Show Notes

Kayla: Welcome back to the Designer Practice Podcast. I’m your host Kayla Das.

When preparing to start a private practice, there are many new business concepts to learn. Learning which business structure to choose being one of them.

In today’s episode, Marco De Ciantis, chiropractor and group practice owner will explain the benefits and pitfalls of sole proprietorship, partnership, and corporation business structures so you can choose which best fits your private practice.

Hi Marco. Welcome to the show. It’s so great having you here today.

Marco: Kayla, great seeing you. Thank you again for inviting me. And it’s always a pleasure. And it’s always fun. So, I’m happy to discuss about today’s topics as well.

Kayla: Yeah, and I’m actually going to say for listeners, I actually have my daughter home today. So, they might here a little bit of cooing in the background. But just get giving them a heads up.

So, before we dive into today’s episode, for anyone who hasn’t listened to your previous episode in December, please introduce yourself, where you’re from, and tell us a little bit about your practice journey.

Marco: Sure. You so much. So, my name is Marco De Ciantis. I’m a chiropractor and I’ve been practicing since January 2013. I owned and operated two multidisciplinary clinics in Toronto for over 10 years. And then just about a year ago, I sold my part in that corporation and partnership, which kind of gives me the wisdom to discuss what will be soon.

And I’ve been doing locums ever since. And for anyone who’s unfamiliar with that term, I’m basically a contract supply teacher. So, I was just spending most of my time the last eight to nine months of the last year in Kenora, which is northern Ontario, just outside of Manitoba, covering a doc who’s on maternity leave. So, I’m just effectively stepping in, keeping her shoes warm, keeping the practice going until she gets back. And then I’ve also been ramping up quite a bit of my humanitarian effort. And then a new business venture where I’m working with and building clinics to rent to other practitioners. So quite a few things going.

Kayla: You’re quite busy. That’s for sure. And I know when we spoke last time, you mentioned kind of briefly into some of the business opportunities you’ve been a part of. And you’ve really been a part of almost, if not all of these business structures that we’re going to talk about today.

Marco: You got it. Absolutely.

Kayla: So first, can you explain what sole proprietorship, partnership and corporation business structures are?

Marco: Sure. Sole proprietorship in of itself is you open up a practice yourself. And I’m keeping it within the healthcare field, whether you’re a dentist, medical doctor any type of practitioner, my name is John Smith. I open up Dr. John Smith or John Smith RMT on the front door. That’s sole proprietorship. You are the business. The business is you. There really is no delineation between that.

A partnership is exactly what it is. It’s two or more. I don’t want to say people because it can also be entities. Other corporations. I won’t go into that, but I’ll just keep it in terms of human beings. It’s a group of individuals, two or more that come together. And then have a practice that isn’t quite to say that it’s a multidisciplinary practice. It’s the owners of this business. There’s two or more and they’re all equal partners or whatever they break that up.

A corporation can be many individuals that come together and form this separate entity that ends up running and owning the business. So, the human beings that are on the board, for example, are independent of that. And this corporation runs the business. And there’s a few nuances that come with that, particularly depending on the healthcare practitioner you are.

Kayla: That’s a great breakdown. Are there any considerations, specifically when someone is choosing a business structure? Like which one might be best for them and are there specific costs associated with each or are there any limitations with each?

Marco: Kayla as anything in life. There’s the pros and cons, cost benefit. I just want to preface this by it. There is no right way. There is no wrong way. It really comes down to what best suits you. So, it was like the Goldilocks. You know, we have. Three different business structures here. We got hot, cold and just right. So in the end, I would say, find out what suits you best and go from there. Sole proprietorship, to a certain extent, you’re wearing the hat. You are the business. You don’t even have to have any other associates running, working with you. It’s just you. So, the cool thing with that is if you just want to work by yourself and your great working by yourself and wearing all the hats, the accounting, the business, and then also managing your practice, it’s all on you. It’s cool.

