September 29, 2025 • 44 mins
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Want a structure that protects your personal assets, trims your tax bill, and makes selling your practice smoother? We sit down with specialist dental solicitor Ray Goodman to translate legal jargon into practical choices for dentists—when to stay as a sole trader, when a limited company pays off, how partnerships really work, and why “expense sharing” can quietly turn into a partnership with joint and several liability. If you’ve ever wondered whether dividends beat salary, who can be a director or shareholder, or how to keep decision‑making fair between owners, this conversation gives you the playbook.
We pull apart the mechanics of limited companies—the corporate veil, director duties, and the underrated advantage of flexible ownership that can include non‑DCP shareholders provided you meet the director rule. We compare this with partnerships, highlighting the risk of being chased for your partner’s debts and the absolute need for watertight agreements covering drawings, profit splits, deadlocks, and exits. We also examine expense sharing arrangements and explain why, if money is pooled with a view to profit, the law likely treats that as a partnership regardless of the label.
Thinking about incorporating an NHS contract? Ray outlines the real pathway: local area team discretion, novation agreements, and the welcome shift in guidance around personal guarantees and time‑limited obligations. We also tackle UDA value conditions that can attach to incorporation and show how to weigh the tax benefits against possible rate reductions. Rounding it out, we look at LLPs, when they make sense, and why many dental accountants still favour limited companies for scalability and sale readiness.
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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Dr James (00:00):
We all know that we need to get our structure right
from the start whenever it comesto setting up our limited
companies and our partnerships.
But the problem is no oneactually explains what the
terminology means, and thereforewe feel a little bit blind.
That's why I'm joined today byMr.
Ray Goodman, expert lawyer todentist.
We're going to be coveringcompany structure, all the
various ins and not the highlevel stuff that us dentists
(00:21):
need to know, but we're nevertaught at university.
I'm also happy to share thatthere is free verifiable CPD
associated with this podcastepisode.
Whenever you finish theepisode, all you have to do is
click the link in the podcastdescription.
It'll take you right throughthe Dentists Who Invest website.
You'll be able to complete ashort questionnaire, and once
passed, you fill in yourreflections, and we'll go ahead
(00:43):
and email over to you yourverifiable CPD certificate,
which is entirely free.
What that means is this podcastepisode will be able to
contribute towards yourverifiable CPD hours during this
learning cycle.
Company structure, someoneshould have made a podcast on
this a long time ago.
(01:05):
What do you think, Ray?
Ray (01:07):
Yeah, I mean it's a it's a subject that we deal with on a
daily basis.
And although I do lots ofspeaking to dentists around the
country, and I speak for the BDAand other organizations have
done for many years, most of theseminars that I'm asked to give
tend to relate purely to theprocess of buying and selling.
(01:27):
So it's nice to be able tospeak about something else,
something that we do deal withon a daily basis, that doesn't
seem as sexy as buying andselling, although it is very
important to get the rightstructure and can have huge
benefits for dentists.
Dr James (01:44):
Directors, shareholders, all those sorts of
things.
Dentists, we we know what theyare to a vague level, but we've
never actually really went intodetail.
And Ray, you're you're a lawyerif I've got that right.
Just so everybody has fullcontacts on yourself for this
podcast.
Ray (02:02):
Yeah, I'm a I'm a solicitor, I'm a specialist
dental lawyer, I'm a partner inthe firm of acuity law.
Many people will will will knowme from my previous role, which
was one of the foundingpartners of Goodman Grant.
We were a specialist dental lawpractice, dealing almost
(02:22):
exclusively with the business ofdentistry.
So buying and selling practicesin corporations, 24-hour
retirements, anything to do withthe business of dentistry.
What we didn't do and what wedon't do is, you know, we don't
deal with dental negligenceclaims.
We only act for dentists and welook after dentists.
And we do that on a nationalbasis.
(02:43):
Goodman Grant became part ofAcuity just on three years ago.
Acuity had prior to that had avery strong dental team acting
for a lot of the big corporateslike Portman, and we still act
for them and many of the otherlarge corporates.
Goodman Grant also acted forsome of the smaller corporates
and hundreds, if not thousands,of individual dentists.
(03:04):
So we've now got a networkright across the country and the
biggest team of specialistdental lawyers in the country.
Dr James (03:11):
Interesting that you used the phrase the business of
dentistry because that is, ofcourse, our event, which is
coming up on the 18th ofOctober.
Shout out the Business ofDentistry event.
That's on Birmingham.
18th of October is, of course,a Saturday.
Feel free to let me know ifanybody out there would like to
come along.
We pretty much sold out.
(03:31):
I think we sold 180 tickets.
There may still be a few on itgo on the go on a first come,
first serve basis, just shoutingthat out because it came up.
Ray (03:40):
Yeah, that should be a great event.
And we're gonna be there.
My one of my partners from ouruh our corporate healthcare
team, Claire Emery, is gonna bethere.
She's on one of the panels inthe breakout session.
So yeah, it should be a greatevent.
Dr James (03:52):
And for the record, I did not ask Ray to plant that
term in his in his response tomy question before we did this
podcast.
It just came out, and I'm gonnaleap on it right now just to
give that a little bit of ashout out, that event, because
it it will be fun, it will be ablast.
Anyway, safe to say, based offwhat you said, Ray, company
structure and the nuances of itthat us dentists need to know is
(04:14):
you're no stranger to it basedon your experience.
So now it seems like a goodtime to segue into that part of
the podcast, that discussion.
Ray (04:22):
Okay, that's great, James.
I'm going to attempt to sharemy screen.
If it all goes horribly wrong,we'll sort it out, but I think
it should be okay.
Dr James (04:31):
Sure.
I believe.
I believe, I believe.
We can make it happen.
Ray (04:34):
Hang on, that's the one.
Why isn't it?
Ah that oh there we go.
Dr James (04:42):
There we go.
We're good, we're cooking.
Ray (04:44):
Okay, I don't know how I get this little thing off the
top.
Ah, will that just disappearitself?
Dr James (04:50):
You know what?
I can't actually see anythingat my side.
It looks good to me.
Ray (04:53):
Okay.
So you just got a clear screenwith the slide.
Dr James (05:00):
Yeah, we can see the slides.
Ray (05:02):
Wonderful.
Okay, so we're going to talkabout business structures for
dental practices.
Critically important, as you'llsee as we go through.
You'll be delighted to knowthat I'm not going to go into
massive legal technical detail,but I am going to cover the
basic principles in hopefullyeasy to understand language.
All professions, we all haveour technical language.
(05:25):
We believe in plain speech asmuch as possible at acuity.
So let's go straight into it.
Before we talk about limitedcompanies, which is the first
slide, many of you will just besole traders.
You operate under your ownname.
You don't have a partner, youdon't have uh a limited company.
(05:45):
And that's a very simple andperfectly acceptable structure.
You're if you're a sole trader,it it is you as an individual
that is entering into all thecontractual obligations, whether
it be with the NHS or with yourindividual patients and
supplier.
So any liabilities that youhave are your personal
liabilities, and that's arelatively straightforward basis
(06:08):
for holding a practice if youwere just on your own.
But it's not the only basis.
So let's have a look at some ofthe alternatives.
So the first thing is limitedcompanies.
A limited company is a separatelegal entity.
In law, it's a separate person,although it doesn't have a
physical body, but it makes itsdecisions by its board of
(06:32):
directors.
They're effectively its brain.
So that means that the companyand not the individuals who own
the company, i.e.
the shareholders, who haveliability for its debts.
So a limited company, separateperson, and is responsible for
any assets and liabilities thatit has, including tax.
(06:52):
So unless there are some quitestrong reasons, perhaps
criminality or trading whilstknownly insolvent, the
shareholders are not liable forthe debts of the company.
Hence the expression limitedliability.
So what are the advantages?
(07:14):
Well, firstly, as we've justsaid, a big a big advantage is
that the shareholders, i.e., theowners of the business, are not
personally liable.
It can also have taxadvantages.
Limited companies can benefitfrom various tax advantages.
Corporation tax rates, i.e.
the rates that companies aretaxed on profits, are generally
(07:37):
lower than individual rates.
But of course, there is thenthe rate on the dividends, i.e.,
when the owner of a companytakes the money out.
