Thursday, December 20, 2012

Dental Supply Companies and Labs Raising Their Rates Due to Medical Device Excise Tax - How to Question those Increases

We have heard from our clients and others in the dental community that supply and lab companies are raising their rates at least 2.3% across the board due to the new medical device excise tax. This across the board raise may be nothing more than a move to use this new tax as an excuse to pad their profits. We are suggesting that dentists who receive such a notice to challenge these companies and ask them to furnish the FDA list of those products that are subject to this excise tax to verify their claim that they are subject to the tax.

For more information, please contact

Friday, December 14, 2012

Preliminary Thoughts on 2.3% Medical Device Excise Tax

We're starting to see much of the same confusion from dentists concerning their read of the final regulations on the 2.3% medical device tax as they had from the proposed regulations.

First and foremost, we have not read the final regulations yet, however, we have seen a few editorials summarizing the regulations and quite frankly it doesn't sound like there is much difference as it relates to dental practices. However, after we do read them, we'll post back if there are any substantial differences we find. So the following comment is based solely on our reading of the proposed regulations along with other editorials written by well-versed professionals and their interpretation of the final regulations.

Here is the position we've taken with ALL of our clients as we go through our year end planning meetings (which is why I have very little time to read the final regulations at this time):

Generally, the dental practice itself will NOT need to directly deal with the medical device tax. Even the milled Cerec crowns may not need the dental practices to track and pay the excise tax for manufacturing the crown, we'll reserve final comment until we read the final regulations ourselves. However, ALL dental practices will be impacted by this new tax as their upstream vendors, supplies, producers and manufactures will have to pay the tax and as already noted, they will certainly pass the cost onto the dental practices.

In my opinion, the cost associated with this new tax should only warrant an increase in practice fees similar to what they have done in prior years and were planning to do in 2013.

For example, if an item that they sell to the practice for $100 is subject to the tax, they will have to pay $2.30 on that item. So they may sell you that item for $103 to cover their additional costs. Consider this when deciding how much to raise your fees:

Suppose a practice does $1,000,000 in revenue with $600,000 in total OH leaving you with $400,000 in profit. Of that $600,000 OH, $150,000 is lab and supplies. Let’s pretend every bit of it is deemed a medical device. If your upstream vendors increase their prices by 3% to cover the additional cost, your lab and supply cost will now be $154,500.

So now your total OH is $604,500 or 60.45%. This means you will now have profit of only $395,500. How much would you have to raise your fees to cover that cost? Well, your revenue will now need to be $1,004,500 to get BACK to $400,000 in profits. 

So my math says that's a fee increase of .45%

You should still consult with your CPA as well. 

Happy year-end tax planning!

For more information, please contact

Friday, December 7, 2012

Protect The Goodwill It’s Taken Years to Build — Before, During and After the Sale of Your Dental Practice

This is a guest post from Dr. Phil LoGrippo of ADS Florida.

The most valuable component of the price of a dental practice is the portion allocated to “goodwill.” Goodwill represents the intangible assets of a business—the difference between an established, successful business and one that has yet to achieve success. In an established dental practice, goodwill consists largely of the name, reputation and skill of the dentist and team, which have led to a strong, loyal patient base and consistent inflow of new patients. For the buyer, goodwill greatly increases the likelihood of continued cash flow from retention of that patient base and from new patients.

For you, the seller, preservation of the goodwill of your practice is paramount to a successful transition. A young dentist who purchased an established practice in Southwest Florida recently said, “The goodwill of the seller in my transition was priceless. His vote of confidence to our patients has increased retention and allowed me to succeed on a level I never would have been able to do otherwise.”

Keep on Building Goodwill

In order to assure that you retain goodwill not only prior to selling but also through the critical transition time during and after the sale, you should maintain your reputation and good name within the practice and community at all times. Through the transition process and even afterward, remain involved in study clubs, the local dental association, community organizations and volunteer groups such as Rotary. This not only will help ensure that you receive proper compensation for your years of practice building, but also that your buyer receives full value. Even after you retire, positive support and praise for the new dentist (such as in social settings) will go a long way toward continued retention of  patients in the new practice.

Choose the Right Broker

Working with an experienced and ethical transition broker is also invaluable in preserving goodwill and value. The right broker will perform a legitimate appraisal and value the practice in a manner that reflects the true anticipated cash flow following the sale, rather than telling you what you may want to hear and subsequently luring a buyer into a bad deal that destroys goodwill. The right broker will also work to find a buyer who is an appropriate fit for the practice, one whose abilities, ethics and practice style match your own, preserving your reputation and the reputation of the practice. Additionally, the right broker will guide the entire process, working with lenders, accountants, and counsel who are knowledgeable in dental transitions. The right broker will also work toward the ultimate goal of having a satisfied seller and buyer, preventing negative interactions that can sometimes occur when working with an inexperienced or self-serving advisor.

For more information, please contact

Tuesday, December 4, 2012

Dentist has Questions about S-Corp Meeting Minutes

I am the only member of an S Corp. I need help with regards annual corporate meeting and keeping of minutes. 

What do you do in an annual corporate meeting when you are the only member? 

What makes up the agenda/minutes of these meetings?

Does an attorney need be present?

I have read that the annual CPA meetings could count as the corporate meeting, any one with a different view?


I've often said that the minutes we prepare for our client meetings have sufficed under IRS audit and should suffice as "corporate" minutes. That said, this is for IRS purposes when they audit and want to make sure the taxpayer is treating their corporation as they should.

I can't speak for any other legal purpose like a lawsuit; however, we have had clients with legal actions, domestic, partnership issues, etc., and when "minutes" have been requested these have been provided and it's never been a problem, meaning, there's never been a response to say these aren't proper minutes or not in proper form.

The minutes we prepare are on our letter head, have clients name (LL, PCL, PLLC, PA, PC, Inc., etc) location, date, time, and attendees. Then we either attach or note agenda and what was discussed, decided, tasks assigned, etc.

Some of the items we have on every agenda: year-to-date results, projections, year-to-year comparisons, other corporation matters, individual tax projections and other practice-business issues. Of course with each client there can be other issues added to the agenda based upon their specific needs.

Again, if asked to produce for an IRS audit these have sufficed. It’s the same with other legal issues I mentioned above. Check with your attorney and\or CPA to make sure they are comfortable with this.
The purpose of doing minutes is to act like you're a corporation since you created one and reporting taxes as one.

For example, if a taxpayer has reported their income as an S-Corporation for 10 years and saved payroll taxes on S-Corporation dividends of say $50k over those 10 years and they were audited and found to NOT be in compliance, i.e., acting like a sole proprietor, then the IRS could take the position that they really weren't an S-Corporation and assess the $50k in taxes plus penalties and interest.

The bottom line is, if you're going to create and report your taxes as a corporation, make sure you do the things a corporation is supposed to do.