Home » blogs » The Different Structures Available For Your Medical Practice

The Different Structures Available For Your Medical Practice

The structure of practices can vary significantly according to needs. Each structure has different advantages and disadvantages covering the level of autonomy, risk, responsibility and cost. Therefore, each one will need to be reviewed carefully before decisions are made on which strategy suits the practice’s short and long term goals. Consultation with an advisor who specialises in medical practices should be undertaken prior to making this decision. The advice should include the taxable and legal consequences of each structure.

ABOUT US
The different structures available for your medical practice
Melanie-Basta-200x200-Square.jpg

Written by

BERIVAN DUBIER
Last Updated Apr 11, 2019
|
Fact checked
|

Invested In You

Your financial journey is an inherent part of your well-being and happiness. When you feel confident and your finances are healthy and secure, the other areas of your life are balanced and supported.

This is why our professional services go well beyond tax compliance and corporate accounting services. At Curve Accountants, our comprehensive approach is designed to present you with proactive, tailored advice that allows you to make smart financial decisions. From strategies for managing wealth and minimising tax to succession planning and business restructuring, we are committed to offering advice tailored to your unique situation.

Learn More

Structures for Medical Practices

Briefly, the types of structures available are:

The different structures available for your medical practice

  • Sole trader;
  • Trust, including a hybrid trust, a unit trust, a discretionary trust or a family trust;
  • Company;
  • Partnership;
  • Associateship and
  • Assistantship

The main features of each structure are detailed below. Deciding upon the right legal structure is the foundations for commencing a profitable business and obtaining medical practice structure advice is highly recommended.

Sole Trader

  • Independence, and unlimited liability;
  • Cheap to run and easy to administer; and
  • The highest tax rates could apply.

Trust

  • A flexible option could use with other practitioners or solo;
  • Ability to distribute income; and
  • Each beneficiaries’ marginal tax rate applies.

Company

  • Limited liability;
  • Can be private or public;
  • Fixed tax rate of 27.5%; and
  • Relatively more complex and expensive to set up and maintain, due to compliance with the Corporations Act 2001.

Partnership

  • Two or more doctors carrying on a business with a view to profit;
  • Partners are liable for each other’s actions; and
  • Relatively cheap to set up and maintain

Associateship

  • Doctors operate the practice together; however, each doctor operates a distinct practice for tax and legal purposes.

Assistantship

  • This applies to non-owner doctors only;
  • Here, non-owner doctors are considered assistants of owner doctors in the provision of medical services; and
  • The assistant is an employee and subject to employment laws.

Choosing a Medical Practice Business Structure

Choosing to work with other co-owners – such as in a partnership or associateship – could have numerous benefits including:

medical practice business structure

  • Sharing expenses;
  • Sharing medical and administrative workload;
  • Sharing of knowledge and intellectual advancement;
  • Learning from one another’s work experience;
  • Opportunity to attract more patients due to doctor specialties and credentials; and
  • Ability to offer patients a variety of skills

However, these benefits could be minimal if the co-owners do not work well together or completely trust one another as business partners.

The benefits of practising as a sole trader include:

  • Independence;
  • Retaining all profits from the medical practice;
  • Limited liability;
  • Autonomy on business, purchasing and budgetary decisions;
  • Responsibility and accountability for the practice; and
  • Being the boss.

A practitioner who chooses to operate as a sole trader is still able to engage other professionals as independent contractors, offering benefits such as:

  • Offer a varied level of skill and expertise within the medical practice;curveaccountants.com.au/budgeting-for-your-medical-practice-success
  • Attract more patients due to this versatility of practitioners;
  • Ability to manage a heavy workload by delegating patients to other doctors and/or technicians; and
  • Being able to operate as a business for tax purposes (see https://curveaccountants.com.au/starting-a-medical-practice/ for more information).

Helpful tip:

icon

Choose a business structure that aligns with your practice’s size, growth plans, and tax objectives. Review your structure as your practice evolves to ensure it remains suitable. Professional advice can help you understand the legal and financial implications of each option.

BERIVAN DUBIER

DIRECTOR

Reviewed by

David-Rayfield-200x200-Square.jpg

SEAN DWYER

DIRECTOR
CPA and financial adviser for over 25 years. Loves to help businesses grow. Dad, jogger, cyclist, windsurfer and bad skier.