There are different ways oftaking monies out of a limited
company.
It can be way of by way ofdividends, it could be by way of
salary.
It's quite complex and it'ssomething that you would need
(07:57):
the advice from a goodaccountant, preferably somebody
who specializes in uh dentalpractices.
There are many of them around.
I'm a member of NASDAQ, theNational Association of
Specialist Dental Accountantsand Lawyers.
There are about 40 oddaccountants, all of whom have
specialist knowledge indentistry.
(08:17):
And I would strongly advisethat in taking advice over
something like incorporatingyour practice, becoming a
limited company, that you mightwant to seek advice from one of
them if your own accountantisn't that experienced in dental
practices.
Another advantage of a limitedcompany is because it's a
(08:38):
separate individual, changes inthe shareholding, i.e.
the owners of the company,don't affect the practice, the
business itself, because theowners don't own it.
Similarly, when you come tosell the practice, it won't be
it won't be the practice thatyou're selling.
You would normally sell theshares in the limited company.
(08:59):
The limited company could sellthe assets, could sell the
practice.
It's generally not advisablebecause it usually leads to a
double tax charge because thecompany will sell the assets,
the money would go into thelimited company, and then you've
got the problem of taking themoney out of the company, which
generally would attract anothertax charge.
So again, accountants' advicecritical in these situations.
(09:24):
Some downsides of a limitedcompany.
Well, as a limited company, youhave a statutory obligation to
file various returns every year,accounts, statutory records, a
statement to the effect ofwhether or not the beneficial
ownership in the company ischanged.
So there's a cost in that.
It's not huge generally, butit's a cost that an individual
(09:47):
sole trader wouldn't have.
And setting up and running alimited company can be more
expensive than other structures.
Again, you have to either formor acquire an off-the-shelf
company, and your your lawyersor your accountants can do that
for you.
And you have the the work everyyear of preparing limited
company accounts and filing.
So those are the main, the maincriteria.
(10:11):
There is one other significantcriteria that I'd like to
mention in relation to limitedcompanies, and that is who can
own it, who can own a practiceto a limited company?
The answer is anybody, and it'sthe only, well, this and LLPs,
which is the other incorporatedstructure, are the only
structures where non-dentistscan own a dental practice.
(10:32):
The general rule rule in underthe Dentists Act is that only a
dentist or a DCP can own adental practice.
Through the vehicle of alimited company, the
shareholders, i.e., the ownersof limited company, are
irrelevant.
So anybody can own a practiceor practices through a limited
(10:55):
company.
The only criteria is that thedirectors must be comprised of
not less than 50% of DCPs,dental care practitioners, i.e.,
anyone who's on one of theregisters that's kept by the
GDC.
So provided you don't have, Imean, a mine, sorry, a majority
(11:19):
of non-DCPs, then you can haveanybody you like as directors.
So, for example, it opens thedoor for ownership to be spread
with family members.
You could you could transferyour practice to a limited
company, and you could spreadthe shares across your wife,
children, anybody else you want.
(11:40):
They don't have to be DCPs, aslong as the board of directors
is not comprised of with aminority of DCPs.
Now, that's often misquoted,including by the GDC, I have to
say.
Uh, and you'll often see itstated that you have to have a
majority of DCPs as directors ofa limited company.
(12:01):
That's wrong if you look at thewords of the statute, which I
have to say is not easy tounderstand and not easily
written.
It actually says you cannothave a minority.
So you can have parity.
You can have two directors, onea direct one, one a dentist,
one a non-dentist, non-DCP, andthat's fine.
(12:22):
What you can't have is perhapssay two non-dentists or DCPs and
one dentist, because thenthey're in a minority.
So that's that that that's uhquite an important and a useful
thing to know.
Ownership of a practice can bemore diverse through the vehicle
of a limited company.
I think I've just jumped onethere.
(12:45):
Directors' liabilities andresponsibilities with a limited
company.
Directors have a fiduciaryduty.
That is a duty to act in thebest interest of the company and
its shareholders.
Often the shareholders aregoing to be the dentist and
perhaps some of his close familyor or colleagues.
(13:07):
And there is an overriding uhresponsibility uh on directors
under company law to act in thebest interest of its of the
company itself and itsshareholders.
There can be situations wherethat conflicts with the
individual's best interests.
In a small company, a smallbusiness like a dental practice,
that's unlikely, but but it issomething that needs to be borne
(13:30):
in mind.
Dentists are also responsiblefor ensuring the company
complies with the laws,including tax obligations and
compliance with the company'sact.
Again, these are not, you know,these are things to be taken
seriously, but normally ifyou've got competent
accountants, they will deal withall that for you.
And financial oversight,directors are responsible to
(13:53):
ensure the company isfinancially sound and not
trading insolvently.
If a company goes, it becomesinsolvent.
The directors are not generallypersonally liable.
However, if they have knowinglyoperated the company in
circumstances where they shouldhave known that the company is
insolvent, there arecircumstances where they can be
(14:16):
held personally liable.
Again, it's rare.
And if if people areresponsible and sensible and
have good specialist advisors,then it's not something you
ought to be worrying about on adaily basis, but just an
awareness.
Limited companies often arebest suited for larger practice
(14:36):
with multiple owners or peoplelooking for investment from
non-DCPs.
As we said, there's no reasonwhy anyone can invest into a
dental practice through alimited company.
They don't have to be DCPs.
So there's an opportunity therefor larger practices to raise
(14:59):
capital from non-DCPs.
And they can be more taxeffective.
Again, you need to take advicefrom your accountants to make
sure that what you're doing thedesired tax effect.
So that in a very shortnutshell is the situation with
limited companies.
Limited companies tend to bethe most favoured structure
(15:23):
outside of individuals orexpenditures.
And it's generally the tax thatthe tax situation that drives
that.
Perhaps some people takecomfort from the protection from
liability, although it's rare,although not unheard of, but it
is rare for dental practices tobecome insolvent.
So usually the reason forincorporating your practice is
(15:49):
financial and tax driven.
So moving on to partnership.
A partnership is a businessstructure comprising of two or
more individuals where theyshare ownership of the practice
with a view to profit.
That's not quite the definitionthat's set out in the
Partnership Act, but it's it'sparaphrased and made a little
(16:13):
bit more straightforward.
And any situation where youhave more than one person who is
running a business with a viewto profit, whether it's
expressed to be a partnership ornot, it will be deemed to be a
partnership under thePartnership Act.
Advantages of partnerships,well, you have shared
(16:34):
responsibility.
It's an opportunity forpartners to pool their
expertise, resources, workload,and that can lead to a more
balanced and efficientoperation.
Two heads, four hands.
It gives more flexibility,perhaps, than a limited company.
It can be more flexible interms of decision making and
profit distribution compared toa limited company.
(16:56):
And it's easy to set up.
You don't have to registeranything with the company's
house.
There's no register ofpartnerships.
It is something that you createreally by the facts.
If you join forces withsomebody with a view to profit,
that is tends to be apartnership.
Having said that, I wouldstrongly recommend in every
(17:19):
situation where you have apartnership that you have a
partnership agreement which willset out all of the points that
would be of concern to you.
For example, what happens ifsomebody dies or becomes
incompetent?
What happens if somebody wantsto leave?
How are you going to splitprofits?
(17:40):
And any other practical pointsthat you would wish to clarify
with your partner or partners atthe beginning of the
relationship.
Things are always great at thebeginning of a partnership.
Everybody's excited,everybody's looking forward to
going ahead, everybody's on goodterms, and nobody's thinking
that they're going to fall outdown the line.
But often, unfortunately,humans being how we are, we tend
(18:06):
to fall out.
And you know, circumstanceschange, people marry, people
divorce, other partners comeinto the picture, pressures get
put on people, and attitudeschange.
So if you are in a partnershipand you don't have a partnership
agreement, I would strongly uhuh uh advise that you contact us
(18:27):
or contact another specialistdental lawyer and we can put
that right for you.
Similarly, in fact, with a witha limited company, a limited
company's constitution is setout in what are known as its
articles of association.
They're fairly heavy andcomplex provisions which control
(18:48):
all of the all of theconstitution of limited company.
