Monthly Archives: June 2015

California Paid Sick Leave Act Effective July 1, 2015

On September 10, 2014, Governor Brown signed into law the “Healthy Workplaces, Healthy Families Act of 2014” (“HWHFA”) (AB 1522). The purpose of this law is to provide protection to California employees by ensuring, among other things, that they are able to address their own health needs and those of their families.

Effective July 1, 2015, this new law will require California employers to provide paid sick leave benefits to their employees. Some of the conditions associated with this law include displaying a poster that addresses employees’ rights for mandatory sick time pay and providing a written notice of paid sick leave rights to newly hired employees at the time of hire.

Depending on the extent of the situation, employers that violate or fail to comply with this law could be forced to pay up to three times the amount of the unpaid sick pay due and administrative fines that vary from $50 to $4,000 per violation.

Learn more details about what employers need to know about this law in a presentation given by Only for Dentists principal, Bassim N. Michael, CPA, CVA, MS Tax.

For more information about this law or how it may affect your individual circumstances, please contact the accountants at Only for Dentists.


Only for Dentists Principal, Bassim N. Michael Presents on Buying and Starting a Dental Practice

On June 10, 2015, Only for Dentists principal, Bassim N. Michael, CPA, MS Tax, presented at the Hilton Santa Clara on what dentists need to know when buying or starting a dental practice. This event was put on by the California Dental Association.

In his presentation, Mr. Michael addressed the current economic trends in dentistry and how they affect the success of a dental practice. He also explained how dentists can find the right practice to purchase and what tax consequences potential buyers should consider given the circumstances.

View Mr. Michael’s presentation in its entirety here.

For more information on buying or starting a dental practice, please contact Bassim N. Michael, CPA, MS Tax.

Are You Using the Right Business Structure for Your Dental Practice?

The business structure you use – sole proprietor, LLC, etc. – has tremendous impact on how your dental practice operates and pays taxes.

A business structure is simply an organizational framework. The IRS requires you to select one for your company, since this designation will determine the tax forms you’ll file as well as who is responsible for the company’s liabilities and debts. If you’ve already started a dental practice and have been operating as one of these structures, you should occasionally re-evaluate your status, especially if you’re growing and/or adding to your organizational structure.

Here are the most common business structures and some of their attributes.

Sole Proprietorship

Whether you’re selling handmade items on Etsy or working solo in a profession like law or real estate, you’re most likely a sole proprietor (though you have other options). While you may have taken this route so you could be your own boss, there are drawbacks, including the fact that you are 100 percent responsible for your company’s liabilities.

You may also find it difficult to get financing.

Figure 1: If this IRS form looks familiar and you don’t have any employees or partners, you’re most likely a sole proprietor.

The IRS defines a sole proprietor as “someone who owns an unincorporated business by himself or herself.” If you fit this definition, and you netted more than $400 as a self- employed person, you’re required to file a Schedule C with your Form 1040 that outlines your income and expenses. Since you are your own employer, you must pay Self-Employment Tax, the Medicare and Social Security taxes that employers pay for W-2 employees, as well as quarterly estimated taxes.

Note: Even if you have an employer who issues you a W-2 form, you must still complete a Schedule C for any side businesses you have.

Limited Liability Company (LLC)
Individuals (and other business entities) can also structure themselves as LLCs. The regulations for these vary by state, and tax obligations are a little more complex than for a sole proprietorship. We can help you decide if this is a good choice for you.

C Corporations
Businesses that choose this structure are generally larger companies with many employees. Since the company functions as a separate legal entity, no individuals are subject to personal liability. They file the IRS Form 1120 (among other documents) instead of a 1040, and they can sell stock in the company to raise revenue. On the downside, C Corporations have complex administrative requirements. They must pay corporate tax, and their shareholders pay tax on dividends on their own returns.

