The Professional Advisory Vol. 76

The Professional Advisory

76

FOR DENTAL PROFESSIONALS

VOL. 76 September 2016

Consult An Expert

ProfessionalAdvisory.ca ProfessionalAdvisory.ca

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Contents

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Consult An Expert Ralph Crawford BA., DMD

Effective Lease Negotiation Strategy Ian D. Toms B.Sc. (Hons)

Examination of Current Interface Between General Practitioners and Certified Specialists Dr. Ron Weintraub

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Selling Your Practice May Be More Expensive Next Year

David Chong Yen CPA, CA, CFP Louise Wong CPA, CA, TEP

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Deal-Busters David Lind MBA

Dental Practice Names David E. Rosenthal BA., LL.B

Good News Coming From the Investment Industry

Biographies Ralph Crawford is an Honours Graduate from the University of Manitoba and has enjoyed a varied dental career. Prior to being editor of the Canadian Dental Association Journal from 1989 to 1997, he operated a Winnipeg private practice concurrently with being a clinical instructor at the University of Manitoba. He served as President of both the Manitoba Dental Association and Canadian Dental Association.

Ian D. Toms is a nationally recognized real property lease consultant with over 27 years experience. He is considered an authority on tenancy issues, lease features, facilities and technicalities, and the art of tenancy negotiation. Ian has drafted and negotiated thousands of lease arrangements for national retail and medical professional tenants in 16 states and 8 provinces, with a specific emphasis on the GTA. Dr. Ron Weintraub is the founder of Innovative Practice Solutions (IPS) and former owner and founder of Bayview Village Dental Associates and Downtown Dental Associates. He practiced dentistry from 1963-2004 and has consulted on behalf of major dental suppliers, manufacturing companies, as well as individual dental offices for over 20 years. In 2004, Ron gave up clinical practice in order to focus solely on Practice Management.

David Chong Yen and his chartered accounting firm currently advise hundreds of dentists and healthcare professionals on tax, estate and financial planning, valuations and accounting. David obtained his Bachelor of Arts degree from the University of Toronto, attained his Chartered Accountant’s Designation while working at an international firm and has subsequently completed the CICA In-Depth Tax Courses.

David Lind is the Principal and Broker of Record at Professional Practice Sales Ltd., which was established in Ontario in 1991 and is a leader in dental practice valuations and sales. Prior to joining PPS, David lead the healthcare business for CIT Financial Ltd. This gave him a strong understanding of the personal and professional needs of dentists as they entered and exited the profession.

Mark McNulty BA, CFP®, CM® David Rosenthal is a senior lawyer whose law practice is devoted to business, corporate and healthcare law for dentists. David advises dentists on a broad range of legal matters, with particular emphasis and legal advice on purchases and sales of practices, corporate reorganizations and professional corporations. David also speaks frequently about such matters, including guest lectures at the faculties of dentistry.

Mark McNulty is President of McNulty Group, a firm responsible for managing $250 million of Ontario dentists’ retirement savings.

McNulty Group helps professional families transition from a life of successful practice to a stress-free retirement by using a holistic approach of practice and personal retirement planning. Mark is the author of The Transition Coach 2.0–A Canadian Dentist’s Guide to a Perfect Retirement, and The $6 Million Dentist: Successful Succession in 7 Modules.

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“The Professional Advisory consists of a group of six independent professionals who provide services to the dental profession, each of whom specializes in a different field. 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.”

Notes from the editor:

Consult An Expert Ralph Crawford BA., DMD

crawford@dccnet.com

I

When looking at 76 publications in 15 years it’s pretty obwas recently rearranging and straightening my office bookshelves, which, among numerous items, contains a vious that page after page of The Professional Advisory has collection of antique dental texts, some going back over a served – and is serving – as a consulting expert for dentists hundred years. Along with the ancient text books is the com- seeking advice on a profitable practice and a worthwhile life plete collection of the Journal of the Canadian Dental Associ- style for self and family. Consider the implications presented ation from its initial publication in 1935 until the last edition by David Chong Yen and Louise Wong in Selling Your Practice in 2014. By chance I happened to browse through one of the May Be More Expensive Next Year. Their expert advice could texts. Titled Professional Practice published in 1916 – one save thousands of dollars. And note how Ron Weintraub hundred years ago – by Dr. George Wood Clapp. When the provides an expert overview in the Examination of Current Dentist’s Supply Company was founded in 1899, Dr. Clapp Interface Between General Practitioners and Certified Speserved as advertising manager and in 1909 when the Compa- cialists and concludes that the proper supportive interaction ny purchased The Dental Digest he became the editor. As best between the generalist and certified specialist is beneficial to as I could find he published at least seven books throughout all stakeholders. There probably isn’t a dentist in the country who finds negotiating a lease simple. Thankfully, there is Ian his dental career.

What fascinated me while reading through Clapp’s Prof- Toms who expertly outlines five excellent considerations for itable Practice was that some things haven’t really changed an Effective Lease Negotiation Strategy.

Who doesn’t like good news? Here we have it right before that much in over 100 years – except that today the dentist isn’t always a “he”. In just the 2nd of 24 chapters there it was; us when Mark McNulty sums up Good News Coming From the Investment Industry. And he also sums up the basis of consult an expert. expert consultation, “The bedrock of the advisor /client relaThe dentist who would conduct his practice well tionship is honesty, openness and trust”. In his Deal-Busters must accustom himself to two lines of thought, David Lind’s opening sentence makes reference to what exone professional and the other commercial. On pertise is all about: “One of our main objectives is to ensure business lines, he needs only plain common sense that transactions close”. Originally, states David Rosenthal, and a knowledge of what things cost him and the Dental Practice Names were pretty simple, using personal importance of collecting what is due him. If he names only. Today it is much more complicated and David finds difficulty in developing this line of thought, clearly outlines expert advice on how and where names can he will do well to adopt the practice he expects be selected that conform to required regulations. others to adopt toward him – that is, when in There’s no doubt Dr. George Wood Clapp’s advice “Conneed, consult an expert.

Certainly, consulting an expert was not something new sult an Expert” was worthy at the time, and the continuous within The Professional Advisory years later when Dr. Clapp wrote his in book.

The concept seeking ad- expertise which Colin Ross is a Partner Professional Practiceof Sales Ltd. (www.ppsales.com), specializes in the valuation and sale100 of dental He can be reached (905) 472-6000 but or 1-888-777-8825 e-mail at: colin.ross@ppsales.com leads to a Profitable Practice. vice nopractices. doubt has been aroundatfor centuries I found it oronly particularly interesting to note that in the early pages of his book Dr. Clapp featured consulting an expert as an essential part of a Profitable Practice. And it hasn’t changed to this day.

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Effective Lease Negotiation Strategy

Ian D. Toms B.Sc. (Hons)

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oody Allen said that if you want to make God laugh, tell him your plans. Humour aside, most people’s plans have little if anything to do with what actually happens in either their business or their personal lives. There are simply too many uncontrolled variables to plan with significant accuracy, especially many years down the road.

A lease is a prime example of how difficult planning many years into the future can be. A lease is an agreement between two parties based on specific circumstances when it was written. A lease may include facilities to accommodate eventualities as time passes. The more adept and skilled the person negotiating the lease, the higher the probability that they will negotiate facilities into the lease, and phrase each clause of the lease to give the tenant the highest probability of successfully navigating through tenancy issues, which can and will arise, whether they are predicted or not.

In this context, here’s something that is really important to know and to think about.

As a tenant during a lease negotiation, you are asking the lord of the land for some level of cooperation, primarily to monkey around with the wording of the lease, and the business terms and conditions of the tenancy. In this negotiation, the tenant is almost always in a requesting or subordinate position. Asking for any cooperation or concession, even to change a word, in the wrong way will lose the landlord’s willingness to cooperate or provide any concession.

There is a certain approach to effectively negotiating a resolution that needs to be followed for maximum results. I have listed some key considerations below.

1. Your negotiating representative should know more than the landlord. Lease phraseology needs to be

written, and tenancy terms and conditions negotiated from the perspective of experience. As time passes and circumstances change, the true meaning of each clause, facility and term will come into focus. If they were properly negotiated,

the correct position for the tenant will be provided. If your negotiating representative does not personally have many years of experience negotiating commercial leases, they will not know what they don’t know, and they will not plant the seeds in your lease for opportunities to blossom many years down the road.