And they can be adopted, thereare standard ones within the
companies act that can just beadopted by referring to them, or
they can be individuallydrafted, or as is probably in
most cases the situation, youtake the standard form of
(19:11):
articles from the Companies Actand then add or detract
provisions to make them fit yourpurpose.
But notwithstanding that, it'salso very advisable, where you
have a company, that you have ashareholders' agreement, which
will also deal with a lot of thethings that would be in a
(19:31):
partnership agreement.
For example, drawings, who'sentitled to draw what, how many,
how how much work each of theshareholders or directors is
required to do, what happens ifsomebody dies, and any other
provisions that that you wouldwant to have clarified at the
beginning of the relationshiprather than wait until something
(19:54):
goes wrong down the line andthen spend a fortune in in
disputes and and horriblesituations, which could have
been avoided if you got thestructure right in the first
place with either a shareholdersagreement or a partnerships
agreement.
Going back to the partnership,sorry.
Whoa, this is very sensitivetoday.
(20:16):
Each partner is personallyliable for the debts of the
practice.
In a partnership, the partnersare what's known as joint and
severally liable for partnershipdebts.
That means that that if yourpartner runs up debts, even if
you're not aware of them, andthey're and and they're done
under in the name of thepartnership, you can be sued to
(20:39):
pay those debts.
So that is certainly somethingthat that i is of concern and
you need to be aware of.
In the partnership agreement,there wouldn't, in normal
circumstances, be an indemnitybetween one partner and the
other, but the problem is if oneof the partners has got no
assets, has got no money, thenbecause it's a joint and several
(21:01):
liability, creditors can goagainst either partner or any of
the partners for the whole lot.
So they'll tend to go for theone with the deepest pockets,
and then they've got the problemof trying to recover the
contributions from the otherpartners.
So that's a big potentialdownside of a partnership.
There's a potential forconflicts of agreement.
(21:21):
Again, if there's uh a properlydrawn partnership agreement in
place, then hopefully you've gotprovisions in there to deal
with any conflicts or deadlocks.
And if there's only twopartners, it might be worth
having an independent thirdperson that any deadlock
situation is referred to.
(21:41):
So it's a lot quicker andcheaper than having to litigate
and ending up in court.
Profit sharing, in the absenceof any other agreement, profits
would be shared equally betweenthe partners, regardless of
who's earned the most fees.
So, again, something that youneed to think about in terms of
your partnership agreement ifyou're not going to be sharing
(22:04):
everything equally.
And sharing equally in a dentalpartnership is unusual.
It's not it it you know, I i itit happens, but it's unusual
because it's very difficult tohave two clinicians both
grossing pretty much the same.
And you know, the highergrossing clinician generally is
(22:24):
not going to want the lowergrossing to share in in the
fruits of his or her labor.
Although there could be reasonsfor that.
The other partner might, youknow, might might take on more
of the administration.
So it's a matter for agreementin every in every different
scenario and should be reflectedin a properly drawn partnership
(22:45):
agreement.
Dr James (22:47):
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Ray (23:46):
Best scenarios for partnerships, smaller practices,
and particularly where partnershave a strong level of trust
and a shared vision.
So a lot of husband and wifepartnerships, some partnerships
where there's been an initialprincipal, and one or more
associates have been broughtinto the partnership.
(24:07):
Perhaps regard hasn't beengiven to the most tax-effective
structure, and it's just beenleft to grow as a partnership.
But partnerships can beconverted if it's appropriate to
limited companies.
The process is referred to asincorporation, and we'll look at
(24:28):
that in a bit more detail in aminute.
So, other than those practicesthat are in limited companies, I
think my experience says thatexpense sharing arrangements are
probably the second most commonwhere you've got more than one
dentist.
Obviously, if you if you're asingle if you're a sole
(24:50):
practitioner, then the thequestion of expense sharing
doesn't exist.
But if there's more than one,then an expense sharing
agreement is is often the way togo.
And what is it?
Is it a partnership?
Well, it's it's it's generallyexpressed to to be specifically
not a partnership, and mostexpense sharing agreements will
(25:14):
have a clause in that says thisnothing in this agreement is
intended to create apartnership.
And it isn't.
But the reality, frankly, is inmy view, that where you have an
expense sharing agreement, yougenerally have uh let's say
we've got a two-handed expensesharing partnership.
In that situation, the twoexpense sharers will have an
(25:38):
expense sharing agreement whichwill set out what falls to be
common expenses.
For example, reception, someexpense sharing agreements
include equipment, some includenurses, others each party is
responsible for the cost oftheir own nurses.
(25:59):
The agreement should reflectwhat you want.
And we can draft an expensesharing agreement which which
covers everything and anythingthat you wish to be covered.
So you've then got thisagreement where which says that,
for example, the equipmentcosts, gas and electricity
(26:23):
costs, costs of reception areall covered, are all to be paid
for out of the expense share.
Now you may have one or moreassociates, therapists,
hygienists that also work forthe expense share.
And their fees will go into theexpense sharing agreement.
(26:45):
So you've got that incomecoming into it, out of which
you're paying perhaps the rent,the receptionist, and and and
any other expenses that are tobe shared.
And if you've got a fewclinicians working, hopefully
they will produce revenue whichis greater than the exp expenses
that are being shared.
(27:05):
So you've got a profit withinthe expense share.
Irrespective of the fact thatthat it you've expressed it not
to be creating a partnership,because that is a common
enterprise with a view toprofit.
My view is that that willalways be deemed to be a
partnership.
And the accounts for thatexpense sharing arrangements
(27:26):
would normally be drawn as anexpense as partnership accounts.
You've then got the individualpractices of the two clinicians,
the two dentists, and theywould be effectively sole
practitioners, and they would betaxed, they would have their
own accounts and they would betaxed on their own income and
expenditure.
(27:47):
There's no reason why one ormore of those individual expense
sharers couldn't be limitedcompanies.
So you could have an expensesharing agreement where one of
the parties or more or all ofthe parties are limited
companies.
Again, it it's really dependenton whether limited liability is
(28:11):
going to be financiallybeneficial to the individual
expense sharers.
Lack of separate legalidentity.
Each partner, as I say, willretain separate identity, but
the expense sharing partnershipwill be a partnership, and all
the rules of partnership wouldbe deemed to apply to it,
(28:32):
including the joint and severalliability issue.
So again, there's a there's apotential risk if one party
doesn't meet his share of anyliabilities under the expense
sharing arrangement.
When would you consider anexpense sharing arrangement?
As we said, one or more thanone party, if you each want to
(28:52):
effectively run and retain thegoodwill of your own practices
and share the common expenses,then expense sharing would be
the starting point.
Whether you then incorporateyour individual practices or
even potentially operate theexpendure through a limited
company is a matter forfinancial planning, and you need
(29:12):
to take good advice on that.
But either way, there should beexpense sharing agreements,
partnership agreements, andshareholders' agreements,
whichever structure orstructures that you deem to be
best for you.
Now, the next structure islimited liability partnership,
or generally known as an LLP.
(29:33):
We don't tend to get manypractices operating under LLPs.
An LLP combines elements ofpartnership and limited company
in that it uh and it offersflexibility of management whilst
providing, like a limitedlimited liability company, it
provides limited liabilityprotection to its members.
(29:53):
So the members are equivalentto the shareholders, and they
aren't personally liable for.
For any liabilities of the LLP,unless, as a as with a company,
they do something prettydrastic and unlawful.
So it does provide that limitedliability protection and it
gives a bit more flexibility forvarious reasons.
(30:18):
Again, generally financial andtax driven, it is rare for an
LLP to be the best structure.
As I say, sometimes it does,and your accountant can advise
you on that.
But generally, the accountantstend to favor limited liability
companies over LLPs.
We've already said theadvantages are limited
(30:41):
liability, flexibility, and taxtransparency.
Disadvantages, they're morecomplex to set up than an
individual partnership or alimited company.
And they do have publicdisclosure requirements like a
limited company.
They tend to be used byprofessionals like dentists and
lawyers, other professionalgroups, but as we said, not that
(31:03):
frequently.
So we've dealt with all of themain structures now.
