Richard Ollive breaks down incorporation for dental practices – what it is, the benefits and everything you should know before you incorporate.
As the landscape of dentistry continues to evolve, more practitioners are rethinking how their businesses are structured.
Traditionally, dental practices have operated as sole proprietorships or partnerships, but a growing number of dentists are now exploring incorporation – usually into a limited company.
Whether you’re starting a new venture or transitioning from an existing setup, incorporation can offer a range of advantages. Here’s what to consider before making the move.
What is incorporation?
Put simply, incorporation is the process of giving your dental practice its own legal identity, distinct from you and your partners.
Once incorporated, your business becomes a limited company that can own assets, enter contracts, pay taxes and even be held liable for its own debts.
As a result, your personal assets are generally protected if your business runs into trouble or owes money, which isn’t always the case if you aren’t incorporated.
Why incorporate your dental practice?
1. Potential tax advantages
Operating as a limited company gives you more control over how you receive income. You can pay yourself a salary, take dividends or use a combination of both. This means you have more control over how much personal tax you pay.
Tax treatment depends on your individual circumstances and may be subject to change in the future.
2. Limited liability
As mentioned, incorporation separates your personal finances from those of the business. This structure can offer peace of mind that if something goes wrong (a lawsuit or unpaid debt, for example), your personal belongings are usually safe.
3. Easier to sell or transfer
An incorporated dental practice is often easier to sell or pass on. This is because buyers can purchase the business as a whole, including your patient list, equipment, employees and reputation (or ‘goodwill’).
4. Flexible business models
As a limited company director, you can bring in investors, allow employees to become shareholders and create a management structure that might not be possible in a traditional partnership.
5. Pension contributions
Another advantage of becoming a limited company director is being able to contribute to your pension via your business. This is a highly tax-efficient way to save for retirement, helping to reduce both corporation and capital gains tax.
Things to consider before incorporating
While incorporation can offer a range of benefits, there are some key areas to consider before starting the process. These include:
Your NHS contract
If your practice provides NHS services, bear in mind that your existing contract won’t automatically transfer over to your new company. You’ll need to apply for approval from the relevant NHS authorities and demonstrate financial stability, regulatory compliance and continuity of patient care.
It’s also worth noting that incorporation can affect your NHS Pension Scheme membership. If your NHS income is paid into a limited company, you may no longer be eligible to contribute to the NHS pension. This is a significant consideration for many dentists and could outweigh the potential tax benefits of incorporation.
That’s why it’s so important to seek specialist financial advice before making any changes to your business structure.
CQC registration
Your new company must be registered with the Care Quality Commission (CQC) before it can begin providing dental services. If you have an existing CQC registration under another legal entity (for example, a partnership), you’ll need to apply to cancel that once your new company is approved.
Transfer of assets
When you set up a limited company, you’ll transfer all practice assets to the new company. This should be formally documented through a transfer agreement prepared with your accountant and solicitor.
Current workforce
Under TUPE regulations, your existing employees will automatically transfer over to the new company and retain their rights. Any self-employed clinicians you have working in your practice will need to sign new terms of engagement with the limited company – a critical step to avoid legal complications.
Property arrangements
If you lease your premises, you may need your landlord’s consent to assign the lease to the new company. If you own the property, you can either transfer ownership to the business or retain it personally and rent it to the company. A good accountant will be able to advise you on the most tax-efficient approach.
The importance of specialist advice
At Wesleyan Financial Services, our Specialist Financial Advisers have a wealth of experience supporting dentists with their business and personal finances.
This might include reviewing your personal finances, protecting yourself with professional cover (for example, vicarious liability insurance) and making your money work harder through commercial investments.
Remember, investments can go down as well as up, and you may get back less than you invest.
To book a conversation with a dental specialist financial adviser from Wesleyan Financial Services, visit wesleyan.co.uk/dental or call 0808 149 9416.
Please note: charges may apply. You will not be charged until you have agreed to the services you require and the associated costs. Learn more at www.wesleyan.co.uk/charges.
This article is sponsored by Wesleyan Financial Services.
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