General practice tool kit

Becoming an owner of a general practice

Choosing the type of business structure you want

Last revised: 24 Oct 2019

How do you decide what you want?

Another of the first decisions you will need to make is the type of business and business arrangement that you want. Answering the following questions will help you to decide what will be best for you.

  • Have you decided to buy, join, or take over an existing practice, or start your own?
  • Do you want to be the sole owner, or will you go into business with someone else?
    • If you want to go into business with someone else, that other person doesn’t have to be a GP.
    • Although many general practices are owned or managed by one or more GPs, successful general practices can also be owned by entrepreneurs, developers, or health professionals.
  • If you’re going into partnership:
    • how might the partnership affect the personal relationships you have with your prospective partners?
    • what partnership agreements do you need?
  • What business structure will work for you? Talk to an accountant about different business structures, and see Business structures below.
  • How long do you want to own this practice? For a few years, or until you retire? What will happen if/when you no longer want to own the practice?

In Australia, general practices are owned and managed under different business structures, and all are regulated and monitored by federal and state legislation and authorities.

Each business structure has different obligations, advantages and drawbacks, along with different risk profiles, tax implications and levels of complexity.

The most common business ownership structures are explained below. If you’re not sure which one is best for you, use the Australian Business Registration Service’s online tool to help you decide, and seek advice from an accountant or other business specialist.

Sole trader

Operating as a sole trader is the simplest business structure in Australia. As a sole trader, you have full control of the business, and are legally responsible for the business in its entirety, including any debts and losses.

Partnership

A partnership is owned by 2-20 people who share the income, losses and control. Although a written partnership agreement is not legally required to operate a partnership, it is highly recommended. The agreement should specify how income and losses will be distributed, as well as the process for and consequences of dissolving the partnership. Use a lawyer to create an agreement that it is both fair and legally binding.

Partnerships are governed by the state or territory in which the partnership operates.

Companies

Companies are considered to be separate legal entities and as such can be “treated as a natural person”, which means they can own assets, incur debt, sue, and be sued.

The owners of a company are shareholders, and the business is managed by one or more directors who are appointed by the shareholders. Under this structure, owners are generally personally exempt from company debt and personal liability, and all moneys earnt belong to the company (not the individual owners).

General practice companies (also known as corporates) often own multiple practices.

Service entities/Trusts

Many medical practices use this structure in which the doctors form a professional firm (often a company) and use a service entity (often a trust) to provide the non-medical services to support the provision of medical services to patients.

The service entity (or trust) employs staff, provides the general management and operation of the practice, and takes care of the practice’s facility (including the power, telephone, computer services). Property assets (such as the premises) can be owned by this entity or a separate entity. Separating the ownership between entities provides a form of asset protection.

In a trust, a trustee can hold assets on behalf of one or more beneficiaries. Many doctors set up medical practices where a family trust (or discretionary trust) owns and operates the entity that owns the service entity, so that family members are beneficiaries who receive income from that entity.

As your business develops, its structure may also change. For example, you might begin as a sole trader and later enter into a partnership or form a company.

If you decide to change your business structure, seek professional advice so that you understand the financial and other ramifications of your decision.

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