Taking over father's medical specialty practice in Florida

[neopsych12]

Upon graduation from fellowship in June 2017, I will be taking over my father's medical specialty practice. It is a clinical practice and also a site for clinical trials. He has two employees for the clinical practice and two employees for the clinical trial practice. He has been filing as a sole proprietor but we just got a new accountant and plan to form an S-Corporation(s). I have a few questions regarding this transition.

1) What are the pros/cons of forming two different S-corporations (clinical practice and clinical trials) vs. a single S-corp in regards to taxes and liability protection? Will this distinction affect my retirement account setup?

2) My parents own the office building and they plan to transfer this asset to me as he plans to shrink is estate. What is the best way to go about this?

3) The current retirement plan is SEP-IRA. Would I be eligible to open an individual 401k plan instead?

Other relevant details: My wife will be graduating from IM residency the same year as me and plans to work as a hospitalist. My father would like to see patients a few half days a week and continue to manage administrative roles until I get the hang of things.

Any recommendations of books/forums where I can learn more about medical practice tax planning would be appreciated!

Thank you in advance for your time.

[jfoxcpacfp]

neopsych12 wrote:

Any recommendations of books/forums where I can learn more about medical practice tax planning would be appreciated!

Click to expand...

This is what your CPA is for. Seriously! (Please make sure you are working with a licensed CPA - don't assume.)

1) You will have duplicate administrative work and costs. However, you will also be able to separate the businesses to sell one and keep the other in the future. Depends on your goals. If you plan to run them simultaneously and as a "unit", then it might be easier to use your bookkeeping software to keep separate sets of records and consolidate all on one tax return.

2) Depending on the value, I would venture to say they should not give it to you. You should inherit and get a stepped-up basis. Or you should buy and get basis, note to be forgiven at death. The building should go into a separate LLC.

3) Yes, you can discontinue the SEP and open a 401k.

You will need to file a gift tax return for the transfer. Is your dad's estate over $5.45M? Is he working with a good estate planning attorney combined with CPA/CFP? You absolutely need to get a qualified appraisal of both businesses - there is sure to be a lot of goodwill. If you do not do so, the SOL does not close and the IRS can step in after death, no matter how far into the future. You should also consider that you will be losing any step-up in basis were you to inherit the businesses. There are many ways to accomplish what you are seeking without an outright gift and you should seek appropriate professional advice to ensure you are making the most appropriate choice given the facts and circumstances.