The Professional Advisory September/2008

The

36 Professional

Advisory For Dental Professionals

IN THIS ISSUE TRANSITION: DO AS I DO OR DO AS I SAY Barry Spiegel LL.M., Q.C

FOOLISH TO PERDICT: PARAMOUNT TO PLAN Dr. Ron Weintraub

INVESTING WITHIN YOUR CORPORATION Mark McNulty BA, CFP, CIM

PROFESSIONAL CORPORATION: A LEARNED LESSON David Chong Yen CFP, CA

WILL I NEED INSURANCE AFTER AGE 65?

Dr. Ian Wexler

“KISS OF DEATH” LEASE CLAUSES Ian Toms B.Sc. (Hons)

HAVING A BETTER TEAM Graham Tuck H.B.A C.A

plus ECONOMIES ARE LIKE GARDENS NOTES FROM THE EDITOR

VOL. 36 : SEPTEMBER, 2008

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The Professional Advisory consists of a group of seven independent professionals who provide services to the dental profession, each of who specializes in a different eld. They have gathered to keep each other informed of the latest developments relating to the profession, and to produce this publication which is designed to provide expert information and advice solely for dentists and their advisors.

Economies Are Like Gardens RALPH CRAWFORD BA., DMD Reading through the pages of this issue of The Professional Advisory we are aware it is September and that the glory of another Canadian summer is waning and the fall season is at our doorstep. As we cast our minds back over the past months and recall flower beds ablaze in colour and gardens, orchards, vineyards, forests and grain fields all abounding in produce we can’t help but be reminded of the close relationship we Canadians have with nature. And in like fashion we were reminded, upon reading a recent Vancouver Sun editorial, that our Economies Are Like Gardens. The editorial whose main premise was that “Unfortunately, some politicians have let the garden lay fallow” opened with the following paragraphs: Economies, like gardens, have to be tended to flourish. A garden will be at its best if the soil is well prepared and seeds and bulbs are carefully placed to accommodate their needs for sun or shade.

Plants require regular watering, occasional trimming and vigilant weeding to keep invasive species at bay.

Fertilizer, in the prescribed amount at the right time, can intensify foliage and colour.

Similarly, economic measures planted in fertile soil, properly maintained and fearlessly fine-tuned, will reward citizens with the fruits of their labours.

And, as the articles in each and every issue of The Professional Advisory clearly point out, isn’t it the truth! Economies of all types - including the economics of dentistry - are like gardens. They require careful planning and proper maintenance to deliver the expected and deserved rewards. Negligence and postponement is like letting the garden lay fallow or go to weed. The authors within this issue again recount in detail that economic measures must be planned and planted in fertile soil to yield abundance.

Graham Tuck cultivates Having a Better Team and targets in on the “stars” within the dental office to yield

more efficiency and profit and Ron Weintraub outlines in his Foolish to Predict: Paramount to Plan some great “Strategies to Consider” in today’s current economic climate. We extend hearty well-wishes of “Good Luck” to Barry Siegel as he retires from “my persona as a lawyer” after 46 years of practice. In his article, Transition - Do As I Do or Do As I Say, he makes it abundantly clear that in retirement and transition “Proper (and lengthy) preparation is the key to success”.

We can well imagine what can happen in any horticultural endeavour if the details of good agro-economics are overlooked. It can be, as Ian Toms points out, the Kiss of Death. The same Kiss of Death the dental tenant experiences when unaware of the early termination clauses in their lease. On the other hand, just as the gardener tills, plants, waters and fertilizes to yield the best, it’s akin to the detailed advice Mark McNulty gives on how Investing Within Your Corporation and integrating the task with your overall portfolio has all the potential of a healthy harvest.

From the time our primitive ancestors first chose to work the soil rather than the hunt of wild animals in order to sustain life; countless lessons have been learned from mistakes on how to make life better.

Through the eons of time the world hasn’t changed very much. David Chong Yen offers up in Professional Corporation - A Lesson Learned how to deal with five specific errors and omissions encountered since the inception of the PC seven years ago. And although it’s not an issue with the average backyard gardener we are sure there isn’t a serious agriculturist who hasn’t heard of insurance - specifically crop insurance. And we hope that the advice they are getting from their professionals is as valuable to them as that offered by Ian Wexler to the Golden Age dentists asking that all important question, Will I Need Insurance After 65?