Partnership, you can share those responsibilities. So, I find there’s a lot more, not leeway, but latitude in the sense of focusing more on your private practice or other things associated with managing a practice other than just is there enough toilet paper? Okay. Did I get all the accounting stuff in? Did we pay every, you know. So, there’s a few things that are off your shoulder.

As a corporation, by and large there’s a few other individuals that can help manage that. And this is where a bookkeeper really comes on. And because there are certain types of bookkeeping that comes with a corporation that are different from a partnership than a sole proprietorship. Corporation also has a lot of tax benefits that the other two structures don’t have.

So first and foremost, whether you’re a sole proprietor, whether you’re in a partnership or corporation, I would highly recommend you have a great accountant, a great bank manager, and a great bookkeeper, unless you do the bookkeeping yourself. You just spent 8 to 10 years learning how to be a practitioner. We didn’t really spend that in terms about accounting. So people come to see you as a professional, go and see the people as professionals when necessary. But those are by and large, the pros and cons of each one of them.

Kayla: Yeah, I know, like in my business, I chose a corporation from the start, and many therapists actually choose sole proprietorship. And one of the things when we think of sole proprietorship, it’s easy because there’s not a whole lot of business setup. I mean, depending on how you structure it, you do need to register it as a business, but there isn’t a whole lot of extras connected to that. Whereas a corporation, when I first started my corporation, I actually tried to set it up myself. Then I was like, okay, this is too confusing. So, I got a lawyer and my lawyer was like, you did everything wrong. We have to now go back, re-register you and start over again. So, it does become a little bit convoluted, but what I like about the corporation side of it is, like you said, there are tax benefits that sole proprietors don’t get. So obviously, I guess one of the cons is that you’re paying business tax and personal tax once the business pays you. But typically, if you don’t necessarily take it out of your business, you can actually be in a lesser tax bracket and you can pay less taxes. And again, I want to disclose that I’m not an accountant know any financial pieces to that accounting side. But these are just some of the things that I’ve noticed as I navigated some of this as a corporation. And if I were to do it again, I would choose corporation over and over and over for my specific situation.

Marco: Hey, you know what? First and foremost, agree with you fully. And from over 10 years ago, I did exactly the same thing. I bought some things I got some– ended up costing thousands of dollars’ worth of oopsies where your lawyer and your bank account manager and my accountant had to rework everything. And it happens that way. I mean, corporations are this– and by all means, I’m not a parent, let alone am I equating corporation to a parent. But I’m just using both as analogy that there’s a separate entity that’s being created and just like a parent where you need some outside help. You need help to do this with the corporation by all means. So yeah, we all make our mistakes. And I’m just happy to say that with the corporation, that’s usually where I made most of them.

Kayla: And I am a parent and I think that analogy really fits because it doesn’t matter what our specialties are. We’re not an expert in everything. So being able to enlist those people. Like now I have my lawyer do my re-filing’s every year and it’s amazing because I never have to worry about it. He just sends me the information at end of the year and it’s already done and I just pay him a couple hundred dollars and then I’m good. So honestly best decision ever. But then again, some people are okay with being a sole proprietor and accepting all of one, the liability, but as well as accepting the financial pieces or the financial taxes connected to that.

I also think it’s important to also distinguish is when we talk about liability in a business again, not a lawyer, but by being a corporation doesn’t absolve you from your ethical requirements as a practitioner. And I think sometimes people go into corporation thinking that it helps absolve them from the liability should something arise within their regulatory body. But you as a professional still have a ethical requirement and obligation. And whether you were working in an organization where someone else is a corporation or you’re running your own, your practice is still your practice.

Marco: Kayla, I’m so happy you actually said that. 1000%. I can only speak through the lens of a chiropractor and through my regulatory college when I did have a corporation, a chiropractic corporation. Every single year we had to register that corporation with our college. And there was a part of that registration component was the ethical component. But now obviously it was pertaining towards not only yourself, but towards that corporation, if it’s ever been sued, bankrupt, blah, blah, blah, blah, blah, blah, blah.