The question arises then, whathappens if we've if we've got a
partnership or even a soletradership, and we decide after
taking advice that it will makea lot more sense financially for
(31:25):
us to be becoming a limitedcompany.
Now, if we don't have any NHS,it's relatively straightforward.
We have to do an agreement,which is almost like a company
sale agreement.
Sorry, a practice saleagreement, where we transfer the
assets from you as anindividual or a partnership to
(31:46):
this new person that's beencreated, who's a limit, which is
the limited company.
It's important that it'sproperly documented because if
you're claiming certain taxallowances, the HMRC could well
challenge the fact that you havesuddenly incorporated your
practice and you're claiming tobe taxed by limit on a limited
(32:08):
company basis.
So it's important that you canshow that the assets have been
properly vested in the limitedcompany.
So we can we can draft you anagreement, transferring the
assets, we can draft thenecessary shareholders'
agreements, perhaps transfer theassociates into a new company.
(32:31):
They may need new associates'agreements.
There's lots of ancillarythings that need to be done to
properly transfer the assets.
Where it gets a little bit morecomplicated is with NHS
practices, where you've got anNHS practice.
And as we've said here on theslide, it's not a simple
process, but it's it's doable.
(32:53):
And we do it on a daily basis.
We have a specialist team thatdeals with incorporations along
with 24-hour retirements.
But the first thing that youneed to do would be to submit a
formal request to your localarea team, and that will include
detailed information about yourpractice and the company that
you propose to transfer thecontract to.
(33:17):
NHS will then assess theapplication to make sure that
they're happy that the companycan meet the obligations in the
contract, that it's in the bestinterest of the patient, and
they may want to see informationabout the company's financial
stability and also take accountof the overall value of the
contract.
If the local area team agree,then they will, well, the first
(33:42):
thing they'll do is they'll sendyou out a long questionnaire to
gather all the information thatwe've just discussed.
You submit that back to them,they'll consider it, their
commissioning team will considerit.
And if they're happy for it togo ahead, then we go to the next
stage.
Now, the ability to transferyour contract to a limited
(34:04):
company has only existed since2006, and it's not a right, it's
a discretion.
So the NHS has an absolutediscretion whether to allow you
to incorporate or not.
And until quite recently, itwas very much a postcode
lottery.
(34:25):
Some LATs were fairly relaxedabout it, others didn't like it,
others just felt they were toobusy doing stuff that they had
to do, and they had a permanentbacklog to be dealing with
discretionary things that theydon't have to do.
So it's been, you know, it'sbeen inconsistent and it and
(34:46):
it's been problematic for manyyears.
On top of that, there's been anadditional problem in terms of
a guarantee that the NHSinvariably insisted on where
contracts were transferred to alimited company, i.e., the
original contractor, theprovider, was required to enter
(35:07):
into a guarantee in the ovationagreement whereby they continued
to guarantee to the NHS theperformance of all the terms of
the contract.
Most particularly of concern,of course, is if there's a
shortfall.
If there's underperformance,then the the practice, the
contractor is responsible.
But by signing, by enteringinto a guarantee, the the former
(35:30):
owner of the of the contractwas guaranteeing that, which is
fine whilst your limited companystill owns the practice.
But further down the line, ifand when you decide to sell the
practice, you'll be selling thecompany that owns the practice,
not the company.
But you, having signed thatguarantee as an individual, will
(35:51):
remain on the hook.
So there was nothing in thedocuments that the NHS had
produced that allowed for therelease of the owner, the
original owner, the originalcontractor, from that guarantee,
which was hugely problematic.
Of recent times, there has beena change finally in the
(36:11):
attitude of the NHS.
And in fact, in the latest inthe last set of guidance notes,
it's the NHS has said that theguarantee in the Novation
Agreement is something that canbe negotiated.
So we are now seeing novationagreements coming through
without any guarantee, which isyou know the best scenario.
(36:33):
And also agreements where thereis a guarantee, but it's time
limited to say five years, orcan be released on a change of
control of the company, which isa huge improvement to the to
the historical situation.
We're also now seeingpost-COVID and and for a while
(36:54):
post-COVID, they uh most justwere not dealing with in
corporations.
Their backlog seems to havesubsided a little and they are
now dealing with them.
And in most cases, LATs areagreeing to incorporations, but
in some cases subject toconditions which we'll we'll
come on to in a minute.
(37:14):
I've already mentioned theNovation Agreement.
That's the agreement thatnovates the contract from
individual dentist to thelimited company, and it's a
legal transfer which contrawhich basically transfers the
liabilities under the contractfrom the individual to the
limited company.
(37:34):
Now, as I mentioned, the NHScan impose conditions as
conditions to allowing you toincorporate.
Some require the contractor toguarantee the company's
performance of the contract, aswe said.
Another is they can andsometimes do look at the UDA
(37:56):
rate under the contract thatyou're looking to transfer.
And if it's less than the localor the national average, they
can require you to adjust theUDA rate to the local average.
They can't require you tochange the contract value.
So if you've got amillion-pound contract and
(38:18):
you've got a UDA rate of say £40a UD8, which would, I think, in
most areas be particularlyhigh, they could look at the
local average and say, okay, thelocal average is say 30, 29
pounds or 31 pounds.
We'll allow you to incorporate,but we want your UDA value to
come down to 31 pounds.
Now, you've then got a dilemma.
(38:40):
You have to then decide whetheror not it's worth it.
Is it worth losing £9 of UDAfor the tax benefits that you're
going to get?
It it may be.
Or if not, then you wouldwithdraw your application.
So these are the things thatyou know could happen and maybe
come up if you make theapplication to incorporate your
(39:02):
practice.
So, in summary, we've gotlimited companies which offer
limited liability, taxefficiency and continuity, but
can involve more regulation,setups, costs, and ongoing costs
in terms of um accounting andand and and uh compliance.
Partnerships allow sharedresponsibility and a bit more
(39:26):
flexibility, perhaps, but alsocome with shared liability and
potential conflicts if you fallout.
And believe me, it it happens alot, the partners fall out.
And then LLPs, a bit of acombination between the two, but
generally not the beststructure for dental
(39:48):
partnerships, unless thecircumstances specifically
dictate, and that would besomething that that I would
think you would be guided on byyour accountant.
Quick disclaimer whilsteverything that I've told you
is, I believe, correct, everycase is different, and whether
you should incorporate yourpractice, whether you should be
(40:09):
looking to incorporate your NHScontract, what other route you
may want to go down, you reallymust take legal and accounting
advice.
But one thing that I would say,and that's whatever you do, use
someone who knows what they'redoing.
You are very lucky in yourprofession in that there is a
(40:32):
whole raft of people like me whoare specialist professionals
for your sector.
And there's, you know, there'sorganizations like Nasdal of
specialist dental accountantsand lawyers.
I'm a former chair of theNasdaq Lawyers Group.
We're members of Nasdale.
There are 40 plus accountantsmembers of NASDAQ.
(40:54):
And then there's theAssociation of Specialist
Providers for Dentists, whichI'm also a member of, all manner
of dental professionals orprofessionals that that that
service the dental professioncomprise that organization.
The people who you can access,it surprises me still how many
uh dentists use uh professionalswho are not specialists in the
(41:18):
sector and who don't reallyunderstand uh the ramifications.
You know, many people come tome and and you know they've
they've previously uh been totheir own solicitor, the guy who
they play golf with or who didthe conveyancing on their house.
They've told him that they'relooking to sell their practice
and and they've been so, ohyeah, sure, we'll act for you.
(41:40):
And they think it's a housewith a few bits of cabinetry in
it.
They wouldn't know a UDA ifthey fell over it in the street.
They have no idea about CQC orother compliance issues.
It's it's really critical touse specialist professionals.
And that's pretty much it.
Thank you very much forlistening.
James, I'm sure you've got somesome questions.
(42:02):
And next slide shows mydetails.
If anybody's got any querieswhen they watch this, feel free
to call.
Always happy to have a chatwith people.
If it's not something thatfalls within our sphere of
expertise as specialist dentallawyers, we will know the people
who can help and happy to referon.
And again, QR code there.
(42:23):
If anybody wants moreinformation about acuity law,
just just go to the QR code orgive us a call or an email or
whatever.
