InSight

You Earned Your DDS/DMD, but Are You a Dental Investor?

Financial Planning Dentist

Taking the time to build your education and skill is important regardless what profession you are in. Of course, some of these take more outlay than others. Becoming specialized in a field is something dentists understand well. Financial advisors are the same way. Financial planners can have a wide range of understanding and expertise that is built through education over time. They can specialize in certain areas, knowing how to advise those in specific industries better than others.

Education Matters

Education is critical in medical, financial, and technological fields. This isn’t something that needs to be explained to a dentist. But when a dental professional tries to handle their own financial matters, they can often lack the training needed to make solid, profitable investments.

This is where the concept of a dental investor can come into play. A financial advisor who supports the specific needs of a dental practice or individual provider is a valuable tool.

Financing Dreams

Dr. Peter Novelle grew up fixing things. Whether taking apart his bike, or rescuing a neighborhood cat, he found himself drawn to helping. Originally interested in veterinarian work, he made the decision to focus on dentistry after his family took a trip to Honduras and he felt a calling to work with people. He loved his high school science classes and excelled in college. 

His first position was in a large dental office where he grew his skills and found an interest in working with youth. He continued his career with a specialty in pediatric dentistry and wanted to open his own practice.

Dr. Novelle wasn’t sure how to open a dental practice with his debt. Even though he was someone who prided himself on being a fixer, he knew he needed outside help. A consummate Do-It-Yourselfer, Dr. Novelle contacted a dental investor to help him create a financial plan to finance his dreams.

Creating a Plan

Dr. Novelle’s dental investment manager met with him to discover his current situation as well as where he wanted to be financially in the future. Together they took a look at his debt, savings, insurance and investments. They created a strategy to meet short-term goals and to begin building on long range objectives such as putting him in a dentist 401(k) plan.

The financial advisor provided Dr. Novelle information and structure so he could ultimately become a more knowledgeable dental investor himself. Everyone has to start somewhere – whether just out of school, working for someone else, or dreaming of building your own practice, a solid financial foundation must come first.

Working with a dental financial advisor early on in your career will help you know what your next investment steps should be for your personal wealth building. From there, as you build your dental office, they will help you move in the right direction for balancing income and taxation, making healthy investment decisions and creating a long-term plan for your practice.

If you’d like to learn more and get a free, no-obligation consultation, please contact us today and speak directly with a dental investor.

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Unlocking the Secrets to Selling Your Business: Maximize Your Retirement Without Getting Taxed to the Max!

Hey there, business owners! If you’re reading this, chances are your company isn’t just your paycheck—it’s your golden ticket to a comfortable retirement. Unlike your 9-to-5 counterparts who rely on 401(k)s and IRAs, you’ve been pouring your profits back into your business, building it up with the hopes of cashing in when you retire. But before you pop the champagne, let’s talk about the tax man. The Tax Time Bomb When you sell a business, you trigger a taxable event. That means you owe capital gains tax on the profit—the selling price minus what you originally paid (your tax basis). Just like selling stocks or real estate, you have to pay up in the year you sell. And trust me, it can be a hefty bill. Why So Taxing? There are some exceptions (like 1031 exchanges for real estate), but they don’t usually apply to private businesses. Selling your business typically results in a significant tax hit because of the combo of a high selling price and a low tax basis. This can push you into higher tax brackets, meaning a larger chunk of your hard-earned money goes to taxes. For instance, if Jane bought her accounting firm for $250,000 twenty years ago and sells it for $1 million today, she’s looking at $750,000 in taxable capital gains. As a single filer, anything over $518,900 gets taxed at the top federal rate of 20%, plus any state taxes. That extra 5% tax hike might not sound like much, but it can represent a whole year’s worth of retirement funds! The Smart Way: Installment Sales Enter installment sales—your new best friend. Instead of getting slammed with a massive tax bill all at once, you can spread out the payments (and the taxes) over several years. This strategy keeps you in lower tax brackets and avoids those nasty tax spikes. How It Works Each payment you receive is split into three parts: interest, capital gain, and return of basis. The interest is taxed as ordinary income, the capital gain is taxed based on the gross profit percentage, and the return of basis is tax-free. For example, if Tina sells her business to Norm for $1 million with a 10-year installment plan at 5% interest, she’ll calculate the interest and principal amounts for each payment. In the first year, with a principal payment of $79,505, 75% ($59,628) is taxed as capital gain, and the rest ($19,876) is tax-free. Spreading out the gains over multiple years can save you big on taxes. Instead of a one-time tax blow, you keep more of your money working for you in lower tax brackets. The Catch: Downsides of Installment Sales But wait, there’s a catch. When you opt for an installment sale, you’re essentially lending money to the buyer. This means you need confidence they can make the payments. Repossessing a business is a headache you don’t want, especially when you’re supposed to be enjoying retirement. Plus, you won’t get all your cash upfront, which can be a bummer. A New Hope: Deferred Sales Trusts If installment sales sound too risky, consider a Deferred Sales Trust (DST). DSTs promise the tax benefits without the hassle. You sell your business to an irrevocable trust in exchange for an installment note. The trust sells the business, reinvests the proceeds, and pays you over time. You avoid the massive tax hit and don’t control the trust, which keeps it tax-friendly. The Risks of Deferred Sales Trusts: What You Need to Know While Deferred Sales Trusts might sound like a dream come true, they come with their own set of risks that you need to be aware of before jumping in. Lack of Official Recognition First off, DSTs aren’t officially recognized by the IRS. This means there’s no clear, established guidance on how they should be treated for tax purposes. While DST promoters may claim that the strategy has survived past IRS audits, there’s no guarantee it will in the future. Without official IRS approval, you’re essentially betting that this strategy will hold up under scrutiny. This uncertainty can be a significant risk, especially when dealing with large sums of money from the sale of your business. Investment Performance Risk When you sell your business to a DST, the trust takes control of the sales proceeds and reinvests them. The performance of these investments directly impacts the payments you receive. If the trust’s investments perform poorly, the trust might not generate enough returns to meet its payment obligations to you. This could leave you short of the funds you were counting on for your retirement. Imagine counting on a steady income stream from your DST, only to find out that the investments have tanked. Unlike a traditional installment sale, where you might have some recourse if the buyer defaults, with a DST, your options are limited. The trust’s assets are what back your installment note, so if those assets lose value, you’re out of luck. Trust Management and Trustee Risks Another critical risk is related to who manages the trust. The DST must be managed by an independent trustee, and this trustee has significant control over the investments. If the trustee makes poor investment decisions or mismanages the trust’s assets, it could negatively impact your payments. Furthermore, you have limited recourse against the trustee unless they breach their fiduciary duty, which is a high legal standard to prove. No Excess Funds for You Here’s another kicker: any excess funds left in the DST after all installment payments are made don’t go back to you. Instead, they stay with the trust’s trustee. This means that if the trust’s investments perform exceptionally well, you won’t benefit from those gains. The only money you receive is what’s outlined in your installment note. This setup creates a potential conflict of interest where the trustee might be incentivized to take on more risk than necessary since they benefit from any excess returns. The Bottom Line DSTs might seem like a great way to defer taxes

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