But I love how you say that just because there’s this separate entity that’s running the business, that doesn’t mean all of a sudden now all the ethics or morality goes out the door. And the one thing I do want to just, and I might be getting ahead of myself over here, sole proprietorship is a great way if you’re very meticulous, or if you’re in a small town, for example, like I was in Kenora, there’s only just over 5,000 people. Sole proprietorship really worked because It’s you. People literally know it’s you. You don’t really even have that big of corporate structures in the town, let alone to even create your own. Not say that you can’t, but certain areas evoke a certain type of practice.

However, when it comes to resale, if you’re a sole proprietor, you built the equity in your name. So as a type of practitioner, if you’re going to sell your practice, whether you’re a dentist, medical doctor, or chiro, you’re not selling the business, you’re selling yourself. And a lot of people don’t want to come back if you’re not practicing there. So, your resale as a sole proprietor is usually the lowest. Because all the equities built in you. As a corporation or partnership, the time you put into it, you build more equity when you hit the eject button, or if you want to sell out, you built more into this because there’s still someone remaining as a partner. Or as a corporation, you built more equity into this corporation, they’re not buying your name, they’re buying this corporation, the assets, which can be the patients, depending on the type of practitioner you are.

Kayla: I think that’s a really, really great point. I’ve never ran a partnership; I would say I know a lot about sole proprietorship and I know a lot about corporation. But for anyone that’s thinking about going into, say, a partnership business structure, what are the differences between, say, that and a sole proprietorship and that and a corporation? Like, what would make it beneficial?

Marco: Yeah. The difference between the partnership and the corporation right off the bat, you’re not creating this separate entity. So, you don’t get the benefits in terms of the corporation, the certain tax benefits that we’re alluding to. And a lot of that comes down with how you pay yourselves and your expenses.

The other thing is that the partnership is exactly what it is. However, that partnership structure is made between the two individuals or four individuals or group of individuals. And what I mean by that is do we get an equal share of the profits? Do we get an equal payment of the expenses? Blah, blah, blah, blah, blah. It’s just an agreement effectively between all these parties that own and operate, whatever it is that is there. You’re really not getting that much in terms of any other benefits in that other than you’re not having to go through maintaining the corporate structure and really getting a corporate focused account and bookkeeper and lawyer, which tend to cost more.

So, if you know your partners and you work well with each other, that is a great way to structure. And it’s also an easier way in terms of leaving. And what I mean by that is when you leave from a corporation, there’s a lot more involved with resigning your corporate position, payouts. It’s just a lot more hoops to go through so less headachy. And if you worked well with others and know the partners or partner, partnership is a way easier thing to go through.

But once again, you’re building equity, but not as much equity as you would where you can pay out compared to the corporate structure.

Kayla: So, when we think about partnerships specifically, can two sole proprietors come together and just be sole proprietors but also be in a partnership?

Marco: Great question. Yes and no. I’ve actually seen that haven’t done this, but I’ve seen this. And I’m going to use a separate analogy this way. Do you ever hear about the micro restaurants?

Kayla: No.

Marco: Okay. So, I’m going to use an example in Toronto, there’s a bar called the Greater Good. And I’m sorry, even though I’m saying the names, I’m just saying this so I’m not making it up. It’s not like I say that name and they pay me 5 and give me a free beer when I walk on in. So, no third party association.

So, inside the Greater Good, there’s Brooklyn Pizza. So, you walk into this bar and there happens to be a pizza shop. Both of those entities are separate. And what I mean by that is even though they’re running within each other, they collect independent payments. So, from my experience, from what I’ve been part of in terms of partnership, in terms of corporate, and from what I seen literally the situation with two sole proprietors coming together that can exist as long as the money’s kept separate. If they’re sharing one POS system and now, they’re collecting through the same system or it’s going to the same bank account, it’s very hard to prove for example, to Revenue Canada, “Oh yeah, we’re separate businesses.” “Well then, why are you collecting the monies in the same bank account or collected from the same point of sales service.”

So yes, you can, as long as you have an agreement on how that space is paid for. And absolutely, if you collect the monies independently, in particular, if your employees, if you have them, are paid independently. You got to show on paper, even though you’re in the same building, you’re still collecting and paying out completely independent from each other.

