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A New Way to Plan for Retirement

26 Dec 2012

You have a WELL-DEVELOPED PRACTICE and you’re contemplating retirement. But retirement laws have held back minimum funding of a pension plan that would have allowed you to live as you wanted. However, now you can obtain both immediate cash and ongoing, noncash benefits by combining a newly defined benefit pension with an early sale of your practice.

The plan involves starting a new retirement program now, using cash from the sale of your practice to fund the retirement program and start living the “good life” earlier. In short, combining the sale of your practice with an employment contract from the buyer may very well produce a better result than continuing to work full-time and trying to sell at a later date.

Recent pension law changes enable a dentist to obtain the highest price for a practice while the practice is at its peak value. Much of the payment price can be deferred into a retirement plan, which will generate tax deductions for the retiring dentist. Actuarial funding levels for defined benefit plans can range from $30,000 per year to $200,000 or more per year, all fully tax deductible and all with the blessing of the IRS. The pension plan law allows the seller to make the maximum contribution without worrying about previous contributions to a defined contribution plan.

By selling the practice at its peak, the seller can obtain a much better price. The price can be negotiated so that part of the sale package includes continuing employment for the number of years needed to adequately fund the retirement benefits under the new pension plan.

This is where the services of an experienced sales broker are invaluable. The broker’s task is to evaluate the practice, locate the buyer, and work out the transaction so that all parties benefit.

In the long run this means less stress and more vacation time for the seller. Using an employment arrangement instead of a partnership agreement can reduce legal costs and the level of future risk. At the same time, the purchaser will gain from being involved in a mature practice instead of working to revive a declining practice.

If necessary, the retiring dentist can live on other assets while funding the maximum into the pension plan. If the seller is married, anything the spouse earns from separate employment can also be used to cover living expenses during this time. Since a substantial amount of the monies paid to the dentist will not be in the form of current taxable income, this will put the dentist in a lower tax bracket — a tax strategy the accountant will love.

Benefits that the seller accumulates in the plan will be rolled over into an IRA when the seller actually retires. The funds can be stretched out over a number of years and even past the death of the retiring dentist with minimal tax consequences.

The retiring dentist stays on the new company’s payroll. Payments that otherwise would be made to the retiring dentist for the sale of the practice go instead to fund the salary for the seller under the employment contract, and to fund the new pension plan. Since the retiring dentist is likely older than the other employees, the bulk of the pension plan contributions should be made on behalf of the retiring dentist. The result is that substantial monies go into the pension plan for the retiring dentist and are fully tax deductable by the practice.

The time to plan your retirement is long before you actually retire. Recent changes in the law now allow you to shorten that planning timetable. By taking advantage of these changes, you will be preparing for a better life for yourself and your entire family.

Alan Clemens, MBA, president of the Clemens Group, serves the states of New York, New Jersey, and Connecticut. Clemens is also a member of ADS, Practice Valuation Study Group, and has lectured nationally and locally on practice transitions for more than 35 years. Reach him at (800) 300–2939 or (888) 419-5590, ext. 212. Visit the company’s Web site at www.theclemensgroup.com. Send him an e–mail at clemalan@theclemensgroup.com.
Written by  Alan Clemens, MBA Read 4447 times

ADS Precise Consultants

ADS Precise Consultants have over 25 years of experience selling dental practices in the Rocky Mountain Region. We focus on AZ, CO, WY, NV, UT, NE, and KS and know the laws, demographics and insurance plans for each state. Our team will perform a close analysis of your individual practice and provide personalized attention throughout the process of selling or purchasing a dental practice. We use appraisal industry guidelines to accommodate individual practices and can even help you relocate to any part of the U.S. Not only will our agents and brokers work with you closely, but we have built professional relationships with attorneys, CPAs, insurance agents, consultants, and banking institutions to help create the most positive outcome possible whether you are selling or purchasing a dental practice. Ultimately, our goal is to help you save time, hassle and money.

Advantages of Working with ADS Precise Consultants

Working with ADS Precise Consultants provides full exposure of your dental practice to the market through the following methods:

  • Monthly newsletters
  • Classified ads in numerous dental magazines and websites
  • Local, regional and national dental meetings
  • Dental seminars and other related marketing venues

Beyond the different marketing methods we also have full-time brokers that assist in pushing transactions through to completion from the acceptance of the offer until you have been funded. We use 25 different broker firms with over 70 agents that have working relationships with thousands of individuals who are in the market to purchase a dental practice in Colorado or the Rocky Mountain Region. Each agent and broker operates independently so you have dozens of “mini-brokerages” all working at the same time to find you a buyer.

Everything is monitored and guided from start to finish. Our service enables you to focus on your dental practice instead of dealing with each individual aspect of the sale. We have established relationships with every major banking and financial institutions involved with financing dental practice acquisitions. This allows us the broadest access to methods of funding your sale.

Selling a Dental Practice

The first step in helping you with selling your dental practice is to have you fill out the Seller Packet on our website which will then be forwarded to Peter Marabito and Jed Esposito. Once the Seller packet is submitted, the information will be reviewed and we will contact you for additional information in order to develop a pricing model for you. We do not charge to develop a pricing model. We evaluate your current financial information and then conduct a short phone interview in order to gather information about your dental practice. Estate appraisals are available upon request but are not required to give your practice a sale value.

Once the pricing model is completed, we will contact you to schedule a time to review your dental practice and go over the listing agreement. We will also discuss our strategy to sell your dental practice and answer any questions that you have.

Once the listing agreement is signed, our brokers and agents will visit your practice in order to become familiar with it and be able to answer any questions from potential buyers. At this point, your practice will be placed on the market for sale.

We understand that each practice is different and we are confident that we conduct the best methods in order to provide you the most qualified buyers in the least amount of time. Once you have selected your candidates, the process as a whole usually takes 45 to 60 days to complete the entire transaction.

Buying a Dental Practice

ADS Precise Consultant’s objective is to train a potential buyer on the proper method of moving through the purchasing process. The first step is to pair you with a trained and licensed broker who will conduct a phone interview with you to obtain basic information and determine your wants and needs. The assigned broker will be your personal contact throughout the process with ADS Precise Consultants.

We prefer to meet with you in person at our Denver office in order to develop a more personal relationship with the agent and broker you will be working closely with to go over what to look for when considering to purchase a dental practice and how we develop and provide information as well as answer any questions. We understand that meeting with us in person isn’t always a possibility so we are always available to meet over the phone and answer any questions along with assisting you with your dental practice search.

If you are interested in purchasing a dental practice, we would be pleased to keep you advised of your options on an ongoing basis. There is no cost or obligation to be added to our lists or to be kept informed of what is on the market. We do ask that a confidentiality form be signed as we will be sharing privileged information with you regarding our listings.

Because of the busy market for dental practices, we encourage you to provide your broker an email address so we can quickly and conveniently update and keep you advised of any new listings. We can also keep you up to date through a fax number or phone call if you prefer. We also maintain a complete listing of all current dental practices for sale on our website as well.

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