Yes, there is no doubt that Economies Are Like Gardens and whether its farming, dentistry, business, politics - whatever - economic measures planted in fertile soil, properly maintained and fearlessly fine-tuned, will reward citizens with the fruits of their labours. PA crawford@dccnet.com

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Transition: Do As I Do Or Do As I Say? BARRY SPIEGEL LL.M., Q.C I will shortly be retiring from the practice of law, and thought this would be a good opportunity to say farewell to my readers. I also thought that you might find it interesting and helpful to read about my experience in preparing for the transition of my practice and my imminent retirement. Some day, you, too, will head into retirement. For many years, I have been advising dentists about how to approach retirement and the transition from the life of a principal to that of an associate or “retiree”. So my question to myself is “Did I really do what I have told my clients to do?” You can be the judge, and, remember that the jury is still out until I have been fully retired for at least a few months.

It has taken eight years from the planning stage to today. Proper (and lengthy) preparation is the key to success. In the year 2000, I began looking for my successor - someone who shared a passion for the law, had a common philosophy of practice, had the necessary technical skills and creativity, and finally, someone who would truly care for and understand the clients’ needs.

Five years ago, I thought I had found the right person.

My spouse was an integral part of the equation. For various reasons, she knew relatively little about my professional practice, our assets, investments, prospects or net worth. (I knew very little more.)

So we spent many hours informing and updating ourselves. We then revised our wills to take our current situation into account and to achieve the appropriate tax advantages. Had I not been a lawyer myself, I would have consulted a wills expert. Had I been wiser, I would have retained a financial planner.

I then prepared a list of things I have always wanted to do but never seemed to have the time for. To retire without any forethought of how to occupy your time can be dangerous. My list was lengthy and included many activities that were both intellectual (to keep my brain functioning) and recreational (to keep my

heart functioning). I had never realized how much I had deprived myself! However, to this date, I have not prioritized these plans preferring to let time tell me when to act. But I am ready--.

Having found my intended successor, we worked closely for almost three years to ensure we met each other’s goals. Full and open disclosure was paramount since it created a mutual feeling of trust and respect.

We then carefully negotiated his purchase of the practice with each of us obtaining independent advice before signing a binding agreement. The law practice was incorporated as a professional corporation and I agreed to remain as a shareholder so that my name could remain as part of the practice name. Since that time, we have worked closely to ensure, as much as possible, that my clients knew who would take over the practice and that he had my complete confidence.

I was not ready to retire, and did not think I had passed my “due date”, so we agreed that I would remain as an associate for at least one year to continue to assist in the introduction of clients and consultants. After one year, I would remain until either of us gave adequate notice to the other.

Nothing you have read so far, while important, is extraordinary. However, I was not fully prepared for the raw emotions that I am feeling as I say goodbye to my persona as a lawyer, and to the clients and friends I have made over my 46 years of practice. The detailed preparation seems to have paid off. My eight years of planning have made this into an exciting time for both my wife and me, which it should be, with just a touch of sadness as I embark on the next stage of my life. PA Barry Spiegel, Q.C. is a senior lawyer with Spiegel Rosenthal Professional Corporation whose practice is devoted to corporate commercial and business law, with special emphasis on advising and consulting for the dental profession. His successor, David Rosenthal, can be reached at (416) 8650736, or fax to (416) 203 8592, or e-mail to david@drlaw.ca

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Investing Within Your Corporation MARK McNULTY BA, CFP, CIM A 49-year-old dentist called me after reading one of my Professional Advisory articles. He asked me the same question that many other dentists his age have been asking, “I am starting to accumulate money inside my professional corporation (PC), so what should I be investing in and how do I eventually get this money out?”

An investment within your corporation is the same as any other. It should complement and fit in with the overall portfolio. In other words, the corporate investment account should be managed in conjunction with your RRSPs and other investment accounts.

Think of it as another pocket in the same pair of jeans.

There are some issues unique to investing inside a corporation. The first thing to be aware of is that only active business income earned inside your corporation is eligible for the special Small Business Deduction (SBD) tax rate. The SBD tax rate for qualifying corporations is less than 20 per cent on the first $400,000 of active business income. However, passive investment income does not qualify for this special tax treatment.

Passive investment income, which includes interest income, dividends and capital gains are all taxed at different tax rates. For instance, interest income is taxed at a 50 per cent tax rate! Capital gains however, are taxed only at 25 per cent.

