The Perfect Corporate Structure: Make All The Partners Happy

If you would like to set up a corporate structure in order to save on taxes, but you find that some of your colleagues don’t want to join you, then you should consider the Perfect Corporate Structure that will make everyone happy. And yes, such a thing exists!

The all too common scenario (for offices with 2-150+ physicians)

Dr. John Smith, age 40, makes $500,000 a year in income. After researching income tax reduction solutions and supplemental benefit plans, he is very excited about a plan that will allow him to put away $75,000 a year in a tax favorable manner for use at a later time.

Dr. Smith works in a 20-physician practice, and so he will need the other partners’ approval to implement his plan. He bends over backward to appease their concerns.

Five of the physicians are younger non-partners who are also interested in the plan. Unfortunately, five of the founding members, over age 55, see no upside to the plan and decide that they will not vote to allow Dr. Smith to implement the plan.

Unfortunately, the scenario above is all too common. In fact, it may be painfully familiar to you. Half the calls I receive on advanced topics are from physicians in groups of more than five physicians. And of those who want to implement advanced income tax reduction plans, more than half run into the same problems as Dr. Smith. Their partners refuse to give permission to implement a plan through the corporation.

There is a solution, however: The Perfect Corporate Structure. The Perfect Corporate Structure is surprisingly simple, and numerous professional offices around the country already have successfully implemented the structure.

Here’s how it’s different from the traditional system. Traditionally, most multi-owner professional practices have a main company (usually a C- or S-Corp) that employs both the principal owners and all the employees. Let’s call that the “mother” company.

Within a traditional structure, any changes towards an advanced plan must be approved by the partners, which makes changes almost impossible. In addition, with just the “mother” company in place, all the employees take their income from the “mother” company, usually via W-2 income.

Here’s how the Perfect Corporate Structure is different: it exchanges a Professional Corporation (P.C.) for the owner as the entity to receive income that the owner would normally receive. So, instead of the owner receiving a W-2 paycheck from the “mother” company, the “mother” company would instead cut that paycheck to the owner’s P.C., where the P.C. would, in turn, cut the paycheck to the owner.

Is it complicated to create a P.C. and have it paid instead of the physician?

Absolutely not. Dr. Smith in our example has a contract with his medical office that says “Dr. Smith” will get paid whatever he is to be paid. With a P.C., Dr. Smith would simply re-do the contract to state that Dr. Smith’s P.C. will be paid his normal W-2 income as a consulting fee. He will also receive the normal matching corporate payroll taxes the “mother” company would pay on his behalf.

Dr. Smith’s P.C. will not affect the other physicians in his office in any way. He could be the only one being paid through a P.C., or any or all of the other physicians could do the same. Once Dr. Smith has the money in his own P.C., he can do whatever he wants with it. In The Doctor’s Wealth Preservation Guide, you will find several different income tax reduction plans, some of which can be implemented in an individual P.C.

Could a P.C. be the right option for you? A better question would be, why wait? If you work within a company where you cannot implement individual tax planning strategies, you are paying thousands in unnecessary income taxes. The sooner you get your P.C., the sooner you can save or defer those thousands via a supplemental benefit plan.

Click to order and find more information in The Doctor’s Wealth Preservation Guide, including a diagram of how the Perfect Corporate Structure looks.