Kayla: Thank you so much. Because that’s something that I have been asked in the past. And honestly, as someone who doesn’t have experience with partnership structures, I wasn’t quite sure on that answer. So, I’m glad that you were able to share that.

So, what are some of the similarities and differences between building a team under each structure? And another question I get asked a lot, can sole proprietors have a team?

Marco: Oh, absolutely. So first and foremost, sole proprietors can have a team. You can be Dr. So and so and associates. So, it’s still a sole proprietorship. Yes, it’s a multidisciplinary clinic, but it’s still your name. It’s still your jam. You just have other people that work for you, which also includes front desk staff, even custodial staff. They don’t have to be practitioner staff. You wear the hat. That doesn’t mean you have to scrub the toilets. There’s people that are here that are professionals that can help you to do that.

So, building a team is great for both of them. How you build the team, whether you’re going to be inside the partnership or whether you’re inside the corporate structure, sole proprietorship comes down to effectively how you want to build the team. If you’re a sole proprietor, you’re building the equity in your name. So, the people that you work with don’t have to be employees. They can be contractors. The difference here comes down to the amounts of employee tax that you pay per month and per year. Which you don’t have to pay for contractors because they’re just contracted out to do a certain work.

As a corporation and as a partnership, to a certain extent, if you’re building your team and you want to buy out or sell out. Because you built these other practitioners that are still going to be there, there’s still a lot more equity in that business to resell and for someone else to buy than if it was just a sole proprietor and your team, whether they’re employees or contractors. Because if someone else comes on in, the patients don’t have to come and see you. And then you could just liquidate everyone else that was there and staff them again yourself.

Kayla: So, if I’m hearing you correctly, when we think of the difference between a sole proprietorship and a corporation, is that the corporation has significantly higher resale than a sole proprietorship.

Marco: And just across the board in terms of any practitioner, it’s the most, in Canada, with medical doctors, primarily because If you’re a medical doctor and you close down your practice, I mean, it’s hard to find a medical doctor, period, in any province. So, even if you sell your practice the retention value is 70 to 80 percent of the patients because, holy heck, there’s no one else to go. Those patients will likely all stay there because who else is going to take them?

It’s followed by dentist and then it kind of drops down when you go to chiro, massage, and physio, primarily because there’s just a lot more of them. And in the end, you don’t have to go and see this one physio you can see any physio so they don’t have to stay in that one practice. And that’s where it comes down to whether you’re sole proprietor or corporation. It’s just more value out of the medical.

Also, in Canada, as a chiro, and any other practice, it’s completely different. If we wanted to, Kayla, for example, own a psychiatry practice or medical practice, we can do it like that as a corporation. In Canada, for chiro the only members of a corporate board each have to have a chiropractic degree. And that’s the only one. Dentists don’t do it that way. Medical doctors don’t do it that way. And part of the reason the chiropractic college does this is to maintain the ethical standards of the corporation.

Kayla: you just made me think of something. And I think this is important to highlight for any therapist or practitioner listening that each regulatory body has its own expectations with corporation structures. So, some will require you to have a professional corporation. Some don’t require it at all. You can just go into a business corporation structure. So, it’s also important when you are considering a corporation structure that you connect with your regulatory body to ensure that you can create a corporation structure. And if you can, what type do they want?

So, it might be professional versus business. It also might be provincial versus federal. Like, I’m a federal corporation but some regulatory bodies require a provincial level. So, it’s really important to know instead of just setting up any business and then having to dissolve it in order to redo it again. And every province is different. So, you might ask, say, a social worker in Alberta. Here, a social worker in Alberta, we can, as of right now, make a corporation of any structure. That’s why I’m a business structure on a federal level. But I know in Ontario there’s differences for social workers and what they need to register their corporation.

Marco: Kayla, great point. Even for example, my regulatory college, as a corporation, you can name it, but you have to have professional chiropractic corporation in the name. So, it doesn’t matter if it’s hula hoop juggling fire pins chiropractic professional corporation has to be in there.