Consider this situation. Let’s say you have $100,000 in cash in your PC to invest. Any interest earned would be taxed at almost 50 per cent. Therefore, if you invested your cash in a bank account earning three per cent, at the end of the year you would get a tax bill for $1,493.70. However, if instead, you invest your cash in a corporate class money market fund where the interest income is taxed as a capital gain and NOT as interest income, you could cut your tax bill in half to

just $746.85. In addition, with the corporate class money market fund you would only have to pay tax once you actually sold the investment, which allows you to defer the tax until you are ready to cash in the investment.

One of the big advantages of investing within your corporation is that you have control over the amount and the timing of the income you receive personally.

This is beneficial because you will only pay personal tax when the corporation actually pays out money to you, which can be years down the road. And if down the road you are in a lower tax bracket, you can actually reduce and in some case eliminate the taxes.

In contrast, if the investments are held in your hands personally, the tax on the investment income would have to be paid in the year that it is earned.

There may also be an estate planning benefit to investing within your corporation. Investment assets inside a corporation may reduce probate fees as it is possible to pass these assets on to your heirs directly without them first passing through probate.

An investment within your corporation is the same as any other. It should complement and fit in with the overall portfolio.

A major disadvantage of building investments within your corporation is that it can affect your ability to claim the $750,000 capital gains exemption upon the sale of your practice. To claim the $750,000 capital gains exemption, there are certain requirements that your corporation must meet to qualify for this exemption. For example, at the time of sale, 90 per cent of the corporate assets must have been used to produce active business income - that is, dental fees.

If you were successful at saving a significant amount of money in your PC, you could well be offside on this 90 per cent rule. One possible solution to this is setting up a hygiene or technical services corporation in addition to your professional corporation. The purpose of this corporation would be to build up

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investment assets which would not be sold. The corporate investments are integrated with your overall purpose of the professional corporation would portfolio and that you have plans to get the money out! be to dividend money to shareholders as a way of Good luck! PA income splitting and to eventually claim the capital gains exemption. Then, when you are retired and in a lower income tax bracket, you would drawdown Mr. Mark McNulty BA, CFP, CIM, is a nancial advisor with Raymond James Ltd., Independent Financial Services. Securities-related products assets from the hygiene/technical services company offered through Raymond James Ltd., member CIPF. Financial planning (which would then be a holding company). offered through Raymond James Financial Planning Ltd., not a member As you can see, there are both advantages and CIPF. This article is for information only. We are not tax advisors and we recommend that clients seek independent advice from a professional complexities to investing within your corporation. advisor on tax-related matters.The opinions expressed by the author are Before going forward I suggest you speak with your not necessarily those of Raymond James Ltd. He may be contacted at investment and tax professionals to ensure that your 905-470-6222ext 209 or mark.mcnulty@raymondjames.ca.

Will I Need Insurance After Age 65?

DR. IAN WEXLER With dentists living longer and more of them working into “the Golden Years”, I am getting asked this question with increasing frequency. The simple answer for the vast majority of dentists is “Yes!” Actually, the more specific concerns and questions can be broken down with the following questions and answers: 1. Will I be able to self-insure after age 65, and therefore be able to cancel my current coverage?

Wouldn’t it be great to look into a crystal ball and see that in ten or twenty years, for example, all of your RRSPs, other investments, and even your home have doubled in value? All you have to do is pick up any newspaper today - and I am not just referring to the financial section, to read about the mortgage crisis in the US and its impact here, rising oil and food prices, inflation, “stagflation”, current stock market woes, and other economic concerns to understand the world we live in. With these issues in mind, it is really up to each and every one of us to determine and balance how much risk we wish to endure and the cost of protecting ourselves, our families, and our practices– both now and “down the road”.

2. I am concerned about myself and/or my family still receiving insurance benefits after age 65 should

I become disabled or pass away now. What are my options?

The majority of long term disability plans pay benefits only until age 65. Most individuals do not understand how long disability benefits are paid or the implications for benefits after age 65. Also, most do not realize that if you are not working and have no “earned income”, you cannot make a contribution to an RRSP. Dentists, in general, are unprepared for what could happen if the disability is not “life threatening”, yet prevents them from working. Two options that dentists should consider adding to their disability program (if available) at a younger age, when RRSPs and other retirement assets have not reached sufficient levels, are a “lifetime benefits rider” or a “retirement protector rider”. These will compensate for benefits after age 65.

