

2. I'm not a expert at this, but my understanding is that commercial real estate is depreciated over 39 years. If he has owned it for less than 7 years, he can use cost segregation to accelerate his depreciation by classifying parts of the building as items that can be depreciated for 5 or 7 years. When it comes time to sell the building, he pays 25% for section 1250 recapture of all of the depreciation that's taken place, and capital gains on any increase of the value of the building. So best if he holds onto building until death, then you would inherit the building at a step up basis for its current value without having to repay the section 1250 recapture or capital gains.

3. A solo 401K is only if you have zero employees. You have two so you are ineligible. A SEP you can control the percent matched, but it must be same for you and all employees. A 401K can be structured to give HCE (highly compensated employees) a higher match but it's complicated to explain. A 401K will also cost you more in fees. The advantage of a 401K is you can also do a backdoor Roth IRA; if you had a SEP IRA you'd have to move the money from the IRA to a 401K to make your IRA basis zero to do the backdoor Roth.

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