You’re right. The local college, if there is a college, because some practitioners are obviously are regulated and they can do that themselves. They do stipulate what you can do what you can’t do. And in the end, you’re still going to have to pay them dues anyway, so– it’s extra dues, by the way, with corporate structure across the boards, doesn’t matter, it costs more, but once again, there’s more benefits, but cost benefit ratio, that’s always what it comes down to.

Kayla: Yeah, no, I agree 100%. So, do you have any additional advice, insights, or tips for listeners when choosing a business structure for their private practices?

Marco: I found that what worked best is to have a great team. So, whether you’re a sole proprietor, partnership, or corporation, the three big ones, the Holy Trinity. An accountant, a bookkeeper, if you don’t do it yourself, and an account manager. I found one bookkeeper about three or four years into my practice. And I’ve been holding onto her ever since same with my accountant from the get go. And I’ve been through a slew of different bank account managers.

Whatever you do, have yourself a great team. Be mindful of the humility that you cannot do it all, and you’re not a professional in doing it all. So even if it costs a bit more to go through your accountant, bookkeeper, or lawyer, trust me, just as you know, Kayla, it saves headaches and way more money in the end.

The other thing too is, by this point, you should know what works best for you. If you’re more of a lone wolf or if you’re more working with others, don’t be afraid to change gears later on in your career. Sometimes, you go through a bunch of partners until you find the real one, or you realize maybe I’m just got to do this on my own, whatever it is. Don’t be afraid to change the structure because if you just stain something that you’re not happy with or is not working, it’s just going to be terrible for yourself and your patients can sense it as well.

Kayla: I think to add to that too, having a lawyer on retainer or just having a lawyer that you can reach out to should you have any questions. I know one of the things that we’re always worried about is “oh, I have this question but I’m afraid to reach out to a lawyer because it’s going to cost me a lot of money.” I’m going to say although of course it costs money. I was quite surprised how little it costs to have a lawyer, especially as a corporation. I pay maybe about 400 a year to do my annual tax filings and that’s a year so

Marco: that’s good.

Kayla: That’s really good that’s really good and he does a really great job. So, I think that sometimes we’re worried that it’s going to cost thousands and thousands of dollars. And depending on what it is, it might be a thousand. But I was pleasantly surprised when I hired a lawyer that it really didn’t cost much. And like I said, if I went back again, I would do corporation over and over and over again. That just fits me and my business.

Marco: I love how you say, same here. I’m not only growing accustomed to it. It works best for me. And by the way, just as an aside, and same thing with my accountant, paid my accountant and it came out to $395.50. Obviously, startup costs, they’re going to be a bit more because there’s a lot of it. But once you get going and you can manage some of the stuff or most of the stuff yourself, really, you’re right, a couple hundred bucks every year. That’s a big saving. That’s a good deal. So great price point for the listeners to know about.

Kayla: Yeah, and I think if you were to think about your time as your money, if I tried to do it myself, well, one, it probably wouldn’t be right. But two, even if it was right, I’d probably be spending way more time than that, that I could be working with clients or could be doing something that’s actually bringing money into my business. So, I agree.

And also, yes, startup is usually always more. I can’t remember exactly when I first started, it was probably around a thousand, but that’s because they’re doing like the corporation. That’s because they’re doing the corporation registration. So, it’s going to cost more.

So, if a listener would like to reach out to you, how can they?

Marco: Sure. They can always email me and they can email me at [email protected] They can also look on daphneclinics.com and they can even reach out to me personally on my personal email, [email protected] and just let me know that you listen to this wonderful podcast and I’ll be more than happy to engage with you.

Kayla: Fabulous. Marco, thank you so much for joining us today on the podcast. It was great having you back on the show.

Marco: Thank you, Kayla. And it’s always a blast. And you always have a great listener base and you do wear so many hats and you always do it gracefully and eloquently. So, it’s always a pleasure to work with you.

Kayla: Oh, thank you so much.

And thank you everyone for tuning into today’s episode. And I hope you join me again soon on the Designer Practice Podcast.

Until next time. Bye for now.

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