In order to determine one’s life insurance needs after age 65, a number of important issues should be reviewed, including but not limited to: • Family and/or spousal income needs • Tax and estate planning issues • Funding for education, ageing parents, etc.

• Debt related issues including mortgage and practice loans For those wanting to be proactive, it therefore makes sense to: 1. Undergo periodic life insurance reviews and evaluations to see if your spouse and/or your family may require that you have life insurance benefits beyond age 65

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2. Consider at younger ages, a “diversified” life goes smoothly, and that you get the best insurance rates insurance portfolio that includes some short, possible. Also, it makes sense to consider plans that medium, and long term plans to cover all of the are guaranteed in terms of premiums and wording. “what ifs?” down the road. This is usually the most 4. What type of insurance plans will I want to practical and cost effective way to protect your family consider keeping, versus getting rid of, after age 65? over the long term.

The answer depends on a number of issues that need Finally, dentists should not ignore how the following to be evaluated as you near age 65. These include: 1. A comprehensive review of your current financial issues will be dealt with beyond age 65: state including RRSPs, other investments and assets, 1. Health care costs, especially if you require home liabilities, cash flow, practice issues and plans, family or institutional care issues etc.

2. Drugs and other medical costs not covered by 2. Tax and estate planning issues provincial health programs To deal with these issues, dentists may wish to 3. The need for: • Life insurance, including individual or “joint consider one or more of the following: last to die” 1. Long term care insurance which pays benefits if • Long term disability (a two year benefit payout you require home or institutional care after age 65) 2. Critical illness insurance which pays a lump • Business overhead expense insurance sum benefit 30 days after diagnosis of one of • Critical illness insurance approximately 25 major illnesses.

• Long term care insurance 3. A Health and Welfare Trust which can allow you to “write off ” most of any medically related expenses All of these issues should then be evaluated and the not otherwise covered by an insurance plan or by the cost of maintaining the coverage balanced with the financial impact and risk of not maintaining it. PA provincial health plan.

3. I intend on practicing beyond age 65. What are my insurance options?

• Consider the issues mentioned in the Dr. Ian Wexler is an authority on insurance issues for dentists. He is the preceding #2 question and answer section of Protect-a-dent and Protect Insurance Agencies Inc. in Toronto • If you know that you will require insurance President which provides specialized expertise in life, disability, critical illness, long coverage after age 65, it is always in your best term care, and other insurance products and services to over 700 dentists interests to purchase coverage when you are across Ontario. He can be reached for questions or other enquiries at “young and insurable” to ensure underwriting (416) 391-3764 or drwex@protect-ins.com

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“Kiss Of Death” Lease Clauses IAN D. TOMS B.Sc. (Hons) Frequently I receive calls from tenants who have just been given notice that despite a long term, their lease will end in a matter of months. These people are in shock. They are certain that there must be some mistake, some misinterpretation of the lease. They believed they had a valid lease with a term plus option length extending several more years.

Unfortunately, it’s often true, many leases provide the landlords with an option to end the lease early. Tenants are often unaware that their lease contains an early termination mechanism until it is too late.

There are two primary types of this mechanism - the early termination clause and the relocation clause. They are often found in the same lease; if there is one there is usually the other. They appear in perhaps one out of three leases I review, so each tenant reading this article has roughly a 33 per cent chance of having at least a form of this problem. For example, if your landlord is Cadillac Fairview, Oxford, Morguard, SmartCentre, or Bentall, your lease very likely has a form of one or both of these clauses. If you have a Dye and Durham Co. Limited Form No. 650.656 lease (look at the upper right corner), your “Kiss of Death” clauses are present in the last paragraph of page two.

Although the probability of either of these clauses being triggered is relatively low, either one can cost a tenant hundreds of thousands of dollars. Their very presence can interfere with practice financing (related to a sale for example) because they effectively limit the term plus option length to the notice period.

The most nasty form is the early termination clause, which in practical terms says that if the landlord sells the property, or decides to “remodel” the property (and what is that?), or decides to renovate, or redevelop the property, the landlord may provide notice to tenant that regardless of anything else, the lease will end. The

triggering mechanisms are so broad and all-inclusive, the notice period so short, and compensation so negligible tenant in effect can be terminated at will, with no downside to landlord! Why would a landlord do this?

