EMPLOYEE vs. INDEPENDENT CONTRACTOR
As an associate, you will either be an employee or an independent contractor. Some
owners try to hire an associate as an independent contractor because they can
potentially save money. However, the IRS has strict guidelines on this issue and
running afoul of the IRS can lead to back taxes, penalties and interest. As the one being
hired, this is not so much an issue for you, and I won’t go into the IRS guidelines in this
post, but there are other issues of which you must be aware.
Your main issue will be compensation. An independent contractor must earn more than employee to net a similar amount. There are two reasons for this; expenses and taxes.
Typically, an employer will pay for your; license, malpractice insurance and continuing
education costs. You may also receive paid time off and health insurance. And, you also
may be able to participate in a pension or profit sharing plan.
As an independent contractor, you will be responsible for all your expenses. In addition
to paying these expenses, nothing for taxes will be withheld by the employer and you
will be responsible for paying your own taxes. You will be required to pay quarterly
income taxes and you will be required to pay self-employment taxes on top of your
It will be important for you to have a good idea of these additional costs so you can
make an informed decision when evaluating different associate opportunities.
GETTING THAT LOAN
You are a recent dental school graduate and you have come across a great opportunity
to own your own practice, but how do you get the bank to lend you the money without
ownership experience and, most likely, a significant amount of student loan debt. While the dream of owning your own office right out of school may be difficult, it is possible.
There are things that you can do while you are still in school to help with this process.
The bank will look at your credit score so make sure it is as high as it can be. Keep your
credit card balances manageable and keep discretionary spending to a minimum. Don’t
assume that you can spend excessively and just roll everything into your student loan
debt. If you can’t manage your household you’re not likely to be able to manage your
Once you have identified a practice to purchase you need to establish a relationship
with a dental specific CPA as soon as possible. You will need someone that can scrub
the financials from either the practice owner, or the practice broker. The bank will want
to see at least three years of sound practice numbers.
The bank will also look at the practice itself. Is it the right size? It needs to be big
enough to support your loan repayment and your living expenses. But, it can’t be too big either. The bigger the practice, the bigger the price and loan repayment. You must be realistic in your production goals. The office equipment can be a factor as well. Look for a practice with equipment that will last a few years at least so an equipment loan won’t be necessary right away. The office staff will also play a large role, low staff turnover is a plus.
Another necessary part of the process will be to show the bank your plan for the office
moving forward. How are you going to maintain that stable practice and how are you
going to grow the practice moving forward. Are there procedures that you can add that
the owner was sending out? Are there better ways to market the practice? Are there
expenses that can be trimmed? These are some of the questions that you must
consider when making a purchase decision and having the right answers will go a long
way towards getting that bank loan to make the dream a reality.