Author: jaclyn angelo

Male Veterinarian In Medical Scrubs Examining Dog At The Veterinary Clinic

The Tax Benefits of a PLLC for Veterinary Practices

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Starting a veterinary practice can be an exciting but daunting process. Deciding on a structure for your veterinary practice can help you protect yourself and your business interests. Many states allow professionals, including veterinarians, to create a professional limited liability company (PLLC). In addition to providing personal liability protection, PLLCs offer several tax benefits, including pass-through taxation.

What Is a PLLC?

A Professional Limited Liability Company, or PLLC, is a specific type of business structure available to licensed professionals, like doctors or veterinarians. The PLLC structure is not available in every state. PLLCs offer veterinary practices a way to organize a business that offers many of the advantages of partnerships and corporations.

 PLLCs provide flexibility for the management of veterinary practices while also protecting the owners’ personal assets from business debts. To form a PLLC, you’ll need to follow the specific requirements in your state, which typically involve filing articles of organization, creating an operating agreement, and obtaining necessary licenses and permits. 

Pass-Through Tax Benefits

The tax benefits of PLLCs make them popular among small business owners. PLLCs are considered pass-through business entities to file federal income tax. The profits made by the veterinary practice will be passed down to the owners, also called members. The member will pay income tax, not the entity itself. The main benefit of pass-through taxation is avoiding double taxation. The pass-through setup is more straightforward than an S-Corp or C-corporation structure. Traditional corporations must pay double taxation at the personal and corporate levels for the same income source. 

Avoiding double taxation can create significant savings. PLLCs with a single owner frequently file taxes similarly to sole propriety, while PLLCs with more than one member may file as a limited liability partnership (LLP). Consulting with an attorney can help veterinary practice owners determine the most strategic way to file for taxes. Filing a single tax return can simplify the process and reduce professional service fees and annual filing costs. 

The Qualified Business Income (QBI) Deduction 

The owner or owners of a veterinary PLLC may be eligible for a qualified business income (QBI) deduction. QBI deductions are available for people with “pass-through income” they report on their personal tax returns. PLLC members who own a veterinary practice can deduct up to 20 percent of their qualified business income when they file their personal income taxes. 

You will need to determine your business income and expenses and then your adjusted gross income before calculating the pass-through deduction. The QBI deduction can lead to significant savings for those with an annual taxable income under $191,950. If your income exceeds this amount, complex IRS rules will determine whether your business income qualifies you for a full or partial QBI deduction. Speaking to an attorney and financial professional can help you create a strategy to minimize your tax liability. 

Contact a Veterinary Attorney 

Deciding on an effective business structure for your veterinary practice can help you limit your tax liability. If you own a veterinary practice, our team of experienced attorneys is prepared to help you decide on a business structure. We will handle the process of filing all of the necessary documents and help you meet ongoing requirements. Don’t hesitate to contact Mahan Law – Veterinary Attorney today to schedule a complimentary, no-obligation consultation. 

Vet in scrubs and happy woman engage with an alert Jack Russell Terrier, illustrating a positive experience at a veterinary clinic visit

Steps to Forming a PLLC for Your Vet Practice

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Minimizing liability for yourself and your veterinary practice is essential for practice owners. Forming a professional LLC (PLLC) allows veterinary owners to create a professional identity for their practices while limiting their personal liability. Understanding the unique requirements and benefits of a PLLC can help you make an informed decision about how to structure your veterinary practice.

What Is a Professional Limited Liability Corporation?

A professional limited liability company (PLLC) is a type of LLC for businesses offering professional services. PLLCs can be owned by one individual or several members. They provide the same kind of protection from legal liability as LLCs but are exclusively for professionals. Professional service businesses such as law firms, medical practices, accounting firms, dental practices, and veterinary practices can form PLLCs.

Steps to Apply for a PLLC for Your Veterinary Practice

While forming a PLLC requires more documents than a typical LLC, the process is straightforward. Every state has different business formation laws; not all states recognize PLLCs. Working with an attorney can help you identify and follow all of the required steps to form a PLLC. Generally, all members are required to hold professional licenses in their respective fields. For example, if you are forming a PLLC with one or more veterinarians, you all need to submit proof of your active veterinary licenses. 

The first step involves working with an attorney to research state application requirements, ensuring a smooth application process. You’ll need to choose a business name that includes “PLLC” or “P.L.L.C.” at the end, draft an operating agreement, and file the formation documents. Depending on your location, you may need to include a premises license and proof of your veterinary practice license from your state’s veterinary medical board. 

The Benefits of Forming a PLLC

Creating a PLLC can be beneficial for veterinary practices for several reasons. They protect members from personal liability for certain types of business debts. If you form a PLLC, you can protect your personal assets, including your home, vehicles, personal property, and more. PLLCS are considered separate business entities from the members. 

For example, if a veterinary patient’s owner sues the veterinary practice and succeeds, the business owner’s personal assets cannot be used to satisfy the monetary judgment against the practice. Similarly, if the business defaults on a loan, the individual members won’t be held responsible for repaying the debt. 

Additionally, PLLCs provide pass-through taxation. Profits from the veterinary practice will be considered income for the members and aren’t taxed at the corporate level. PLLCs offer owners flexibility in structuring the relationship between the members and those who manage the veterinary practice. Members can agree on a management structure that best meets their needs without having to comply with all of the formalities of a corporate structure. Members have the option to file taxes as an S Corp. 