In today’s realty market, landlords are commonly selling and then re-tenanting developments, re-furbishing and then re-tenanting developments, or converting commercial developments to residential (condominium) developments. And they are using the early termination clause to control the existing tenancies to do so.

The second and almost as unfortunate clause is the relocation clause. In practical and general terms, this clause says that on certain notice, tenant, at tenant’s expense, must relocate within the development. Typically a tenant is given a period of a few months to develop and relocate into premises chosen by landlord - at tenant’s expense. This clause is used by landlord to free up space for an alternate tenant landlord prefers, such as a larger tenant and/or one willing to pay more rent.

What happens to the tenant when either of these clauses is triggered is that they must build alternate premises in a very short period of time at their own expense. Imagine completing site selection, offer to lease negotiation, lease negotiation, design, permitting, construction, and relocation within four months, at an overall cost typically of $300,000 to $500,000, not to mention patient loss. Bet that would change your holiday plans!

The ultimate solution is to either remove both clauses, or amend both clauses to benefit the tenant during the initial lease negotiation. The effect of removal is obvious, but imagine negotiating both clauses so that

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if triggered, the tenant actually benefits by having of these clauses, you need to be aware of the triggering a new practice built, in a location of choice, on a mechanisms and have a plan in place to react if the comfortable time line, at the landlord’s expense! clause is implemented. PA You need to check your lease to determine if either of these clauses are contained, and if so plan to deal with them. In some instances these clauses can be Based on more than 20 years business experience Mr.Toms, B.Sc. (Hons) amended or deleted during the term, especially at acts as a tenant advocate on behalf of select retail and professional tenant clients primarily in the Greater Toronto Area. Mr. Toms is licensed as a renewal time.

Real Estate Broker and can be reached at (705) 743-1220, by e-mail at If you are stuck with an unacceptable version of either iantoms@pipcom.com, or through his web site at: www.iantoms.com

Foolish to Predict: Paramount to Plan Brief Review Of 90s Down-turn

DR. RON WEINTRAUB Even if we had a crystal ball, none of us can predict the future with any degree of certainty. With the current economic climate, we should not ignore some of the warning signs. Prudence prevails in alerting our profession to what we might face. For success in a downturning economy, we need to choose strategies to ride out negative effects on our practice.

Good Reasons To Start Making Plans A service and manufacturing based economy exposes Ontario to a potential economic slowdown in contrast to resource-based provinces. Unlike our medical confreres, dental practices are not recession proof. When healthy, our economy yields many jobs offering dental benefits as a component of their health plans. Dental benefits are a great help in accessing good dental treatment for families. For those with or without a dental plan, however, should the loss of jobs continue, our patient pool might shrink.

We have seen this in the past. A significant downturn in the economy affected dentists drastically in the early 1990s. Understanding the cyclical nature of the economy, we want to be in a strong position to go forward when the economy strengthens.

In the early 90s, some dental practices sailed through the economic storm without noticing any negative effects. In fact, some of them actually achieved exponential growth. These practitioners probably wondered what all the fuss was about. While some practices thrived, others struggled. Among the reported factors the thriving practices shared with us are the following: 1. Practices located in areas with patient bases financially insulated from negative economic activity noticed little change.

2. Practices that developed a value for the role dental health plays in the overall health of their families through high-quality patient education faired better than others did. These patients understood that dental visits were not part of their discretionary outlay but were necessary expenditures.

3. Practices in underserved areas (there are still some in Ontario) did not notice the attrition that occurred within their patient base because of heavy demand for their services.

Strategies To Consider What strategies can potentially vulnerable practices employ in troubled economic times? Primarily, we need our critical thinking skills. We need to step back and look objectively at our practice by evaluating its strengths and weaknesses by asking questions.

1. Have we educated our patients to the value of dentistry?

2. Have we looked at the mix of procedures we are offering

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and put the emphasis on basic dentistry and less emphasis on discretionary procedures despite their value? Balancing pathology-driven dentistry with aesthetic dentistry can play a promising place in our practice.

3. Do we offer a degree of flexibility in payment plans to allow patients to accept the treatment they need?

4. Is our staff empathetic to patients’ concerns of financial constraints?

4. Put an effective confirmation system in place to reduce no-shows and down-time to avoid gaps in scheduling.

5. Include a daily huddle for effective communication and trouble shooting for the day’s events.

6. Invest in technology that has a proven return on investment and distinguish between investing and taking on an expense.

