October 5, 2005
Once a health care practitioner has made the decision to go into business, a careful analysis must be performed to decide the best business entity to fit his or her needs. In Massachusetts, a number of options exist that can facilitate the growth of your practice, while still providing you with the safeguards needed to reduce personal liability. While this article examines some of the pros and cons of the various business entity choices available to health care practitioners, it is best to carefully analyze and plan each step of the business formation process with a qualified attorney and tax consultant. In addition, please keep in mind that this article is intended to provide only generalized information, and the details discussed herein may be applied differently to your specific situation.
I. Sole Proprietorship – a sole proprietorship is simply an unincorporated individual starting a practice, with assets he or she owns in his or her own name alone. In addition to personally owning all of the business assets, a sole proprietor also retains all of the business liabilities and debts. Although a sole proprietorship is completely transferable by the owner, the proprietorship terminates upon the death of the practitioner. There is no Massachusetts statute that governs the organization of a sole proprietorship; therefore no formal organization documents are required prior to starting this type of business. However, Massachusetts law does requires that any person engaged in business under a name that is different than his or her own to file a business certificate with the town clerk’s office for the town/city in which they operate.
Sole proprietorships also have certain tax benefits when compared to some of the other formations, in that profits are only taxed once as personal income attributed to health care practitioners. This is in contrast to the double taxation issues discussed below. Although a sole proprietorship is simple to form, and may have some tax benefits, it is generally not recommended that health care practitioners engage in sole proprietorships because usually the personal liability far exceeds any benefit relating to the ease of creation.
II. General Partnership ...
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by: Justin H. Dion, Esquire
September 6, 2005