10. Trying to pay off student loans or other debt too fast.
- Goal should be creating savings, not “getting out of debt.”
- Taxes higher if no debt.
- Principal reduction of debt is not deductible.
9. Doing their own accounting.
- Spend your “free” time doing things you enjoy, not learning accounting.
- Makes income tax preparation easier and less expensive because records are more reliable.
- Cost is less than half the fee for a crown.
8. Not keeping business and personal financial transactions separate.
- Makes income tax preparation more difficult.
- Exposure to potential IRS adjustments in the event of an audit.
7. Doing their own payroll, including making payroll tax deposits.
- Mistakes are costly.
- Penalties can run 15% of taxes deposited late.
- Outside services specialize in payroll and are not expensive.
6. Hiring friends or family or other inexperienced people to work in the dental practice.
- Hurts practice to have inexperienced staff dealing with patients, especially front desk.
- Hurts practice to have inexperienced staff dealing with filing insurance claims for patients.
5. Putting off setting up a retirement plan until out of debt.
- Review different types of plans and establish one as soon as you start working.
- Can retire in 20 years if save consistently.
4. Focusing too much on interest rates and not monthly payment when borrowing money.
- Focus should be on cash flow, monthly payment.
- Longer term loans are better for creating savings and lowering taxes
3. Not setting up the proper type of business entity.
- Partially depends on ownership of real estate.
2. Not setting up their business entity early enough.
- Why incorporate? And when?
- Current school of thought is to set up a business entity as soon as you start working.
- Can begin funding a retirement plan.
- Can deduct certain costs against the income generated from dentistry services.
1. Not setting up your “team” soon enough.
- Attorney to review office lease, contracts, employment agreements, entity formation, etc.
- CPA financial advisor to advise on setting up business entities, retirement plans, arrange financing and to review contracts from a tax perspective.