7. Have a knowledgeable support group for the prac-

Effective Customer Service and Office Management What should we do if we see a lessening demand for our services? Thinking ahead is helpful when we see the economic tide ebbing. On the one hand, we might choose to hunker down to weather the storm by changing very little and maintaining our practice as is. We might cut staff and staff costs. We might consolidate the workday to avoid long stretches of empty time in a five-day schedule. We might present only those treatment plans we think patients can afford.

But this reflex reaction could spell disaster.

tice such as accountants, lawyers, financial planners, and consulting firms who have other clients with similar issues and discuss your perceived needs with them.

8. Continue a low cost marketing strategy to make sure you get your share of the pie.

Staying afloat in troubled waters during a downturn in the economy doesn’t necessarily require a life jacket.

For dental practices, it requires some critical thinking to determine appropriate strategies so we can manage our practices effectively until a sound economy returns. PA

On the other hand, we might adjust the practice culture by including some of the following tips.

1. Reconfigure the focus of the office to coordinate with the possible new economic realities of our patients.

2. Hire talented, empathetic personalities.

3. Accentuate the factor that makes a practice successful in the first place: more and better customer service.

Ron Weintraub is a founding partner with the Bayview Village & Downtown Dental Associates and brings over thirty-ve years of knowledge and experience in the practice of general dentistry to the Professional Advisory.

Large companies such as Patterson Dental, Ash Temple Ltd, Henry Schein Arcona, & the former Canadian Dental Co. have beneted from his insight.

As a consultant to Innovative Practice Solutions, Ron advises dentists on practice enhancement, practice purchases, sales, location evaluations, associate buy-ins, and business mergers. Dr. Weintraub can be contacted at (905) 470-6222 Ext. 221 or drronips@rogers.com.

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Professional Corporation: Lesson Learned DAVID CHONG YEN CFP, CA During the past seven-plus years since dentistry Professional Corporations (PC) have been around, we have encountered omissions and errors being made during the setup of a PC. Listed below are the top five errors and/or omissions encountered with a PC setup and the corresponding lessons we can learn: 1. No Royal College of Dental Surgeons of Ontario (RCDSO) authorization One must apply and obtain approval from the RCDSO to carry on a dental business under a PC. No application filed with the RCDSO or operating your dental practice without the RCDSO approval can result in potential tax problems in addition to problems with the RCDSO.

Each shareholder should have a separate class of shares; this facilitates flexibility and can yield tax savings.

Lesson learned: Always make sure your professional advisor submits the application to the RCDSO and obtains the approval prior to operating your PC. 2. No flexibility in dividend payments Since January 1, 2006, certain family members of the dentist may become shareholders of a PC. This way, the dentist can save taxes by paying dividends to low income family members.

Unfortunately, we have seen cases where all shareholders including non-dentist family members own the same number and class of shares. What’s so bad

about this? It means that all shareholders, including the dentist, must receive the same amount of dividends. The dentist, who is usually the richer, does not want this dividend and most times they are already in the highest tax bracket.

For example, your parents who are recipients of Old Age Security (OAS) and have investment income of $20,000 each, and your child who is in his/her second year of university, own the same class and number of shares. Since your parents receive OAS, the maximum dividend they each can receive is about $31,000 before the ‘clawback’ (i.e., part of the OAS will have to be repaid) applies. That means your child will be limited to a $31,000 dividend. However, your children older than 18 who attend university full time for eight months and with tuition of say $5,000 pay only $1,000 in taxes, when they receive a dividend of $50,000.

Lesson learned: Each shareholder should have a separate class of shares; this facilitates flexibility and can yield tax savings.

3. No Rollover form prepared/filed What is a Rollover? It is a tax deferred/free transfer of assets from your personal hands into your PC. To qualify for this, one must file a form with Canada Revenue Agency (CRA) within a time limit. The CRA can levy a penalty for as much as $8,000 if the form is filed late and such penalty is not tax deductible.

If you did not file the form, then CRA can make the transfer a taxable event (i.e., you are deemed to have sold your assets - including your goodwill) at the fair market value. You could be liable for as much as $116,000 in personal taxes if your practice is worth $500,000. CRA also charges interest on any late tax payment.

