What sort of Asset Management Principles should physicians consider?
Asset Management for Professionals
I’m going to share some information about asset evaluation and management in this and upcoming posts. Information that I share should not be misconstrued as financial advice, since I am not a certified financial planner, accountant, or attorney. My goal is to provide information that would be of value to those wishing to make the most of their finances. The information presented should be confirmed and discussed with your attorney or accountant in order to make well-informed decisions.
Physician financial planning requires more than just researching investment opportunities. Asset protection certainly cannot be overlooked. Physicians work long hours and are very devoted to the career they have spent so much time developing. The creation of a nest egg and the acquiring of financial assets is a hard fought battle, and these assets must be treated with respect and secured. You’ve got to protect what you have. Owning and operating a practice requires long-term physician finance applications including the protection of the very establishment that has been so meticulously built. An example of one form of asset protection is in the formation of an LLC business enterprise. Medical professionals are able to take advantage of many safeguards that are afforded through an LLC.
Asset Management: The LLC
The LLC, or Limited Liability Company, is an excellent legal form of partnership that physicians can utilize. Medical professionals can work together in partnership in a shared practice, and in the process, the company’s tax implications are well-organized and liability protection is provided. The physicians are partners involved in the LLC, and they will have limited personal liability such as in the case of malpractice or debt collection. If the company is sued by someone, the individual physician’s personal finances are protected and not to be considered as collateral for subjugation through the courts. The same applies to the company’s debts and their collection from any creditors. This type of business arrangement truly separates the finances of the medical practice from that of the individual members. Thus, the personal assets of the individual physicians are safe even if the medical practice experiences any financial trouble.
Asset Management: Tax implications of an LLC
In addition, a company that is formed as an LLC has the advantage of being taxed as a sole proprietorship, partnership, S corporation, or C Corporation. These options provide extraordinary flexibility in the company’s overall tax liability at the end of the year. A Certified Public Accountant (CPA) can provide advice on which taxation opportunity best suits the medical practice, based on the numbers provided by the establishment. The pass-through taxation that LLC members enjoy means that they can claim the profits and losses on their personal taxes as opposed to at the company level. Thus, the individual members can avoid being taxed twice. This can provide some excellent savings to the overall end of year liability, and it allows a number of expenses to be adapted to the return to lessen the tax liability on April 15.
The LLC can be created with the help of a qualified attorney and the filing of the appropriate Articles of Organization with your state. Different rules and regulations can apply to individual states.
Image credit:
Financial Literacy Program at California State University, Fullerton