Edited by

David-Rayfield-200x200-Square.jpg (1)

Alix Dower

PRACTICE MANAGER

I’m like a ninja with spreadsheets and a detective with data, passionate about problem solving and providing solutions. Experienced Practice Manager with a demonstrated history of working in the financial services industry.
Are you a business or medical professional who’s ready to secure your financial future? Book a free consultation with the team at Curve Accountants today!
CONTACT US

Free eBook Download

David-Rayfield-200x200-Square.jpg (2)

Starting A Medical Practice

David has extensive experience in writing, editing and marketing before joining iSelect in 2023 as Digital Editor. When not making our content better, you can find them browsing log cabins for sale in the forest.
REQUEST DOWNLOAD

David-Rayfield-200x200-Square.jpg (3)

Buying An Established Medical Practice

A mark of a good practice is a demonstrable ability to produce an above-average return for its owners. This ebook outlines the importance of this and strategies for prospective buyers..
REQUEST DOWNLOAD

FAQ

What structures can a medical practice use?
Common legal structures include a sole trader, partnership, company or trust. Doctors may also share premises and services through an associateship or use a separate service entity while retaining distinct clinical practices. The right arrangement depends on who earns patient fees, who employs staff, who owns assets, how decisions are made and how risks and costs are shared.
Is a sole trader structure simple, and does it limit my liability?
A sole trader structure is usually relatively simple to establish and administer, with business income included in the practitioner’s individual return. It does not provide limited liability: the practitioner is personally responsible for business debts and obligations. Professional indemnity insurance and sound contracts remain important whatever structure is chosen.
Does a company automatically reduce a doctor’s tax to a fixed rate?
No. A company is a separate legal entity and may pay tax at 25% if it qualifies as a base rate entity, or 30% otherwise. The article’s 27.5% figure is outdated. The tax on income earned from a doctor’s own services, and the tax consequences of paying profits out as salary or dividends, require separate analysis. Company directors also have legal duties and possible personal exposure.
Can I use a family trust to distribute my medical fees?

A trust may be useful for genuine business ownership and succession planning, but it does not automatically make a practitioner’s personal services income available for distribution at family members’ tax rates. The personal services income rules, professional firm profit allocation guidance and general anti-avoidance rules may be relevant. The contracts, commercial substance and source of each income stream must be reviewed before making distributions.

How do a partnership and an associateship differ?
In a partnership, practitioners carry on a business together and share its profits or losses under their agreement, with potential responsibility for partnership obligations. In an associateship, practitioners may share premises, staff or administration while each runs a separate clinical practice. The label alone does not determine the legal or tax result: patient contracts, billing flows, bank accounts and written agreements must reflect the arrangement in practice.
Does calling another doctor a contractor or assistant decide their employment status?
No. Employment and contractor obligations depend on the actual contractual rights and how the arrangement operates, not just its title. A genuine employee generally brings PAYG withholding, superannuation and employment law obligations. Payments to practitioners under some contractor arrangements may also be relevant for state payroll tax; Victorian medical centre rules should be checked separately.
What is a medical practice service entity?
A service entity may supply rooms, staff, equipment and administration to practitioners in return for a service fee. Its agreement should identify the services, commercial fee and responsibilities, and the invoicing and GST treatment must be reviewed. A service entity does not, by itself, shift a doctor’s personal clinical income to another taxpayer or eliminate payroll tax and employment obligations.
What should I review before choosing or changing the structure?
Map who contracts with patients and practitioners, owns goodwill and equipment, employs staff, collects fees and bears liabilities. Then compare setup and ongoing costs, tax, GST, payroll tax, insurance, funding, governance, succession and exit plans. A restructure can trigger tax, duty, contract and registration consequences, so obtain coordinated accounting and legal advice before transferring a practice or its assets.

Related Blogs

Find Out How Curve Accountants Can Help

Owning your own business or practice is a defining characteristic of who you are. By partnering with Curve Accountants to support you in your business finances, together we can have open and honest conversations about money, and bring fresh thinking and creative ideas to amplify the exact financial goals you want to work towards. Just as your own customers, clients, or patients trust you implicitly to provide them with the best advice and outcome, we believe the same should be achieved for your financial health. Get in touch with us today to book a free consultation with an industry-accredited tax and business accountant Melbourne-wide, from either our head office in Sandringham, or our office.
CONTACT US
Curve Accountants office reception