Lesson learned: Always make sure your professional advisors file this Rollover form within the time limit. Also, proper documentation is important to support your assets transferred.

4. No Double Will

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At your death, the government charges your estate a probate fee which is 1.5 per cent for assets greater than $50,000. That means probate fees of more than $7,000 may be payable for a dental practice worth $500,000. To save probate fees, you could have a second will which pertains to shares of your PC only. All your other assets are covered in a separate will.

Lesson learned: Consider having two wills; one for your PC shares and one for all of your other assets.

A separate will saves money when you die, leaving more money for your love ones.

5. No employment contract Once you set up your PC, you become an employee of your PC - no different from your receptionist or chairside assistant. You will receive a salary and proper payroll deductions must be withheld and

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submitted to CRA on a timely basis.

Your lawyer should also prepare an employment contract which outlines the terms of your employment, and more importantly, provides a $10,000 death benefit. Such benefit is tax free in the hands of the recipient while tax deductible to your PC. Lesson learned: Obtain an employment contract which should include a death benefit provision.

Your PC will get a tax deduction. Your loved one will receive $10,000 tax free. PA David Chong Yen, CFP, CA with an international rm background and more than twenty-eight years of experience, advises healthcare professionals and owner-managers. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail david@dcy.ca.

This article is intended to present tax saving and tax planning ideas and is not intended to replace professional advice.

Having A Better Team GRAHAM TUCK H.B.A., C.A. I talk about “stars” to most dentists for whom we are doing a valuation. A “star” is an employee who is worth their weight in gold because they handle their job with an expertise and speed that others cannot do. I have talked to dentists who feel that their receptionists are stars, BUT in one case there were two receptionists and the practice was only billing $600,000. The staff said they cannot keep up with the work and they need the extra person in reception. There was only one dentist and one part-time hygienist. These receptionists are not “stars”.

I have seen many practices with “stars”. In one of these practices there were two hygienists, four days per week each, (eight days of hygiene per week); one dentist also four days per week, one chairside assistant and one receptionist four days a week. Billings were over $900,000 and accounts receivable were low.

This practice thrived because of the team the dentist created around himself.

Things to consider: 1. Too many dentists have learned to live with mediocre staff. The excuse is that they have been with them too long to do anything about it. They probably feel too much loyalty to take dramatic steps to improve staff.

2. Let me say at this time that before taking any direct or indirect action you should work with a labour lawyer who will steer you through the minefield of potential legal suits.

3. Good staff are not easy to find and if you have an exceptional employee try not to lose that individual.

I would rather pay one star $28.00 per hour than have two average employees at $14.00 per hour.

4. It’s more important to have a star on your front desk than chairside. Your front desk is the least supervised staff member of your team. Your chairside is the most supervised.

5. The easiest way to develop stars is to hire a star rather than try to convert someone to become one.

If the employee does not have the basic innate makeup to be a star, I think it is hard to make them into one. Stars are bright, cheerful, self motivated individuals that can handle their job with ease.

6) Always check references. This step is often

The Professional Advisory

VO L. 36 : SEP T EMBER 2008

employee. Finding stars is not easy! I have a three missed but for the time it takes it can avoid big proband a half minute test that I have used for 30 years to lems later. select the potential star candidates from the medio7) Remember to utilize the three month trial period cre. It does not rate personality or other personal when an employee starts. If the new employee is not traits but if a candidate scores well they have, in my excelling, you might be better to find a new candiexperience, the inherent background to be trained date. to do the job and be a star. And if they score low 8) Never hire someone that you cannot let go if they they will most likely never be a star. are not performing well. Personal friends may be If you would like to get a copy of the three and a half considered in this category. minute test that I use, contact me and I will send it 9) Often referrals from your reliable employees make out to you (with the answers) at no charge. PA good candidates. Expect it to cost you time and energy to find great employees and to train them Graham Tuck, H.B.A., C.A. is the broker/owner of Professional Practice 10) If an employee leaves your practice this is an Sales (Ontario) Ltd., which specializes in the valuation and sales of opportunity to find a new one who is a star. The dental practices. He can be reached at (905) 472-6000 or 1-888trick is to focus on finding a star to replace the departing 777-8825 or e-mail at: grtuck@rogers.com

The views expressed in any article are those of the author alone. They should not be acted upon without the advice of your “professional advisors”.