Dr James (42:33):
And and Ray, for the benefit of people who are
listening to this via podcastversus viewing it as a video,
would you be happy to read outthose details on the screen just
there?
Ray (42:44):
Yeah, certainly.
So what we're looking at is aslide.
We are acuity law.
My email address isray.goodman, g o o d m a n at
acuitylaw, one word, ac-u-i-t-yl-a w dot com.
My number is 07974 727 420.
(43:07):
And our website iswww.acuitylaw.com.
But again, if you want, thereis a QR code that gives you
access straight through.
As I said at the beginning,we're a national full service
corporate firm with offices inBristol, Cardiff, Leeds,
(43:27):
Liverpool, London, and Swansea.
And we have the biggest team ofspecialist dental lawyers in
the country.
We all know that we need to get our structure right
from the start whenever it comesto setting up our limited
companies and our partnerships.
But the problem is no oneactually explains what the
terminology means, and thereforewe feel a little bit blind.
That's why I'm joined today byMr.
Ray Goodman, expert lawyer todentist.
We're going to be coveringcompany structure, all the
various ins and not the highlevel stuff that us dentists
(00:21):
need to know, but we're nevertaught at university.
I'm also happy to share thatthere is free verifiable CPD
associated with this podcastepisode.
Whenever you finish theepisode, all you have to do is
click the link in the podcastdescription.
It'll take you right throughthe Dentists Who Invest website.
You'll be able to complete ashort questionnaire, and once
passed, you fill in yourreflections, and we'll go ahead
(00:43):
and email over to you yourverifiable CPD certificate,
which is entirely free.
What that means is this podcastepisode will be able to
contribute towards yourverifiable CPD hours during this
learning cycle.
Company structure, someoneshould have made a podcast on
this a long time ago.
(01:05):
What do you think, Ray?
Ray (01:07):
Yeah, I mean it's a it's a subject that we deal with on a
daily basis.
And although I do lots ofspeaking to dentists around the
country, and I speak for the BDAand other organizations have
done for many years, most of theseminars that I'm asked to give
tend to relate purely to theprocess of buying and selling.
(01:27):
So it's nice to be able tospeak about something else,
something that we do deal withon a daily basis, that doesn't
seem as sexy as buying andselling, although it is very
important to get the rightstructure and can have huge
benefits for dentists.
Dr James (01:44):
Directors, shareholders, all those sorts of
things.
Dentists, we we know what theyare to a vague level, but we've
never actually really went intodetail.
And Ray, you're you're a lawyerif I've got that right.
Just so everybody has fullcontacts on yourself for this
podcast.
Ray (02:02):
Yeah, I'm a I'm a solicitor, I'm a specialist
dental lawyer, I'm a partner inthe firm of acuity law.
Many people will will will knowme from my previous role, which
was one of the foundingpartners of Goodman Grant.
We were a specialist dental lawpractice, dealing almost
(02:22):
exclusively with the business ofdentistry.
So buying and selling practicesin corporations, 24-hour
retirements, anything to do withthe business of dentistry.
What we didn't do and what wedon't do is, you know, we don't
deal with dental negligenceclaims.
We only act for dentists and welook after dentists.
And we do that on a nationalbasis.
(02:43):
Goodman Grant became part ofAcuity just on three years ago.
Acuity had prior to that had avery strong dental team acting
for a lot of the big corporateslike Portman, and we still act
for them and many of the otherlarge corporates.
Goodman Grant also acted forsome of the smaller corporates
and hundreds, if not thousands,of individual dentists.
(03:04):
So we've now got a networkright across the country and the
biggest team of specialistdental lawyers in the country.
Dr James (03:11):
Interesting that you used the phrase the business of
dentistry because that is, ofcourse, our event, which is
coming up on the 18th ofOctober.
Shout out the Business ofDentistry event.
That's on Birmingham.
18th of October is, of course,a Saturday.
Feel free to let me know ifanybody out there would like to
come along.
We pretty much sold out.
(03:31):
I think we sold 180 tickets.
There may still be a few on itgo on the go on a first come,
first serve basis, just shoutingthat out because it came up.
Ray (03:40):
Yeah, that should be a great event.
And we're gonna be there.
My one of my partners from ouruh our corporate healthcare
team, Claire Emery, is gonna bethere.
She's on one of the panels inthe breakout session.
So yeah, it should be a greatevent.
Dr James (03:52):
And for the record, I did not ask Ray to plant that
term in his in his response tomy question before we did this
podcast.
It just came out, and I'm gonnaleap on it right now just to
give that a little bit of ashout out, that event, because
it it will be fun, it will be ablast.
Anyway, safe to say, based offwhat you said, Ray, company
structure and the nuances of itthat us dentists need to know is
(04:14):
you're no stranger to it basedon your experience.
So now it seems like a goodtime to segue into that part of
the podcast, that discussion.
Ray (04:22):
Okay, that's great, James.
I'm going to attempt to sharemy screen.
If it all goes horribly wrong,we'll sort it out, but I think
it should be okay.
Dr James (04:31):
Sure.
I believe.
I believe, I believe.
We can make it happen.
Ray (04:34):
Hang on, that's the one.
Why isn't it?
Ah that oh there we go.
Dr James (04:42):
There we go.
We're good, we're cooking.
Ray (04:44):
Okay, I don't know how I get this little thing off the
top.
Ah, will that just disappearitself?
Dr James (04:50):
You know what?
I can't actually see anythingat my side.
It looks good to me.
Ray (04:53):
Okay.
So you just got a clear screenwith the slide.
Dr James (05:00):
Yeah, we can see the slides.
Ray (05:02):
Wonderful.
Okay, so we're going to talkabout business structures for
dental practices.
Critically important, as you'llsee as we go through.
You'll be delighted to knowthat I'm not going to go into
massive legal technical detail,but I am going to cover the
basic principles in hopefullyeasy to understand language.
All professions, we all haveour technical language.
(05:25):
We believe in plain speech asmuch as possible at acuity.
So let's go straight into it.
Before we talk about limitedcompanies, which is the first
slide, many of you will just besole traders.
You operate under your ownname.
You don't have a partner, youdon't have uh a limited company.
(05:45):
And that's a very simple andperfectly acceptable structure.
You're if you're a sole trader,it it is you as an individual
that is entering into all thecontractual obligations, whether
it be with the NHS or with yourindividual patients and
supplier.
So any liabilities that youhave are your personal
liabilities, and that's arelatively straightforward basis
(06:08):
for holding a practice if youwere just on your own.
But it's not the only basis.
So let's have a look at some ofthe alternatives.
So the first thing is limitedcompanies.
A limited company is a separatelegal entity.
In law, it's a separate person,although it doesn't have a
physical body, but it makes itsdecisions by its board of
(06:32):
directors.
They're effectively its brain.
So that means that the companyand not the individuals who own
the company, i.e.
the shareholders, who haveliability for its debts.
So a limited company, separateperson, and is responsible for
any assets and liabilities thatit has, including tax.
(06:52):
So unless there are some quitestrong reasons, perhaps
criminality or trading whilstknownly insolvent, the
shareholders are not liable forthe debts of the company.
Hence the expression limitedliability.
So what are the advantages?
(07:14):
Well, firstly, as we've justsaid, a big a big advantage is
that the shareholders, i.e., theowners of the business, are not
personally liable.
It can also have taxadvantages.
Limited companies can benefitfrom various tax advantages.
Corporation tax rates, i.e.
the rates that companies aretaxed on profits, are generally
(07:37):
lower than individual rates.
But of course, there is thenthe rate on the dividends, i.e.,
when the owner of a companytakes the money out.
There are different ways oftaking monies out of a limited
company.
It can be way of by way ofdividends, it could be by way of
salary.
It's quite complex and it'ssomething that you would need
(07:57):
the advice from a goodaccountant, preferably somebody
who specializes in uh dentalpractices.
There are many of them around.
I'm a member of NASDAQ, theNational Association of
Specialist Dental Accountantsand Lawyers.
There are about 40 oddaccountants, all of whom have
specialist knowledge indentistry.
(08:17):
And I would strongly advisethat in taking advice over
something like incorporatingyour practice, becoming a
limited company, that you mightwant to seek advice from one of
them if your own accountantisn't that experienced in dental
practices.