2. Approach the landlord as though he/she is a family member. Harassing, bullying or badgering a landlord

will result in a mess. Your negotiating representative should approach the landlord with quiet confidence and respect – the landlord will respond in a like manner. After all, they are just people trying to do their job. Getting harassed by someone half their age with no experience will not result in a favourable outcome. Not only is that behaviour offensive, but it tells the landlord that you, the tenant, may be anxious which is a dead giveaway, destroying your negotiating position. You can tell how your representative will approach the landlord. If they are harassing you into signing their contract, you can bet they will try to harass the landlord, and your lease will not be properly negotiated.

3. Negotiate resolution. Most landlords are sophisti-

cated negotiators. The game is quid quo pro, which means trading things of equal value. During a negotiation, your representative, in real time, has to assess what has value to you and what can be traded away in exchange for perceived value. If your representative doesn’t have the experience or training to recognize or adeptly play this subtle game, they will “give away the farm”. One of the common mistakes my firm corrects is that inexperienced representatives will trade away present value in exchange for unequal future concessions simply to justify their large fees. Trading the first three months’ rent free in exchange for dollar a square foot for the remainder of the term doesn’t make sense; and you, as the tenant, will never know your representative did this to you.

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4. Don’t burn bridges. If your negotiator pushes the landlord too hard, the landlord will remember and “get you back”.

“Winning” during a negotiation doesn’t mean scorched earth. It means getting the job done effectively, efficiently and ethically, achieving maximum benefit for the tenant. For example, consider the value of an extra dollar per square foot compared to the value of an option to renew. If a landlord is pushed hard for rent and the tenant loses an option to renew as a consequence, how did the tenant “win”?

5. Do not use deception or trickery. Deception is the

mark of a true amateur. Sure there is posturing and acting, but if your negotiator gets caught “adjusting” a document without involving the landlord, or not telling the truth, the landlord will be suspicious throughout the negotiation and will not cooperate. A simple slip can cost you big bucks, but no representative is going to tell you they got caught! You will end up paying a premium for a poorly negotiated lease.

One of the common mistakes my firm corrects is that inexperienced representatives will trade away present value in exchange for unequal future concessions simply to justify their large fees.

When choosing your negotiation strategy, keep the points outlined above in mind. Make sure you or your negotiating representative are transparent, experienced and approachable.

Please send comments to

Mr. Toms is president and Broker of Record of Realty Lease Consultants Inc. He has been creating and preserving realty leasehold value since 1986 and can be reached at (705) 743-1220, by e-mail at ian@realtyleaseconsultant.com, or through his web site at: www.realtyleaseconsultant.com.

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Examination of Current Interface Between General Practitioners and Certified Specialists

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he focus of dental practice and public expectations is shifting to a more holistic and biological base centering on pathological, general health issues. Ironically, our most qualified experts often express the feeling that they are less included in the treatment of some challenging issues in dental treatment. It would seem logical that as the scope of treatment for many patients enlarges, the importance of use of experts in various fields would be more sought after than previously. Actually, the converse in some areas seems to be prevalent.

As oral health providers, we should realize that as knowledge expands and treatment modalities and equipment become more complex, Certified Specialists should be more important in our everyday practice. Examining the current interface between general practitioners and certified specialists shows existence of an overlap of General Practitioners (GP) and Certified Specialists (CS).

Recognized Certified Specialists

The Royal College of Dental Surgeons of Ontario lists the following as recognized specialists in Ontario: 1. Dental Anesthesiologists 2. Endodontics 3. Oral and Maxillofacial Radiology 4. Oral and Maxillofacial Surgeons 5. Oral Medicine Specialists 6. Oral Pathology 7. Orthodontics and Dental Facial Orthopedics 8. Pediatric Dentistry 9. Periodontics 10. Prosthodontics 11. Public Health Dentistry Potential for Overlap of Specialists with General Practices

The possibility exists of an overlap of specialists with general practices in the following areas: Dental Anesthesia, Endodontics, Oral and Maxillofacial Surgery, Orthodontics and Dental Facial Orthopedics, Pediatric Dentistry, Periodontics, Prosthodontics.