Contact a Veterinary Attorney Today

Forming a PLLC for your veterinary practice can provide a strong shield against liability, ensuring your personal assets are protected. At Mahan Veterinary Law, we provide skilled legal counsel for veterinary practices throughout the United States. With our extensive experience and knowledge, we can advise you on the best business structure for your practice and assist you in forming a PLLC. Don’t hesitate to contact Mahan Law – Veterinary Attorneys to schedule a complimentary, no-obligation case evaluation. 

A vet and owner attending to a small kitten.

Valuation Methods for Veterinary Practices: Legal Implications

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Selling a veterinary practice is complicated. From evaluating the pros and cons of selling, to identifying potential buyers, when it comes to selling a practice, every step is important. However, of all these steps, valuation may be the most important. If you price your practice too low, you miss out on significant financial compensation. And if you price it too high, you limit the pool of potential buyers. In other words, arriving at an accurate value of your practice can make or break your transaction. In this article, we examine valuation methods for veterinary practices. 

EBITDA

A common valuation method for veterinary practices is known as EBITDA, which stands for the following:

  • Earnings before interest
  • Taxes
  • Depreciation
  • Amortization 

Typically, appraisers apply the EBITDA after making adjustments to a veterinary practice’s income statement. This ensures that the value arrived at is a meaningful and accurate figure. Specifically, this method indicates a practice’s operating profit and financial soundness. And the higher the profit, the higher the sale price of the practice will be. In addition, by including amortization and depreciation as well as debt payment costs and taxes, the EBITDA method attempts to represent the cash profit that is generated by the organization’s operations.

Appraisal 

Next, a party who is appraising a veterinary practice examines two other key areas. The first of these is the owner’s SDE, which stands for seller’s discretionary earnings. This is calculated by combining the EBITDA with the practice owner’s benefits and income. And the second of these is the practice owner’s net income, which defines the practice’s earnings after all the practice’s expenses have been deducted.

Additional Valuation Factors 

In addition to those issues discussed above, there are a variety of other factors to consider when valuing a veterinary practice, many of which can have legal implications. As opposed to valuation methods like EBITDA, several of the other valuation factors are somewhat subjective, making it difficult—if not impossible—to value your practice without the assistance of one or more qualified professionals. Ultimately, arriving at an accurate value of your practice will determine the success of the transaction. Therefore, if you are considering selling your practice, you should contact an experienced veterinary attorney for assistance. 

Contact Our Experienced Veterinary Attorneys 

If you are a veterinary practice owner and considering selling your practice, you need an experienced veterinary lawyer on your side. At Mahan Law, we will use our significant legal knowledge and vast network of co-counsel attorneys to help facilitate the sale of your veterinary practice. Whether you need help identifying potential buyers, valuing your practice, or taking any of the other key steps required to sell your practice, our lawyers will strive to ensure that your transaction is a success. Please contact us today to arrange a consultation with one of our talented veterinary professionals.

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Avoiding Common Pitfalls in Veterinary Practice Acquisitions

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As a veterinarian, purchasing your own practice can be a dream come true. However, if you fail to avoid missteps during the process, it can quickly become your worst nightmare. So, if you are looking to acquire a veterinary practice, you must ensure that you do so in a way that gives you the greatest odds of success. In this article, we discuss how to avoid common pitfalls in veterinary practice acquisitions. 

Pitfall #1: Failing to Conduct Due Diligence

Due diligence, in layman’s terms, is the legwork one must do before making an important business decision. So, in the area of veterinary practice acquisitions, due diligence involves evaluating all aspects of a practice, including its reputation, finances, internal workings, and client retention. In other words, when considering a practice for purchase, you should leave no stone unturned. And although it may be tempting to rush through the process, particularly if you believe the practice is an excellent deal, it’s in your best interests to take your time to ensure that you aren’t overlooking any issues that may come back to haunt you in the future. 

Pitfall #2: Failing to Have the Right Team Around You

Acquiring a veterinary practice is one of the most important business decisions you’ll ever make. However, it is also a complicated process. Therefore, before attempting to purchase a veterinary practice, you should assemble a strong team. If you fail to have the right team around you, you’ll undoubtably overlook important details that can negatively impact the transaction. Your advisory team, at a minimum, should consist of an experienced veterinary practice acquisition attorney and an accountant. 

Pitfall #3: Failing to Consider All Assets 

Finally, when acquiring a veterinary practice, you also purchase all its assets, including furnishings and patient records. The seller typically provides a list of assets to the buyer prior to the sale for review. However, as the purchaser, you shouldn’t trust this list. Rather, you should tour the facilities and view the inventory for yourself. By considering all assets and inspecting them yourself, you and your team will be in a better position to arrive at a fair offer price. 

The Bottom Line

Veterinary practice transactions are complicated, and any mistakes made during the process can be costly. Therefore, if you are planning on acquiring a veterinary practice, you need an experienced team on your side, including a knowledgeable acquisition attorney. When you hire an experienced acquisition attorney to assist you, he or she will take the steps necessary to ensure that your transaction is conducted properly and that you obtain the best deal possible.

Contact an Experienced Veterinary Practice Acquisition Attorney

At Mahan Law, our experienced acquisition attorneys are here to help ensure that you avoid the many pitfalls inherent in the veterinary practice transaction process. If you are interested in purchasing a veterinary practice, our experienced veterinary team will take the steps necessary to give you the best odds of success. Please contact us to arrange an initial consultation with an experienced veterinary practice acquisition attorney.