The Best Business Structure for a Medical Centre

Best Business Structure for a Medical Centre: It is common in Australia for Medical practitioners to join forces and service their
community from jointly owned medical centres. A medical centre is a facility that provides
medical services to patients. It is usually staffed by a team of medical professionals,
including doctors, nurses, and other healthcare professionals.

By combining medical professionals, medical practices can benefit from economies of scale
and cost-sharing for practice management, insurance, accounting and tax expenses. It may
offer access to a wide range of medical resources, such as diagnostic equipment, medical
supplies, and pharmaceuticals, which can help diagnose and treat patients.

This allows medical professionals to develop excellent knowledge through conversations
with partners and peers. Additionally, medical practitioners affiliated with the same practice
have a unified understanding of the standard operating procedures and protocols, offering
continuity in patient care.

Partnering with other medical professionals can be an invaluable asset for a medical
practice. It allows medical practitioners to focus on what matters the most: their patients
and their care, while allowing others to take care of the managerial and administrative
tasks.

Common Business Structure for Medical Practice

A properly established business structure allows a group of medical practitioners to
maintain a service entity together, relieving them of managerial duties, while each
practitioner gets to manage their practice separately. Generally speaking, a partnership, a
company or a unit Trust can be established to hold the Medical centre for various doctors
and medical professionals.

At Investax, we do not establish a general partnership-type structure for doctor’s clinics due
to the joint liability and the lack of asset protection, even though partners might contribute
differently towards the ownership. So we have focused mainly on Unit Trust and Company
Structure for Medical Centre.

Unit Trust

A Unit Trust is one of the most common business structures doctors use to hold their
Medical Centre business.

In a Unit Trust structure, a Trust is established that allows each doctor to have their own
entitlement/ownership, and a Pty Ltd company acts as a trustee of the Trust. The unit Trust
issues units to doctors holding entity which is generally their family discretionary Trust. Each

In a Unit Trust structure, a Pty Ltd company acts as a trustee of the Trust.

doctor or their nominated entity generally becomes the shareholder of the Trustee
company.

The advantage of using The Trust structure –

1. The Unit Trust doesn’t pay any tax
2. Profit gets distributed to the unit holders according to the ownership percentage
3. If the Unit holder is a company, the unit holder will pay the relevant company tax
4. If the unit holder is a Discretionary or Family Trust, the Trust will get all the benefits
   related to the Discretionary Trust
5. 50% capital gain discount on the sale of business or assets
6. Small business concessions, if eligible
7. Minimum or no Div 7a Loan issue
8. Easy to exit during retirement or early retirement

Company –

In Australia, medical practitioners also structure their practice as a company. The Company
issues shares to doctors holding entity which is generally their family discretionary Trust.
The advantage of using the Company Structure –

• Lower tax rate – Medical practitioner companies are taxed at the company tax rate of 25% for small businesses
• Limited Liability
• Profit can be retained in the Company after paying the tax
• Use of Franking Credit to reduce the personal tax burden
• Less costly establishment compared to the Unit Trust
• If you own Real Estate, you get Land Tax Threshold
  

Medical practitioners can also structure their practice as a company

Asset protection for both Company and Trust

1. Limited liability – Shareholders of the trustee or a medical practitioner company
   have limited liability, meaning they are not personally liable for the business’s debts
   beyond their investment.
2. Protection of personal assets – As the Company and the Trustee are separate legal
   entities, shareholders’ and Unit Holders’ assets are generally protected from legal
   action against the practice.
3. Creditor protection – If the Company/Trustee cannot pay its debts, creditors can only
   pursue the assets of the Company/Trustee and not those of the individual
   shareholders.

Commonly used provisions in Shareholders or Unit holders agreements –

• Buy-in and buy-out clauses
• Service Fee clauses for day-to-day operations
• Qualification requirements for the practitioners
• Voting requirement for key business decision
• Exit clauses with the restraint of trade period and territory
• GST requirements
• Leave clauses

Which structure is best for you –

A business structure is the key to your business success. Each business structure has pros
and cons, so you should carefully weigh all options, considering all the crucial considerations
and discussing them in close consultations with your trusted business advisors and
accountants.
When structuring your medical practice, you should get tailored advice to meet your specific
circumstances. It is important to keep in mind that your medical practice is a complex
system of interdependent parts. As such, any modifications to the business structure should
be evaluated thoroughly and strategically to protect its long-term success.
At Investax, we aim to design your business structure to maximise tax benefits and increase
asset protection for you and your medical centre.

We offer a 15-minute free consultation to discuss your tax, property investment and business needs. Book your complimentary consultation now.

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General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Invetax, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.