Dr. Ron Weintraub

HISTORICAL RELATIONSHIP VS CURRENT TRENDS Why is there an apparent disconnect between the historical relationship and current trends vis-a-vis crossreferring?

Although the established parameters for GPs to perform almost all aspects of dentistry legally, provided they have adequate training and expertise, it is left to GPs’ judgment whether to refer or treat in-house. Some of the active drivers to promote in-house treatment include the following: a. The availability of extra-curricular hands-on courses (mostly offered by CSs) add some postgraduate training components to GPs’ skillset; b. The degree of diminished busyness of some GP offices in larger urban areas opens up time to expand the level of offering in the office; c. The expansion of many multi-provider group practices allows clinicians the option to focus on areas of dentistry of their interest and gain knowledge and proficiency to offer to their patient base.

FROM PATIENTS’ PERSPECTIVE • Patients appreciate not having to relocate for treatment to a non-familiar office that does not offer the relationship component the family practice affords.

• Patients automatically assume their GP office is sufficiently trained to provide all services.

• Areas of procedures that easily fall within the scope of the GP office are no longer routinely referred out (e.g. Periodontics, Orthodontics, Surgical and Prosthodontics) because offices used to be so busy with routine treatment that they did not have to extend their mandate.

• Current patients benefit from more treatment offered at the GP fee guide level, therefore, making access to care more attainable financially.

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7 SOME ISSUES REGARDING REFERRAL • Dental Anesthesia – There are two choices: (1) in house and (2) at a specialized facility. The decision whether to bring in a certified anaesthetist (dental or medical) should take into account the ability to provide trained staff (beyond Registered Nurse and clinical assistant) to support both in preparation and recovery versus the ability of the trained anesthetic/clinical dental treatment provider to produce more results in a shorter period of time under general anesthesia.

• Endodontics – We should avoid taking on extra challenging root configurations with the idea that we can satisfactorily negotiate and seal the canals with the thought we can always send it off to an Endodontist. This scenario is a loss to the GP, a loss to the Endodontist, and a loss to the patient often leading to the patient leaving the practice.

• Oral and Maxillofacial Surgery – Similarly, we should avoid the concept of “I will try, and if I am not successful, I can always refer out to an oral surgeon”. Even though routine surgical placement of implants is part of many everyday general practices, case selection is of primary importance. When some doubt of good results in our hands exists, wisdom prevails to refer out to another level of expertise. The same criteria exist for seemingly complex Exodontia.

• Orthodontics – Many courses on in-house management of Orthodontic intervention as well as Invisaline are available. Moreover, a beneficial role for a well-trained generalist to offer in-house service after a complete evaluation and diagnosis has been done. The decision whether to refer is always based on patients’ best interest.

• Periodontist – Periodontists are often referred to for complex implant placement as well as periodontal surgery and hygiene maintenance. It is a good opportunity to share periodontal maintenance between the Periodontist and the generalist.

• Prosthodontist – In the area of full mouth rehabilitation, a generalist should consider the benefit to the case when it does not have to be prepared segmentally in their environment. Therefore, the management of re-establishing an ideal occlusal relationship to the full arch reconstruction is optimally achieved in a prosthodontic environment.

As oral health providers, we should realize that as knowledge expands and treatment modalities and equipment become more complex, Certified Specialists should be more important in our everyday practice.

The proper supportive interaction between the generalist and the certified specialist is beneficial for all stakeholders of our profession, particularly the wellbeing of the patient as well as the professional relationship between CS and GP. The mutually supportive interaction between GP and CS bodes well for the continuing ethical professional growth of our practices.

Please send comments to

Ron Weintraub is a founding partner with the Bayview Village & Downtown Dental Associates and brings over thirty-five 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 benefited from his insight. As owner of 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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Selling Your Practice May Be More Expensive Next Year

Louise Wong CPA, CA, TEP

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or many practice owners, the decision to sell your practice is a long process which requires you to consider many different factors. The Liberal government has compounded this issue by introducing a new tax change which could result in a larger than expected tax bill for some dentists who sell their practice after December 31, 2016.