Another advantage of a limitedcompany is because it's a
(08:38):
separate individual, changes inthe shareholding, i.e.
the owners of the company,don't affect the practice, the
business itself, because theowners don't own it.
Similarly, when you come tosell the practice, it won't be
it won't be the practice thatyou're selling.
You would normally sell theshares in the limited company.
(08:59):
The limited company could sellthe assets, could sell the
practice.
It's generally not advisablebecause it usually leads to a
double tax charge because thecompany will sell the assets,
the money would go into thelimited company, and then you've
got the problem of taking themoney out of the company, which
generally would attract anothertax charge.
So again, accountants' advicecritical in these situations.
(09:24):
Some downsides of a limitedcompany.
Well, as a limited company, youhave a statutory obligation to
file various returns every year,accounts, statutory records, a
statement to the effect ofwhether or not the beneficial
ownership in the company ischanged.
So there's a cost in that.
It's not huge generally, butit's a cost that an individual
(09:47):
sole trader wouldn't have.
And setting up and running alimited company can be more
expensive than other structures.
Again, you have to either formor acquire an off-the-shelf
company, and your your lawyersor your accountants can do that
for you.
And you have the the work everyyear of preparing limited
company accounts and filing.
So those are the main, the maincriteria.
(10:11):
There is one other significantcriteria that I'd like to
mention in relation to limitedcompanies, and that is who can
own it, who can own a practiceto a limited company?
The answer is anybody, and it'sthe only, well, this and LLPs,
which is the other incorporatedstructure, are the only
structures where non-dentistscan own a dental practice.
(10:32):
The general rule rule in underthe Dentists Act is that only a
dentist or a DCP can own adental practice.
Through the vehicle of alimited company, the
shareholders, i.e., the ownersof limited company, are
irrelevant.
So anybody can own a practiceor practices through a limited
(10:55):
company.
The only criteria is that thedirectors must be comprised of
not less than 50% of DCPs,dental care practitioners, i.e.,
anyone who's on one of theregisters that's kept by the
GDC.
So provided you don't have, Imean, a mine, sorry, a majority
(11:19):
of non-DCPs, then you can haveanybody you like as directors.
So, for example, it opens thedoor for ownership to be spread
with family members.
You could you could transferyour practice to a limited
company, and you could spreadthe shares across your wife,
children, anybody else you want.
(11:40):
They don't have to be DCPs, aslong as the board of directors
is not comprised of with aminority of DCPs.
Now, that's often misquoted,including by the GDC, I have to
say.
Uh, and you'll often see itstated that you have to have a
majority of DCPs as directors ofa limited company.
(12:01):
That's wrong if you look at thewords of the statute, which I
have to say is not easy tounderstand and not easily
written.
It actually says you cannothave a minority.
So you can have parity.
You can have two directors, onea direct one, one a dentist,
one a non-dentist, non-DCP, andthat's fine.
(12:22):
What you can't have is perhapssay two non-dentists or DCPs and
one dentist, because thenthey're in a minority.
So that's that that that's uhquite an important and a useful
thing to know.
Ownership of a practice can bemore diverse through the vehicle
of a limited company.
I think I've just jumped onethere.
(12:45):
Directors' liabilities andresponsibilities with a limited
company.
Directors have a fiduciaryduty.
That is a duty to act in thebest interest of the company and
its shareholders.
Often the shareholders aregoing to be the dentist and
perhaps some of his close familyor or colleagues.
(13:07):
And there is an overriding uhresponsibility uh on directors
under company law to act in thebest interest of its of the
company itself and itsshareholders.
There can be situations wherethat conflicts with the
individual's best interests.
In a small company, a smallbusiness like a dental practice,
that's unlikely, but but it issomething that needs to be borne
(13:30):
in mind.
Dentists are also responsiblefor ensuring the company
complies with the laws,including tax obligations and
compliance with the company'sact.
Again, these are not, you know,these are things to be taken
seriously, but normally ifyou've got competent
accountants, they will deal withall that for you.
And financial oversight,directors are responsible to
(13:53):
ensure the company isfinancially sound and not
trading insolvently.
If a company goes, it becomesinsolvent.
The directors are not generallypersonally liable.
However, if they have knowinglyoperated the company in
circumstances where they shouldhave known that the company is
insolvent, there arecircumstances where they can be
(14:16):
held personally liable.
Again, it's rare.
And if if people areresponsible and sensible and
have good specialist advisors,then it's not something you
ought to be worrying about on adaily basis, but just an
awareness.
Limited companies often arebest suited for larger practice
(14:36):
with multiple owners or peoplelooking for investment from
non-DCPs.
As we said, there's no reasonwhy anyone can invest into a
dental practice through alimited company.
They don't have to be DCPs.
So there's an opportunity therefor larger practices to raise
(14:59):
capital from non-DCPs.
And they can be more taxeffective.
Again, you need to take advicefrom your accountants to make
sure that what you're doing thedesired tax effect.
So that in a very shortnutshell is the situation with
limited companies.
Limited companies tend to bethe most favoured structure
(15:23):
outside of individuals orexpenditures.
And it's generally the tax thatthe tax situation that drives
that.
Perhaps some people takecomfort from the protection from
liability, although it's rare,although not unheard of, but it
is rare for dental practices tobecome insolvent.
So usually the reason forincorporating your practice is
(15:49):
financial and tax driven.
So moving on to partnership.
A partnership is a businessstructure comprising of two or
more individuals where theyshare ownership of the practice
with a view to profit.
That's not quite the definitionthat's set out in the
Partnership Act, but it's it'sparaphrased and made a little
(16:13):
bit more straightforward.
And any situation where youhave more than one person who is
running a business with a viewto profit, whether it's
expressed to be a partnership ornot, it will be deemed to be a
partnership under thePartnership Act.
Advantages of partnerships,well, you have shared
(16:34):
responsibility.
It's an opportunity forpartners to pool their
expertise, resources, workload,and that can lead to a more
balanced and efficientoperation.
Two heads, four hands.
It gives more flexibility,perhaps, than a limited company.
It can be more flexible interms of decision making and
profit distribution compared toa limited company.
(16:56):
And it's easy to set up.
You don't have to registeranything with the company's
house.
There's no register ofpartnerships.
It is something that you createreally by the facts.
If you join forces withsomebody with a view to profit,
that is tends to be apartnership.
Having said that, I wouldstrongly recommend in every
(17:19):
situation where you have apartnership that you have a
partnership agreement which willset out all of the points that
would be of concern to you.
For example, what happens ifsomebody dies or becomes
incompetent?
What happens if somebody wantsto leave?
How are you going to splitprofits?
(17:40):
And any other practical pointsthat you would wish to clarify
with your partner or partners atthe beginning of the
relationship.
Things are always great at thebeginning of a partnership.
Everybody's excited,everybody's looking forward to
going ahead, everybody's on goodterms, and nobody's thinking
that they're going to fall outdown the line.
But often, unfortunately,humans being how we are, we tend
(18:06):
to fall out.
And you know, circumstanceschange, people marry, people
divorce, other partners comeinto the picture, pressures get
put on people, and attitudeschange.
So if you are in a partnershipand you don't have a partnership
agreement, I would strongly uhuh uh advise that you contact us
(18:27):
or contact another specialistdental lawyer and we can put
that right for you.
Similarly, in fact, with a witha limited company, a limited
company's constitution is setout in what are known as its
articles of association.
They're fairly heavy andcomplex provisions which control
(18:48):
all of the all of theconstitution of limited company.
And they can be adopted, thereare standard ones within the
companies act that can just beadopted by referring to them, or
they can be individuallydrafted, or as is probably in
most cases the situation, youtake the standard form of
(19:11):
articles from the Companies Actand then add or detract
provisions to make them fit yourpurpose.
But notwithstanding that, it'salso very advisable, where you
have a company, that you have ashareholders' agreement, which
will also deal with a lot of thethings that would be in a
(19:31):
partnership agreement.
For example, drawings, who'sentitled to draw what, how many,
how how much work each of theshareholders or directors is
required to do, what happens ifsomebody dies, and any other
provisions that that you wouldwant to have clarified at the
beginning of the relationshiprather than wait until something
(19:54):
goes wrong down the line andthen spend a fortune in in
disputes and and horriblesituations, which could have
been avoided if you got thestructure right in the first
place with either a shareholdersagreement or a partnerships
agreement.
