‘Tis the season … to review! The end of the year can bring joy and excitement, but it also nudges us to reflect on the past 12 months and review where we are. Many people use this time to book annual physical health checks and visit their accountants and financial advisors to see how their financial health has faired. But few people take a look at their Legal Health. But while you’re in review-mode, why not be proactive and see how legally healthy you are too?
Being proactive with your legal affairs, both in your business and your personal life, can avoid future legal problems and help to ease future burdens that could be left to family and loved ones.
But what is a Legal Health Checkup? Let’s take a look at the areas you should review and what you’ll want to watch out for.
- Are You Incorporated?
- Do you have a commercial lease?
- Do you have Team Members?
- Do You Have a Will and Powers of Attorney?
Are You Incorporated?
If you are running your own practice, or even if you are successfully associating, you should give some serious thought to incorporating. As you earn more money, there are more complications and tax implications to consider. A Dentistry Professional Corporation could allow you the opportunity to income split with family members and take advantage of the lifetime capital gains exemption. But this is not something you should do on your own.
There are a lot of nuances and compliance requirements involved in creating a new dentistry professional corporation. To avoid wasting time and money with mistakes, you should have a lawyer help you through the process. DMC can help guide you through all the options available and complete the setup process for you. And if you need financial and/or tax advice, we can connect you with the best professionals in the dental industry today.
Do you have a commercial lease?
If you have a lease for your dental practice’s office space, you will want to look at it. Why? Because of most lease agreements’ complex and longstanding nature, many people happily put it away and don’t look at it again once it’s been signed. But there are many reasons to take it out and have another look.
How many years do you have left on your lease, and do you have a renewal option coming up?
Many tenants forget or don’t know that you need to give your landlord notice that you want to renew within a specific timeframe. And if you miss this window, you could be putting your entire practice in jeopardy. Make sure you take a look at all the key dates and note them in your calendars. For more on the importance of being on top of your lease renewal timeframe, check out this previous post.
Is it relatively easy for you to transfer your lease to another dentist/dentistry professional corporation if you decide to sell or move on?
In our experience, landlords can be notoriously difficult to deal with. If you didn’t have a competent lawyer helping you negotiate, you could have missed some clauses that solely benefit them. If you’re planning on ever selling your practice, you’ll need to have a lease in place that can be easily assumed by the prospective purchaser. Acting on any problematic terms now will help make the future sales process much more straightforward. We have seen entire deals die due to a bad lease.
Is there a demolition clause or early termination clause in favour of the Landlord?
A demolition clause gives the Landlord the right to terminate your lease if the building needs to be demolished. Some demolition clauses kick-in if the landlord simply wants to renovate or if you ask to reassign your lease. Landlords love including this ‘get out of jail free’ card. So, if you’re renting in an older building, you could be kicked out with no compensation after spending years building up your practice or paying a lot of money to buy the practice!
Is the Landlord fulfilling their end of the lease terms?
Like the demolition clause, your lease could contain many terms that, upon closer review, only favour your Landlord. Not only do you want to take note of these for potential renegotiation, but you also want to note the terms that are favourable to you. Is the Landlord doing everything agreed upon to take care of the surrounding property, parking area, building maintenance, etc.? Are there options to have any large leasehold improvement projects covered (fully or partially) by the Landlord?
For more information on critical areas of a commercial lease and how they affect you, visit our blog’s Leases section.
Do you have Team Members?
Your team members are the lifeblood of your practice. They include your hygienists, front-desk team, assistants, office managers and dentist associates.
Are they on employee contracts or contractor agreements?
Having proper employment agreements can limit future liabilities (e.g. the amount you may have to pay to an ex-employee), help you in court should a former employee ever seek compensation from you, and offer clarity on matters that the Ministry of Labour can enforce.
Are those contracts and agreements correctly drafted and still legally valid?
An example we often see is an employee with an independent contractor agreement who is actually working as an employee. The Canada Revenue Agency may allege that the employee is not an independent contractor. And if they do, it will negate any expense savings you had from that prior classification. A finding against you would force you to pay all of the un-withheld taxes, CPP, and EI for potentially the whole time they have been working with you, plus interest and penalties. Ouch!
Employment law is always in flux. Without reviewing and updating your policies and procedures, you might find yourself with employment agreements and office policy manuals that are out of date or obsolete. Our Employment Team can review your current contracts and policies and work with you on a strategy to implement new policies, procedures, and agreements to protect you and your practice. And if you don’t have any, there’s no better time than now to get some set up and start minimizing your risks.
Do You Have a Will and Powers of Attorney?
Haven’t you heard? You need a Will! It’s prudent to review (or create) your Will before you travel, undergo significant medical procedures, and when you experience a substantial change in your family or financial situation. So, if you don’t have one, or if you decided above that it’s time to incorporate, now’s the time.
What are you risking?
Without a Will, you risk leaving behind a mess. Your estate may not be administered in a timely fashion or by someone you would have selected. Your property may not be distributed to beneficiaries you had in mind (and perhaps not in the most tax-advantageous manner). And you may not like who ends up being responsible for your dependents. And worst of all, it could delay or undermine the sale of your dental practice. This adds to the risk of not getting money from the value of your practice into your beneficiaries’ hands.
Do you have the right type of Will?
Now that you know it’s time to create or update your Will, let’s talk about your second Will. That’s right, if you have a dentistry professional corporation and you want to save on estate administration taxes, you should actually have two Wills: a corporate Will and a non-corporate Will. For more information on the different types of Wills and their benefits, review our previous posts here.
Your Legal Health Checkup
So, now you’re ready to start your own Legal Health Checkup. If you have questions or want help with any of these areas, please give us a call. We not only have expertise in helping buy and selling dental practices, but we are also ready and happy to help with employment contracts, lease agreements and advising on wills and estates. The DMC team is dedicated to helping dentists succeed and improve both their business and their lives by saving them time and money. Send DMC an email any time.