Who is affected?

The new tax change affects dentists with Professional Corporation and/or Hygiene/Technical Service Corporations (PCs/H/TSC) who are considering selling their dental practice assets. The tax change does not affect dentists selling shares of the PC/H/TSC. While many dentists prefer to sell shares in order to utilize the lifetime capital gains exemption (LCGE), there are instances where selling assets may make sense, including: 1. Dentists who have two or more practices in their PCs but only want to sell one 2. Dentists who have assets (i.e., dental building, investments etc.) they wish to keep inside their PC/T/HSC 3. Dentists who have used up their LCGE and/or do not qualify for the LCGE If you fall into one of the above and are considering selling your practice in the next year or two, the new tax change could have a large impact on when you sell your practice.

What is the tax change?

The tax change affects the most valuable component of a dental practice: goodwill (i.e. patient charts). Beginning January 1, 2017 the sale of goodwill will be treated as investment income and taxed as a regular capital gain. Investment

David Chong Yen CPA, CA, CFP

income inside a corporation is taxed at a high corporate tax rate of 50.20 per cent. In the case of goodwill which is treated as a capital gain, the income from the sale is only 50 per cent taxable. This results in a tax rate of 25.10 per cent (50 per cent X 50.20 per cent).

Previously, the sale of goodwill was taxed as active business income with only 50 per cent being taxable. In other words, it received preferential tax treatment compared to other assets like equipment, building and computers. Under the old tax rules, 50 per cent of the income from the sale of goodwill would be subject to a tax rate of 15 per cent (for income under $500,000) and 26.5 per cent (for income over $500,000). This meant an effective tax rate between 7.5 per cent (50 per cent X 15 per cent) and 13.25 per cent (50 per cent X 26.5 per cent) depending on how much income was reported in the year.

How does it affect me?

One of the benefits of selling assets is that the vendor keeps their PC/H/TSC and the money received after paying corporate taxes from the sale is held inside the corporation until the dentist decides to pay it out as dividends. This could take place over several years and/or be paid to several shareholders reducing personal taxes for the family.

For example, a million dollars could be paid out over a decade at $50,000 per year to the dentist and their spouse which would be a lot less tax than paying out $1 million to the dentist all at once. The new tax change reduces this benefit severely as the upfront corporate taxes have been increased from between 7.5 per cent and 13.25 per cent to 25.10 per cent.

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On a sale of patient charts for $1 million, expect the following corporate tax bill:

Sale date

December 31, 2016

After Jan 1, 2017

Sale Price for Goodwill

$ 1,000,000

$1,000,000

Corporate taxes $ 75,000 to $132,500

$251,000

The difference between selling your practice goodwill on December 31, 2016 and January 1, 2017 could be as high as $176,000 in corporate taxes. Some of these corporate taxes are refundable to the corporation, but would require shareholders to receive dividends (i.e. incur personal taxes).

What can I do?

1.

2.

3.

4.

Plan well in advance. Speak to your advisors if you are considering selling your practice. The earlier the better.

Sell your practice assets before January 1, 2017. Keep in mind that in many cases, from start to finish, transactions can take several months before they close. Hence, planning for a December 31st closing date could be risky especially given the holiday season. To be on the safe side, you may want to set a closing date well in advance of December 31, 2016.

Sell shares. Speak to your advisors to weigh the pros and cons of a share sale versus an asset sale. With the new tax change, it could make sense to sell shares even where no LCGE is available.

Plan your dividends. Timing the dividend payout from the sale of your practice and paying dividends to low income shareholders will help you reduce your overall tax bill if you sell after January 1, 2017.

We have emphasized in the past the importance of planning at least three years in advance for the sale of your practice.

Tax changes have the ability to shorten the amount of time you have to make a decision to a matter of weeks and possibly even days. Between securing employment contracts for your employees, securing a premise lease which will be de-

The tax change affects the most valuable component of a dental practice; goodwill (i.e., patient charts).

sirable to the banker/buyer, preparing an appraisal, finding a buyer, negotiating terms and completing the deal, December 31, 2016 is not that far away. The last thing you want is to be sitting on the fence on December 31, 2016 staring down a $176,000 tax bill as the clock strikes midnight and everyone else is ringing in the New Year.