Going back to the partnership,sorry.
Whoa, this is very sensitivetoday.
(20:16):
Each partner is personallyliable for the debts of the
practice.
In a partnership, the partnersare what's known as joint and
severally liable for partnershipdebts.
That means that that if yourpartner runs up debts, even if
you're not aware of them, andthey're and and they're done
under in the name of thepartnership, you can be sued to
(20:39):
pay those debts.
So that is certainly somethingthat that i is of concern and
you need to be aware of.
In the partnership agreement,there wouldn't, in normal
circumstances, be an indemnitybetween one partner and the
other, but the problem is if oneof the partners has got no
assets, has got no money, thenbecause it's a joint and several
(21:01):
liability, creditors can goagainst either partner or any of
the partners for the whole lot.
So they'll tend to go for theone with the deepest pockets,
and then they've got the problemof trying to recover the
contributions from the otherpartners.
So that's a big potentialdownside of a partnership.
There's a potential forconflicts of agreement.
(21:21):
Again, if there's uh a properlydrawn partnership agreement in
place, then hopefully you've gotprovisions in there to deal
with any conflicts or deadlocks.
And if there's only twopartners, it might be worth
having an independent thirdperson that any deadlock
situation is referred to.
(21:41):
So it's a lot quicker andcheaper than having to litigate
and ending up in court.
Profit sharing, in the absenceof any other agreement, profits
would be shared equally betweenthe partners, regardless of
who's earned the most fees.
So, again, something that youneed to think about in terms of
your partnership agreement ifyou're not going to be sharing
(22:04):
everything equally.
And sharing equally in a dentalpartnership is unusual.
It's not it it you know, I i itit happens, but it's unusual
because it's very difficult tohave two clinicians both
grossing pretty much the same.
And you know, the highergrossing clinician generally is
(22:24):
not going to want the lowergrossing to share in in the
fruits of his or her labor.
Although there could be reasonsfor that.
The other partner might, youknow, might might take on more
of the administration.
So it's a matter for agreementin every in every different
scenario and should be reflectedin a properly drawn partnership
(22:45):
agreement.
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Ray (23:46):
Best scenarios for partnerships, smaller practices,
and particularly where partnershave a strong level of trust
and a shared vision.
So a lot of husband and wifepartnerships, some partnerships
where there's been an initialprincipal, and one or more
associates have been broughtinto the partnership.
(24:07):
Perhaps regard hasn't beengiven to the most tax-effective
structure, and it's just beenleft to grow as a partnership.
But partnerships can beconverted if it's appropriate to
limited companies.
The process is referred to asincorporation, and we'll look at
(24:28):
that in a bit more detail in aminute.
So, other than those practicesthat are in limited companies, I
think my experience says thatexpense sharing arrangements are
probably the second most commonwhere you've got more than one
dentist.
Obviously, if you if you're asingle if you're a sole
(24:50):
practitioner, then the thequestion of expense sharing
doesn't exist.
But if there's more than one,then an expense sharing
agreement is is often the way togo.
And what is it?
Is it a partnership?
Well, it's it's it's generallyexpressed to to be specifically
not a partnership, and mostexpense sharing agreements will
(25:14):
have a clause in that says thisnothing in this agreement is
intended to create apartnership.
And it isn't.
But the reality, frankly, is inmy view, that where you have an
expense sharing agreement, yougenerally have uh let's say
we've got a two-handed expensesharing partnership.
In that situation, the twoexpense sharers will have an
(25:38):
expense sharing agreement whichwill set out what falls to be
common expenses.
For example, reception, someexpense sharing agreements
include equipment, some includenurses, others each party is
responsible for the cost oftheir own nurses.
(25:59):
The agreement should reflectwhat you want.
And we can draft an expensesharing agreement which which
covers everything and anythingthat you wish to be covered.
So you've then got thisagreement where which says that,
for example, the equipmentcosts, gas and electricity
(26:23):
costs, costs of reception areall covered, are all to be paid
for out of the expense share.
Now you may have one or moreassociates, therapists,
hygienists that also work forthe expense share.
And their fees will go into theexpense sharing agreement.
(26:45):
So you've got that incomecoming into it, out of which
you're paying perhaps the rent,the receptionist, and and and
any other expenses that are tobe shared.
And if you've got a fewclinicians working, hopefully
they will produce revenue whichis greater than the exp expenses
that are being shared.
(27:05):
So you've got a profit withinthe expense share.
Irrespective of the fact thatthat it you've expressed it not
to be creating a partnership,because that is a common
enterprise with a view toprofit.
My view is that that willalways be deemed to be a
partnership.
And the accounts for thatexpense sharing arrangements
(27:26):
would normally be drawn as anexpense as partnership accounts.
You've then got the individualpractices of the two clinicians,
the two dentists, and theywould be effectively sole
practitioners, and they would betaxed, they would have their
own accounts and they would betaxed on their own income and
expenditure.
(27:47):
There's no reason why one ormore of those individual expense
sharers couldn't be limitedcompanies.
So you could have an expensesharing agreement where one of
the parties or more or all ofthe parties are limited
companies.
Again, it it's really dependenton whether limited liability is
(28:11):
going to be financiallybeneficial to the individual
expense sharers.
Lack of separate legalidentity.
Each partner, as I say, willretain separate identity, but
the expense sharing partnershipwill be a partnership, and all
the rules of partnership wouldbe deemed to apply to it,
(28:32):
including the joint and severalliability issue.
So again, there's a there's apotential risk if one party
doesn't meet his share of anyliabilities under the expense
sharing arrangement.
When would you consider anexpense sharing arrangement?
As we said, one or more thanone party, if you each want to
(28:52):
effectively run and retain thegoodwill of your own practices
and share the common expenses,then expense sharing would be
the starting point.
Whether you then incorporateyour individual practices or
even potentially operate theexpendure through a limited
company is a matter forfinancial planning, and you need
(29:12):
to take good advice on that.
But either way, there should beexpense sharing agreements,
partnership agreements, andshareholders' agreements,
whichever structure orstructures that you deem to be
best for you.
Now, the next structure islimited liability partnership,
or generally known as an LLP.
(29:33):
We don't tend to get manypractices operating under LLPs.
An LLP combines elements ofpartnership and limited company
in that it uh and it offersflexibility of management whilst
providing, like a limitedlimited liability company, it
provides limited liabilityprotection to its members.
(29:53):
So the members are equivalentto the shareholders, and they
aren't personally liable for.
For any liabilities of the LLP,unless, as a as with a company,
they do something prettydrastic and unlawful.
So it does provide that limitedliability protection and it
gives a bit more flexibility forvarious reasons.
(30:18):
Again, generally financial andtax driven, it is rare for an
LLP to be the best structure.
As I say, sometimes it does,and your accountant can advise
you on that.
But generally, the accountantstend to favor limited liability
companies over LLPs.
We've already said theadvantages are limited
(30:41):
liability, flexibility, and taxtransparency.
Disadvantages, they're morecomplex to set up than an
individual partnership or alimited company.
And they do have publicdisclosure requirements like a
limited company.
They tend to be used byprofessionals like dentists and
lawyers, other professionalgroups, but as we said, not that
(31:03):
frequently.
So we've dealt with all of themain structures now.
The question arises then, whathappens if we've if we've got a
partnership or even a soletradership, and we decide after
taking advice that it will makea lot more sense financially for
(31:25):
us to be becoming a limitedcompany.
Now, if we don't have any NHS,it's relatively straightforward.
We have to do an agreement,which is almost like a company
sale agreement.
Sorry, a practice saleagreement, where we transfer the
assets from you as anindividual or a partnership to
(31:46):
this new person that's beencreated, who's a limit, which is
the limited company.
It's important that it'sproperly documented because if
you're claiming certain taxallowances, the HMRC could well
challenge the fact that you havesuddenly incorporated your
practice and you're claiming tobe taxed by limit on a limited
(32:08):
company basis.
So it's important that you canshow that the assets have been
properly vested in the limitedcompany.
