DTUK1110

April 26-May 2, 201016 United Kingdom EditionMoney Matters E ver since the General Dental Council (GDC) amended the regulations to allow dentists to trade through limited companies from July 2006, the issue has been clouded with speculation and misinfor- mation that has deterred many practitioners from investigating the possibilities. While it’s true that incorpo- ration will not suit every prac- tice, the decision should at least be made in full knowledge of the facts. Individual practice circumstances vary widely, and objective, professional advice should always be sought before a change of status is contem- plated. This article is dedicated to answering the basic quest- ions about incorporation that all dentists operating as sole traders or within a partnership should be asking. What is incorporation Incorporation is the process that transfers the ownership of an existing sole trader dental practice or partnership to a lim- ited company (usually newly formed). Incorporation is now an option for practice principals and partners, and also for self- employed associates. What is a limited company? A limited company is a sepa- rate legal entity, with its own le- gal identity, which is owned by one or more shareholders and managed by one or more direc- tors. In a sole trader or a part- nership, both ownership and management vest in the sole trader or partners. What does ‘limited’ mean? Assuming the company has not traded fraudulently or reckless- ly, and the directors or share- holders have not given creditors any personal guarantees, their liability for the company’s debts is limited to their original invest- ment in the company. This is usually a nominal sum between £1 and £1,000. Are there any special rules for dental practices? Yes. The GDC requires that a majority of the directors in a dental practice limited company are registered with the GDC, but there is no GDC restriction on who can be a shareholder. How will I be paid? Directors in a limited company may become employees and be paid a salary as well as receiving both taxable and tax free ben- efits. Taxable benefits could in- clude private medical insurance, a company car etc, while tax-free benefits (within certain limits) include child care vouchers and pension contributions. Shareholders in a limited company receive dividends, which represent their share of some or all of the company’s net profit after Corporation Tax has been paid. How does the limited com- pany work? Because it is a separate legal entity, the company has it own bank accounts, assets and li- abilities, employs staff in its own name and enters into contracts in its own name. Some limited companies have a company secretary who is responsible for keeping the stat- utory records of the company up to date and filing fiscal returns. In smaller companies, such as dental practices, these duties are usually carried out by the prac- tice’s accountants. How do I convert my sole trader business or partner- ship to a limited company (in- corporation)? 1) Set up a new limited company at Companies House (usually done by accountants), with you and any partners as director(s) and shareholder(s). The share- holders can also include any one else involved in the business, family members for example. 2) Open a bank account in the name of the new company. 3) Have your practice valued by a reputable expert, with separate valuations for the physical assets (equipment, furniture etc) and the goodwill. 4) Sell your practice assets and goodwill to the new company (freehold land and buildings are usually excluded) using a sale of business agreement prepared by a solicitor. Capital Gains Tax, normally 10 per cent, is payable on any profit on the original practice purchase price. 5) Decide whether the limited company should immediately borrow the money to pay you for the practice, enabling you to repay non tax-deductible pers- onal debts, a mortgage on your home for example; or maintain a loan due to you, which can be drawn on free of tax until it is paid off to defray your nor- mal living expenses. If you choose deferred payments, the terms should form part of the sale agreement. 6) All your existing contracts, including PCT contracts, should be transferred into the name of the new company; PAYE regis- trations should be reregistered to the new company; and di- rect debit and standing orders switched to its bank account. 7) You have now ceased trad- ing as a sole trader, and your practice is trading as a limited company. Of course, this is only a brief summary of the incorporation process and cannot take into ac- count individual practice differ- ences. As we stated at the outset, a limited company may not be the ideal trading vehicle for eve- rybody, and the value of profes- sional advice cannot be overstat- ed, but for those who do choose this route, the mechanics of con- version are straightforward. In later articles we shall be assess- ing the potential benefits. DT Michael Lansdell aims to answer the basic questions about incorporation that all dentists operating as sole traders or in a partnership should be asking The incorporation process About the author Michael Lansdell was brought up in South Africa, receiving his honours degree there in 1991. He completed his training with in- ternational accounting firm Deloitte in 1994, and went on to become a founding partner at Lansdell & Rose Chartered Accountants (SA) a year later. Based in Kensington, London, Lansdell & Rose deal only on a long-term retained ba- sis, exclusively with owner-managed clients, generally dentists and doctors, and specialising in the incorporation of dental practices. As a client-focused team, they look for sustainable long- term solutions for their clients that maximise profits, minimise tax and build wealth. For more information, visit www.lansdellandrose.co.uk or call 020 7376 9333. The next generation of Cerinate Porcelain Provide your patients with a pain free alternative to traditional veneers. So......why choose Lumineers? No Anaesthesia Instant Orthodontics Longevity Versatility Permanent NEW- LUMINEERS 2 30% - increases patient demand for your patients - clinically proven to last overs 20years - can be placed over existing restorations whitening, no staining or discolouration , NOW Stronger Now witha limitedLIFETIMEWARRANTY Now a ONE DAY COurse Course features: Diagnosis & Case Selection, Treatment Planning Step by Step procedures, Hands on Workshop.... ....and much more MIDLANDS 15th May 2010 Book now 0844 247 3527 email:lumineers@dkap.co.uk - UK Clinician Dr W.E.Jenkins BDS(Wales)DPDS DKAP reserve the right to cancel. Content is subject to change without notice. DKAP International Ltd is an independent reseller and is not affiliated with or sponsored by Den-Mat Holdings LLC. ‘a limited company is a separate legal entity, with its own legal identity, which is owned by one or more share- holders and man- aged by one or more directors’

Please activate JavaScript!
Please install Adobe Flash Player, click here for download