Please send comments to

This article was prepared by David Chong Yen, CPA, CA, CFP and Louise Wong, CPA, CA, TEP of DCY Professional Corporation Chartered Accountants who are tax specialists and have been advising dentists for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail david@dcy.ca / louise@dcy.ca. Visit our website at www.dcy.ca. This article is intended to present tax saving and planning ideas, and is not intended to replace professional advice.

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Deal-Busters

David Lind

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ne of our main objectives as Dental Practice Brokers is to ensure that transactions close. Unfortunately there are circumstances that arise that can cause a deal to either get delayed or possibly not close at all. I believe it is beneficial to the readers of The Professional Advisory to review the major impediments to a successful practice sale.

The premises your practice is located in forms a significant portion of the goodwill of the practice. As regular readers will know, goodwill accounts for about 80 per cent of the value of most practices. In order to transfer the premises to another dentist, the dentist has to be granted long term use of the space. There are two types of practice premises: owned and rented. In each case the premises must be the appropriate size for the practice, not too large and not too small. It must have the appropriate cost for the practice size. Occupancy cost should equal roughly 6.5 per cent of gross income. It does not matter if it’s rented or owned, the cost to the practice should be the same. This cost does not include the equity portion for owned premises. This equity portion derives its own return from the long-term capital appreciation of the real estate. In rented premises, the lease must be easily assignable, the buyer will need a minimum term of 10 years after closing, and there should be no demolition clause. In owned premises, the selling dentist must be prepared to sell the premises with the practice at fair market value, or enter into a long term lease of perhaps 15 to 20 years, and should also offer an option to purchase to the buyer in the lease. A critical review of your practice premises is a natural first step before contemplating a sale.

If you are in leased space, consider having a lease consultant review your lease.

Another critical component of the goodwill of your practice is your team. You should have the right number of good

people working with you. Resist the temptation to add extra staff members as floaters. If you have a bad apple on your team, deal with it as it will make your practice better now, and after the sale. Your staff should be paid market rates for their positions. Overpaid staff, more often than not create problems for the sale of your practice. Your total staff cost should be approximately 25 per cent of gross. If you have long term staff that you would like to reward, it is better to do it with bonuses and not salary. It will enhance the value of your practice if you get all of your staff on professionally drafted employment contracts. If you do this, it is critical that it be done properly, with enough notice, and proper legal documentation. Plan on doing this at least two years before you sell.

Associates can be a significant benefit to a dentist. They allow you more personal time, work the hours you don’t want to work, and increase practice revenue. They can also be a significant risk. They get to know your patients and may or may not be a potential purchaser of your practice.

If you have an associate, you must have the associate sign an associate agreement, prepared by a reliable lawyer, prior to the associate seeing any patients. The agreement must contain non-competition language within a reasonable geographic radius and non-solicitation language for patients and staff. Many associates believe they are entitled to buy your practice at lower than market value because they have contributed to the value through their own work, and because they have relationships with “their” patients. This is obviously not true; however it highlights the necessity for the agreement.

You must have clean financial statements that are prepared by an accountant. The results shown on your financials must be corroborated with the production reports

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from your practice management system and must also align with your bank statements. If you offer discounts and have to write-off portions of fees, this must also be reflected in the reports. If there is any cash or bartering accepted for treatments, this will not be included in the financials and will have the effect of actually reducing the value of the practice.

This is because typically the costs for staff and supplies for those treatments will be reflected in the reports with no corresponding revenue.

This is a very competitive market for buyers which may lead some sellers to conclude that anything can be sold. This is not the case. Buyers are smart and well advised. The dollar amounts involved in these deals are very significant now so they will do their diligence before committing to completing the purchase. They will analyze all the areas that I have discussed in this article and will not complete the purchase if they are not satisfied with the results. The sellers that are prepared and have clean records, balanced financial metrics, good staff and patients will enjoy a smooth, stress free and rewarding transition.

