Selling a part of your practice?
March 22, 2011 @ 9:32 am
posted by Deon
massage I had a very interesting meeting today with a Physiotherapist who is looking at selling a part of her practice. You might ask, as I did, why she wants to do this? The answer came back, I would like to retain a current staff member who is very valuable to my practice. I would also like to ensure the long-term survival of my business, which I have spent a good 6 years building up.

We continued to explore the various options available within the current business structure of her practice, this being a solus practice.

Well in a nut shell we quickly agreed that there are not really many options in this format, other than employment or association to bring someone on board. Associating with another business or practice does have its benefits, but does not contribute directly to the growth in your own business value.

So what are the current options available to a healthcare practitioner in South Africa, under the current legislation. Well there is the option to stay as a single owner solus practice, or you could register the business as a

  • Partnership
  • Incorporated company

You cannot under the Health Professions Council of South Africa regulations, register your practice as a

  • Closed corporation
  • Pty (Ltd)

as both of these offer a degree of shelter behind the corporate vale

So where does that leave us? Well, if my auditor’s advice is anything to go by, “A partnership is a sinking ship!”I would not take it that far, but certainly try to learn some lessons from this, being:

  • If a partner ever decides to leave from the partnership (or dies), the business entity needs to be dissolved, and started again under a new name
  • The name of the business, and the business as it is,will not have a long-term life span

Here are some of the benefits of setting up the business structure as an Incorporated Company

  • You declare shares, making the ownership of the business proportionate to the number of shares you own
  • These shares can be purchased and sold. This allows for the dynamic flow of ownership of the practice, without jeopardising the longevity of the business or its on-going concern as a viable practice
  • Share value in relation to the value of the practice gives instant Return on Investment information to shareholders

Sure, so there must be a down-side to establishing an Inc. These include:

  • You will have to spend the money on registering the Inc., which can be more than registering other business structures
  • You will have to be audited yearly, which carries it’s own costs. In my experience though, a good auditor and good tax advice can often offset these additional costs

So where does that leave us? Well, if you are looking at taking your practice seriously, and want to build up a true asset which can work for you as a business, then consider an Incorporated company.

Why not make the shift from working for yourself, to owning a business?

After all, who owns whom?