One of the first things physiotherapists entering private practice must consider is the choice of business structure. While it should be obvious, this one decision has tremendous income, management control and taxation implications for you now and down the road.
Three common business structures for clinic owners to consider include:
1. Sole proprietorship, sole trader
This is a set-up where your private practice is not separated from yourself as a business owner. You can choose to use a distinct business name or your own name, but you are responsible for all your business’ liabilities.
This business structure is the most popular choice for start-ups, e.g. part-timers who continue working at a hospital, individuals with a limited client base and income and home-based physiotherapists. Remember however, that this structure offers little protection for yourself.
If you want to start and operate a clinic with one or more colleagues, a formal partnership arrangement is required. In this scenario, all the enlisted partners must legally share all the profits, risks and losses according to the partnership contract, which is established at the start of the practice’s operation. Dispute resolution is key when in business with others, so discuss your needs with experienced professionals before committing to a legally binding contract.
3. Limited Liability Corporation (LLC), Company (Pty Ltd)
This structure is the most common amongst small businesses. Unlike partnerships and the self-employed, it is a legal entity separate from the owner and is required to fulfil specific regulatory requirements.
Other business structures exist and your situation may require a change as your private practice grows. Consult with a qualified tax accountant, lawyer or your government’s business registry for more details.
They can help you meet basic regulatory requirements like:
- Company registration.
- Registering a business name.
- Acquiring a business number and/or tax file number.
- Registering for permission to withhold employee payroll taxes.
Of course, when it comes time to build a website for your new clinic, chat with us.