Partnerships – and there are multiple types – are also very complex entities. They consist of two or more individuals who are not considered employees, but who are personally liable for the partnership’s debts and other obligations. The partnership itself is not required to pay income tax like corporations do. Rather, they file a Form 1065 to report income, deductions, etc. Profits or losses are then “passed through” to the partners, who file Form 1040 as if they were sole proprietors, but who must attach a Schedule K-1 to the 1065.

You can see from this brief discussion that the business structure you select has enormous influence on your income tax obligations and your personal liability. Before you make a decision, or if you’re considering changing an existing structure, let us walk you through all of the possible implications for your practice.

What Does the Executor of a Will Do?

A number of decisions have to be made when a Last Will and Testament is created for a dental practice owner. The majority of those decisions relate to the disposition of estate assets. However, there are other decisions that must be made as well, including the appointment of an Executor. All too often, the appointment of an Executor is more of an afterthought and is done without giving the choice much thought. A better understanding of the numerous and varied duties and responsibilities of an Executor, however, should point out the importance of taking the time to choose the right person for the job. Among those duties and responsibilities are the following:

  • Securing estate assets – immediately following the death of the decedent, the Executor must locate, secure, inventory, and value all assets in which the decedent had an ownership interest.
  • Opening probate – documents must be prepared and filed, along with the original Will, with the appropriate probate court to open the probate of the decedent’s estate.
  • Notifying creditors – creditors of the estate must be notified that probate has been started. Notice must also be published in a local newspaper for unknown creditors.
  • Reviewing claims – creditors have a specific amount of time within which to file a claim against the estate. The Executor must review all claims and approve or deny the claim. Approved claims must then be paid out of estate assets.
  • Defending the estate – if the Will is challenged, or a creditor whose claim was denied chooses to litigate the claim, the Executor must defend the estate throughout the subsequent litigation.
  • Managing property –the Executor is responsible for managing estate property throughout the probate process. For real property, this may include everything from ensuring that taxes are paid to overseeing necessary repairs or maintenance.
  • Selling property – sometimes, estate assets must be sold to pay creditor claims or to create the required division of assets as called for in the decedent’s Will. When assets must be sold, the Executor is responsible for overseeing the sale.
  • Paying taxes – before probate can be concluded, all personal and estate taxes must be calculated and paid by the Executor out of estate assets.
  • Transferring assets – finally, the Executor is responsible for ensuring that all documents necessary for the legal transfer of estate assets to the intended beneficiaries are prepared and filed, after which the assets are actually transferred to the new owners.

It should be clear at this point that the choice of an Executor can ensure that the probate process moves along smoothly and efficiently or can cause probate to turn into a lengthy and costly affair. This is why the choice should only be made after careful consideration and contemplation.

Does My Business Need to Collect Sales Tax?

Small dental practices face numerous hurdles along the way to success. At the top of the list is navigating the various local, state and federal taxes obligations the business incurs. Neglecting to file taxes that the company owes can cause a fledgling business to fail before it even gets off the ground. Among the potential tax obligations that a dental practice may incur is the requirement that the business collect sales tax. Calculating the amount of sales tax due is complicated. However, before a business gets to that point it must decide whether or not it is even required to collect the tax, and if so at what rate.

Sales tax laws and rates vary from one state to the next, and sometimes from one city to the next within the same state. In addition, the rates are subject to change, and do change on a regular basis. If you deliver products or services to people in a state within the United States in which your business has any type of physical presence, you may need to collect sales tax if that state imposes a sales tax.

Almost all products that are sold on a retail level are taxed, assuming the state in question collects sales tax. Some of the important exceptions include food, prescription drugs, animal feed and products that are intended for re-sale. Services are much more complicated. Some states exempt all services while others only exempt some services.

The requirement that your business has a “physical presence” in the state also leads to much confusion. A “physical presence” does not just mean an actual brick and mortar office. A call center, sales agents, warehouse or other “presence” in the state can create the legal nexus required to trigger the sales tax obligation.

If you are in doubt about your situation, feel free to call our office. We’d be happy to help you through the process.