Dental Risk Management Webinar Replay

R.K. Tongue and the Professional Protector Plan for Dentists (PPP) partnered with the Virginia Dental Association to present the PPP’s newly-launched Dental Risk Management Webinar May 12th and 14th, 2020. If you missed the live webinar, you can now access the recorded sessions. Recorded session attendees receive the same great information, CE credit, and PPP malpractice insurance policy discount!

Click here to register and attend day 1

Click here to register and attend day 2

Features & Benefits of the Course:

Covers the latest claim information and real life experiences of colleagues to help mitigate risk.

Earn up to 4.5 hours of CE credits.

PPP insured dentists will receive a 10% risk management credit on their professional liability premium for 3 years.

Dentists not insured with the PPP may be eligible for risk management credit by purchasing coverage within one year of completing the course.

COVID-19 Insurance FAQ

Plain-English Answers to Your COVID-19 Insurance and Benefits Questions

Will business interruption insurance pay for my lost collections due to office/business closure?

Most likely, no. In the absence of an Act of Congress, Commercial business interruption insurance generally requires direct physical damage to a covered property as a trigger. When in doubt, file a claim since only your insurance carrier can make a final determination.

Does the declaration of a national or state emergency, mandatory business closure, or stay-at-home order change my business interruption insurance claim eligibility?

In the case of COVID-19, no. Business interruption insurance typically includes a “civil authority” provision that extends business interruption coverage when access to an insured office is specifically prohibited by the government or similar authority, but this provision still requires direct physical damage to property in the immediate vicinity of an insured office. Only an unprecedented and potentially unconstitutional Act of Congress can cause an insurer to provide coverage that is not otherwise present within the policy contract.

Will malpractice insurance provide for defense and indemnity expenses if a patient alleges exposure and infection due to dental services?

Yes, assuming the exposure and infection relates to a “dental incident”. However, specific claim circumstances must be examined in order to determine coverage, and exceptions will exist. For example, exposure that occurs in a reception area or dental office building when no dental services are rendered would likely be disclaimed by malpractice insurance but very likely be covered by General Liability insurance.

Does the declaration of a national or state emergency, mandatory business closure, or stay-at-home order change how my malpractice insurance responds?

It may. For dentists, professional associations like the ADA and most state dental associations initially recommended that dental offices cease all non-emergency operations. Most healthcare organizations were similarly guided to cease performing elective procedures. More recently, governments and civil authorities legally mandated the total closure of dental offices except in cases of emergency. Failure to comply with laws or mandates can trigger exclusions within the malpractice insurance policy.

As a further result of mandatory closures and stay-at-home orders, some insurers or programs that use “warranty statements” within their applications and policies are proactively imposing coverage restrictions associated with COVID-19.  Meanwhile, insurance programs like the Professional Protector Plan and Physician’s Protector Plan utilize policy language that defers to dental licensing and regulatory authorities to govern coverage.  When in doubt, contact the company or your agent/broker for guidance.

Are malpractice insurers providing COVID-19 risk management and standard of care guidance?

Generally, malpractice insurers and program administrators are providing resources and risk management guidance.  This guidance often includes heightened infection control protocol and specific discussion and informed consent concerning COVID-19.  Nevertheless, standard of care remains defined by the average level of care exercised by a prudent provider in the community. 

Will my insurance company provide me with premium payment relief during the COVID-19 outbreak?

Most insurance companies are voluntarily offering extended grace periods for premium payment and some are working on ways to provide discount credits or deferred payment opportunities to policyholders whose businesses are shut-down or in cases where normal business operations are significantly limited. Additionally, insurance regulatory authorities in some states mandate policy cancellation forbearance and extended premium payment grace periods. Policyholders should consult with their insurers directly to determine what premium concessions are available.

Does health insurance cover business-owners or employees who become sick or need testing?

Medical needs associated with contracting the coronavirus are generally a covered health insurance claim.

If an employer furloughs or reduces hours for some or all employees in response to the COVID-19 National Emergency, can the company continue to cover those employees on their fully insured group health insurance plan?

For most carriers, YES. Most carriers are temporarily relaxing their requirement that employees be actively working to be eligible for coverage and will allow you to cover your reduced hour employees, as long as you pay the monthly premium. Please note that you must offer this coverage on a uniform, non-discriminatory basis.

What continuation of coverage applies if my health plan is fully insured and one or more employees are terminated as a result of COVID-19?

If at least one active member remains on the group plan, standard COBRA and state continuation protocols apply. State Continuation applies to groups of under 20 employees and groups of 20+ employees must adhere to Federal COBRA guidelines. It is the employer’s responsibility to notify employees of their continuation rights.

What if employees are terminated and they do not elect COBRA or it is not available? What other health insurance options do they have?

If employees are terminated and either they do not elect COBRA or it is not available, then the involuntary termination of the group health plan is a qualifying event for them to enroll in an individual health plan. Individuals must elect health coverage within 60 days of the termination, or they will have to wait until the next annual open enrollment period. In addition, some state Exchanges are opening a special enrollment period for Individuals to enroll in health plans as a result of coronavirus. Details and deadlines vary by state.

What if I have to terminate all of my employees and I am the only one left on the health plan?