So we can we can draft you anagreement, transferring the
assets, we can draft thenecessary shareholders'
agreements, perhaps transfer theassociates into a new company.
(32:31):
They may need new associates'agreements.
There's lots of ancillarythings that need to be done to
properly transfer the assets.
Where it gets a little bit morecomplicated is with NHS
practices, where you've got anNHS practice.
And as we've said here on theslide, it's not a simple
process, but it's it's doable.
(32:53):
And we do it on a daily basis.
We have a specialist team thatdeals with incorporations along
with 24-hour retirements.
But the first thing that youneed to do would be to submit a
formal request to your localarea team, and that will include
detailed information about yourpractice and the company that
you propose to transfer thecontract to.
(33:17):
NHS will then assess theapplication to make sure that
they're happy that the companycan meet the obligations in the
contract, that it's in the bestinterest of the patient, and
they may want to see informationabout the company's financial
stability and also take accountof the overall value of the
contract.
If the local area team agree,then they will, well, the first
(33:42):
thing they'll do is they'll sendyou out a long questionnaire to
gather all the information thatwe've just discussed.
You submit that back to them,they'll consider it, their
commissioning team will considerit.
And if they're happy for it togo ahead, then we go to the next
stage.
Now, the ability to transferyour contract to a limited
(34:04):
company has only existed since2006, and it's not a right, it's
a discretion.
So the NHS has an absolutediscretion whether to allow you
to incorporate or not.
And until quite recently, itwas very much a postcode
lottery.
(34:25):
Some LATs were fairly relaxedabout it, others didn't like it,
others just felt they were toobusy doing stuff that they had
to do, and they had a permanentbacklog to be dealing with
discretionary things that theydon't have to do.
So it's been, you know, it'sbeen inconsistent and it and
(34:46):
it's been problematic for manyyears.
On top of that, there's been anadditional problem in terms of
a guarantee that the NHSinvariably insisted on where
contracts were transferred to alimited company, i.e., the
original contractor, theprovider, was required to enter
(35:07):
into a guarantee in the ovationagreement whereby they continued
to guarantee to the NHS theperformance of all the terms of
the contract.
Most particularly of concern,of course, is if there's a
shortfall.
If there's underperformance,then the the practice, the
contractor is responsible.
But by signing, by enteringinto a guarantee, the the former
(35:30):
owner of the of the contractwas guaranteeing that, which is
fine whilst your limited companystill owns the practice.
But further down the line, ifand when you decide to sell the
practice, you'll be selling thecompany that owns the practice,
not the company.
But you, having signed thatguarantee as an individual, will
(35:51):
remain on the hook.
So there was nothing in thedocuments that the NHS had
produced that allowed for therelease of the owner, the
original owner, the originalcontractor, from that guarantee,
which was hugely problematic.
Of recent times, there has beena change finally in the
(36:11):
attitude of the NHS.
And in fact, in the latest inthe last set of guidance notes,
it's the NHS has said that theguarantee in the Novation
Agreement is something that canbe negotiated.
So we are now seeing novationagreements coming through
without any guarantee, which isyou know the best scenario.
(36:33):
And also agreements where thereis a guarantee, but it's time
limited to say five years, orcan be released on a change of
control of the company, which isa huge improvement to the to
the historical situation.
We're also now seeingpost-COVID and and for a while
(36:54):
post-COVID, they uh most justwere not dealing with in
corporations.
Their backlog seems to havesubsided a little and they are
now dealing with them.
And in most cases, LATs areagreeing to incorporations, but
in some cases subject toconditions which we'll we'll
come on to in a minute.
(37:14):
I've already mentioned theNovation Agreement.
That's the agreement thatnovates the contract from
individual dentist to thelimited company, and it's a
legal transfer which contrawhich basically transfers the
liabilities under the contractfrom the individual to the
limited company.
(37:34):
Now, as I mentioned, the NHScan impose conditions as
conditions to allowing you toincorporate.
Some require the contractor toguarantee the company's
performance of the contract, aswe said.
Another is they can andsometimes do look at the UDA
(37:56):
rate under the contract thatyou're looking to transfer.
And if it's less than the localor the national average, they
can require you to adjust theUDA rate to the local average.
They can't require you tochange the contract value.
So if you've got amillion-pound contract and
(38:18):
you've got a UDA rate of say £40a UD8, which would, I think, in
most areas be particularlyhigh, they could look at the
local average and say, okay, thelocal average is say 30, 29
pounds or 31 pounds.
We'll allow you to incorporate,but we want your UDA value to
come down to 31 pounds.
Now, you've then got a dilemma.
(38:40):
You have to then decide whetheror not it's worth it.
Is it worth losing £9 of UDAfor the tax benefits that you're
going to get?
It it may be.
Or if not, then you wouldwithdraw your application.
So these are the things thatyou know could happen and maybe
come up if you make theapplication to incorporate your
(39:02):
practice.
So, in summary, we've gotlimited companies which offer
limited liability, taxefficiency and continuity, but
can involve more regulation,setups, costs, and ongoing costs
in terms of um accounting andand and and uh compliance.
Partnerships allow sharedresponsibility and a bit more
(39:26):
flexibility, perhaps, but alsocome with shared liability and
potential conflicts if you fallout.
And believe me, it it happens alot, the partners fall out.
And then LLPs, a bit of acombination between the two, but
generally not the beststructure for dental
(39:48):
partnerships, unless thecircumstances specifically
dictate, and that would besomething that that I would
think you would be guided on byyour accountant.
Quick disclaimer whilsteverything that I've told you
is, I believe, correct, everycase is different, and whether
you should incorporate yourpractice, whether you should be
(40:09):
looking to incorporate your NHScontract, what other route you
may want to go down, you reallymust take legal and accounting
advice.
But one thing that I would say,and that's whatever you do, use
someone who knows what they'redoing.
You are very lucky in yourprofession in that there is a
(40:32):
whole raft of people like me whoare specialist professionals
for your sector.
And there's, you know, there'sorganizations like Nasdal of
specialist dental accountantsand lawyers.
I'm a former chair of theNasdaq Lawyers Group.
We're members of Nasdale.
There are 40 plus accountantsmembers of NASDAQ.
(40:54):
And then there's theAssociation of Specialist
Providers for Dentists, whichI'm also a member of, all manner
of dental professionals orprofessionals that that that
service the dental professioncomprise that organization.
The people who you can access,it surprises me still how many
uh dentists use uh professionalswho are not specialists in the
(41:18):
sector and who don't reallyunderstand uh the ramifications.
You know, many people come tome and and you know they've
they've previously uh been totheir own solicitor, the guy who
they play golf with or who didthe conveyancing on their house.
They've told him that they'relooking to sell their practice
and and they've been so, ohyeah, sure, we'll act for you.
(41:40):
And they think it's a housewith a few bits of cabinetry in
it.
They wouldn't know a UDA ifthey fell over it in the street.
They have no idea about CQC orother compliance issues.
It's it's really critical touse specialist professionals.
And that's pretty much it.
Thank you very much forlistening.
James, I'm sure you've got somesome questions.
(42:02):
And next slide shows mydetails.
If anybody's got any querieswhen they watch this, feel free
to call.
Always happy to have a chatwith people.
If it's not something thatfalls within our sphere of
expertise as specialist dentallawyers, we will know the people
who can help and happy to referon.
And again, QR code there.
(42:23):
If anybody wants moreinformation about acuity law,
just just go to the QR code orgive us a call or an email or
whatever.
Dr James (42:33):
And and Ray, for the benefit of people who are
listening to this via podcastversus viewing it as a video,
would you be happy to read outthose details on the screen just
there?
Ray (42:44):
Yeah, certainly.
So what we're looking at is aslide.
We are acuity law.
My email address isray.goodman, g o o d m a n at
acuitylaw, one word, ac-u-i-t-yl-a w dot com.
My number is 07974 727 420.
(43:07):
And our website iswww.acuitylaw.com.
But again, if you want, thereis a QR code that gives you
access straight through.
As I said at the beginning,we're a national full service
corporate firm with offices inBristol, Cardiff, Leeds,
(43:27):
Liverpool, London, and Swansea.
And we have the biggest team ofspecialist dental lawyers in
the country.
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