This is a very competitive market for buyers which may lead some sellers to conclude that anything can be sold.

This is not the case.

Please send comments to

David Lind is a Principal and Broker of Record in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices. He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: david.lind@ppsales.com

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Dental Practice Names

David E. Rosenthal BA., LL.B.

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riginally dentists were required to practice dentistry only using their personal names as registered with the Royal College of Dental Surgeons of Ontario (College).

However, dentists are now permitted to carry on dentistry using a practice name other than their personal names.

Before using a practice name, that name must be registered at the Ontario Ministry of Government and Consumer Services (Ministry), as required by the Ontario Business Names Act (BNA). The fundamental requirement of the BNA is straightforward. No individual shall carry on business or identify his or her business to the public other than his or her own name unless the name is registered under the BNA. The same restriction applies to corporations, including dentistry professional corporations. The name registration at the Ministry is valid for five years and must be renewed every five years.

A practice name is not a separate legal entity but rather a business style. The BNA requires that when carrying on business using a practice name, the practice name and the person’s name (or your dentistry professional corporation if it owns your dental practice) be set out in all contracts, invoices, negotiable instruments and orders involving goods or services issued or made by the person.

Before using a practice name, that name must also be registered at the College. Depending on the practice name, such name might require approval by the College’s Executive Committee before its use is permitted.

Note that generic names that do not contain a descriptive element would not be considered a practice name (for example ‘dental centre’, ‘dental clinic’ or ‘and associates’) but the principal dentist is still required to notify the College in writing of the names and certificate numbers of all dentists who practice at the location. Similarly, the principal dentist

is required to notify the College of any changes in the dentists who practice at the location within 30 days of the change.

However, if you add a descriptive element or word, then the name becomes a specific practice name and requires formal registration. Adding, for example, the word “Main Street” to any of those generic names will create that descriptive element and trigger registration requirements.

As outlined in the College’s Practice Name Advisory, if the practice name is “reasonably referable to the location of the practice” then registration is required, but approval of the College’s Executive Committee is not required. Names such as Bay Street Dental Centre or Main Street Dental Office would be acceptable under this category. Often a dental practice is located in a shopping mall or plaza, so if the practice was located on Bay Street at the Bay Plaza, a name such as Bay Plaza Dental Centre would also be acceptable.

However, any other practice name that does not refer to the practice location does require Executive Committee approval. As indicated in the Regulations of the Dentistry Act, 1991, the College will not approve a practice name that contains information that: (i) may be potentially misleading, (ii) is not verifiable by facts, (iii) makes comparisons to other dental practices or dentists, or (iv) is likely to create expectations of favourable results or appeals to the public’s fears.

It is very important to note that a practice name must also comply with the advertising regulations and the College’s Practice Advisory on Professional Advertising. Due to space limitations this article does not discuss the advertising regulations. However a practical tip for dentists who wish to advertise is as follows:

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The College will offer advice about any proposed advertisement. If there is any doubt regarding the propriety of your proposed advertisement, please send a copy of the proposed advertisement to the College for their review and comment.

This is one of the many invaluable services provided by the College to its member dentists.

When purchasing a dental practice, typically the purchaser acquires the rights of the vendor to continue to use the practice name associated with the practice. This involves filing at both the Ministry and the College. Your lawyer can assist you in ensuring proper registrations are completed and required approvals are obtained.

No individual shall carry on business or identify his or her business to the public other than his or her own name unless the name is registered under the BNA.

Please send comments to

David Rosenthal is a senior lawyer with Spiegel Rosenthal Professional Corporation whose practice is devoted to corporate, commercial and business law, with special emphasis on advising dentists. He can be reached at (416) 865-0736 or e-mail to david@drlaw.ca.

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Good News Coming From the Investment Industry

Mark McNulty BA, CFP®, CIM®

T

he Canadian investment industry is finally starting to become more transparent when it comes to your costs and performance. Sometimes when I look at the reports put out by investment dealers, it almost feels like they are trying to confuse you. As an investor what I want is pretty simple – how much did I start with, how much do I have now, what was my investment return, and how much did I pay in management fees?

Securities regulators in Canada have enacted Client Relationship Model Phase Two (CRM2). For the very first time, advisors will be required to include a page in their regular reporting that details the commissions and compensation you’ve paid for investing and advice. Investment firms will be required to follow new disclosure rules covering fees and other expenses, including trailer fees, redemption fees, point-of-sale commissions, switching fees and RRSP administration fees. The requirement is that a report be provided to clients which itemizes each cost and provides an aggregate dollar figure for the relevant 12-month reporting period.

Beginning July 2016, CRM2 also requires your firm to give more information about your returns. Until CRM2 there was no legal requirement to show performance.

The rationale behind CRM2 is to achieve a higher level of disclosure to clients and therefore more transparency with respect to how much the client is paying for financial advice and management. Many fees are currently hidden in the cost of purchase or embedded in commissions that fund companies pay directly to brokers. These sorts of fees are not generally disclosed to the client. The result is that some clients are often not aware of how much they are paying their advisor and thus have no way to gauge value for their fees.

And without directly asking the advisor, which can bring up

an awkward conversation, there is no easy way for the client to find out.

The new regulations apply to commissioned brokers as well as fee-based advisors, although commission-based accounts are most affected. Many commission customers have no real understanding of the fees they are paying indirectly through commissions, trailer fees and deferred sales charges. The level of disclosure to fee-based clients is certainly at a higher level to begin with, since fees are paid directly by the client to the advisor and much of the relationship between a fee-based advisor and the client revolves around the level of service provided in return for those fees.

This new drive for increased client understanding and the transparency of fees is positive for the industry – both advisors and clients. Initially there may be a period of adjustment and dislocation. There will be occasions where unhappy clients will now be able to ask hard questions about the costs of their advisor and how the fees are affecting their portfolio returns. Certainly many will look for new advisors.

Similar legislation to CRM2 has been implemented in Australia and the UK. Subsequently thousands of investment advisors left the business.

Advisors who have been putting clients’ money to work in high-fee investments in order to receive trailer fees will be put to task and will have to grapple with hard questions about the service and performance that clients are receiving in return for those fees. These types of discussions can only serve to raise investor awareness and understanding, and the end result of the new regulations should prove to be beneficial.

The bedrock of the advisor/client relationship is honesty, openness and trust. More disclosure and discussion about fees and costs to the client can only lead to better long-term

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More disclosure and discussion about fees and costs to the client can only lead to better long-term relationships.

relationships. The industry as a whole is behind the new regulations, and clients will certainly welcome the new disclosures. While the topic of fees has been gaining attention in the mainstream media, until now there has been no real pressure or, at least, incentive for advisors to talk to clients about the fees they charge. Starting a new relationship with an advisor or with a client with no hidden agenda, and complete disclosure about the costs upfront, means there should be no surprises along the way.

Feedback can be sent to info@mcnultygroup.ca

Mark is President of McNulty Group, a firm responsible for $250 million of Ontario dentists’ retirement savings. McNulty Group helps professional families transition from a life of successful practice to a stress-free retirement by using a holistic approach of practice and personal retirement planning. In addition to multiple television and radio appearances, Mark is the author of The Transition Coach 2.0–A Canadian Dentist’s Guide to a Perfect Retirement and The $6 Million Dentist: Successful Succession in 7 Modules.

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Advisory TheProfessional Advisory FOR DENTAL PROFESSIONALS

The Professional Advisory

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FOR DENTAL PROFFESSIONALS

VOL. 63 February 2014

Progressus – a going forward, advance

Visit our website at www.professionaladvisory.ca to view current issue and complete archives.

ProfessionalAdvisory.ca

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Left to right: David Rosenthal, BA., LL.B. Spiegel Rosenthal Professional Corporation Barristers and Solicitors Ron Weintraub, DDS Innovative Practice Solutions David Lind Principal, Broker of Record Professional Practice Sales Ltd. Ian D. Toms, B.Sc. (Hons) Broker of Record Realty Lease Consultants Inc. Mark McNulty, BA, CFP, CIM Director, Private Client Group McNulty Group, HollisWealth David Chong Yen, CPA, CA, CFP DCY Professional Corporation Chartered Accountants

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