The impact on the plan varies by carrier. Some carriers allow for “owner-only” groups while others require at least one full-time W-2 non-related employee to be enrolled. Either way, in most cases, your group plan will not be in jeopardy until the renewal date. Keep in mind that involuntarily losing group health coverage is a qualifying event to enroll in an individual health plan.

Will carriers waive any rehire waiting period for re-hired employees who were terminated due to COVID-19?

Most carriers will waive waiting periods for those employees who are rehired after the pandemic.

Are medical carriers considering off-renewal changes for small businesses that may be financially impacted? What if I want to elect a different plan?

Responses vary by carrier. Some carriers permit off-renewal plan changes and others do not.

Can employers use credit cards to pay premiums for fully insured group health plans?

No, most carriers are unable to accept credit card payments for group premium.

Does workers compensation provide benefits if an employee contracts the coronavirus?

Employees who contract the novel coronavirus virus due to a work-related exposure can experience a covered workers comp/employer’s liability claim. Your insurer will evaluate each claim on its own specific circumstances.

Will individual or group long-term disability income insurance provide benefits if I become ill?

Yes, if you remain ill long enough. The effects of the novel coronavirus and related COVID-19 disease can be a covered long-term disability income claim provided the sickness duration meets your waiting period. The most common waiting period for individual disability income benefits is 90-days.

Will overhead expense disability insurance provide benefits if I become ill?

Yes, if you meet the waiting/elimination period. The most common business overhead expense disability waiting period is 30-days.

Will group short-term disability insurance provide benefits if I become ill?

Most likely, yes. Most short-term disability plans have relatively short waiting periods for benefits eligibility, e.g. 7-days for sickness and 0-days for injuries.

I heard that “pandemic insurance is available” can I get it?

Probably not. Specific “pandemic insurance” for business interruption is generally rare. RKT is aware of a London-based specialty market that may offer insurance protection for future pandemics, but this insurance cannot be purchased during an ongoing viral outbreak/pandemic. RKT is also aware of a Canadian insurer that offers an optional business interruption insurance rider for pandemics as part of its business insurance policy. Although we do not know many specifics about this product or its limitations and exclusions, we know that it is not available in the U.S.

Where can I find additional R.K. Tongue insurance and risk management discussion about COVID-19?

Virginia Dental Association / R.K. Tongue webinar – April 3rd, 2020

Walk Carefully! How to Navigate a COVID-19 Liability Minefield by Dental Bites with Dental Zorro and The Smiling Lawyer • A podcast on Anchor – April 8th, 2020

DC Dental Society / R.K. Tongue webinar – April 9th, 2020

Virginia Academy of General Dentistry / R.K. Tongue webinar – May 1st, 2020

When in doubt, file a claim. The foregoing Q&A is for general informational purposes. Only your insurance company can make a coverage determination based on your specific claim circumstances.

*Guidelines vary by jurisdiction and carrier and are subject to change at any time.

COVID-19 / Novel Coronavirus Pandemic Insurance response

Dear Valued R.K. Tongue Co. Client,

Over the last week, The U.S. Federal Government, State Governors and Senior Officials throughout most of the U.S. have declared states of emergency, closed schools, cancelled large gatherings and banned or restricted travel.  Most business-owners and employees of U.S. corporations are confronting the prospect of decreased revenues, supply shortages, and possible closure or remote-work mandates.  Many of those business-owners and employees are looking to their risk management and insurance professionals for guidance.

In these unprecedented times, the R.K. Tongue Co., Inc. (RKT) team takes its risk management and insurance advisory role seriously.  We have already begun implementing business continuity plans to facilitate our ongoing ability to serve your insurance needs.  Additionally, and based on recurring questions, we have put together the following FAQ response and general assessment of the U.S. Domestic insurance landscape as it applies to viral outbreaks and pandemics:

  • Commercial business interruption insurance generally specifies direct physical damage to a covered property as a coverage trigger. A pandemic does not constitute direct physical damage in the context of commercial property & casualty insurance
  • Employees who contract the novel coronavirus virus due to a work-related exposure, may experience a covered workers comp/employer’s liability claim
  • If a business-owner or an employee gets sick or needs testing, such medical needs are likely a covered health insurance claim
  • The effects of the novel coronavirus and related COVID-19 disease are likely to be covered by short-term disability and may possibly be a covered long-term disability income and/or overhead expense disability claim if the sickness lasts long enough to meet applicable waiting periods
  • Specific “pandemic insurance” for business interruption is generally rare.  RKT has recently become aware of a London-based specialty market that may offer insurance protection for future pandemics, but this insurance cannot be purchased during an ongoing viral outbreak/pandemic.  RKT was also recently made aware of a Canadian insurer that offers an optional business interruption insurance rider for pandemics as part of its business insurance policy.  Although we do not know many specifics about this product or its limitations and exclusions, we know that it is not available in the U.S.

Because news about the novel coronavirus breaks rapidly and the response to the pandemic is so fluid, we encourage you to contact our office or the concerned insurance company directly if you experience an adverse event and need to file a claim. 

We understand and share your concerns, fears, and business challenges.  We will provide updates to you, our valued clients, as circumstances dictate.  Please take all relevant precautions to stay safe and healthy.

VDA Services/VDSC Announces Endorsement of RK Tongue, Co., Inc. for Insurance Services

The R. K. Tongue Co., Inc. team is excited to welcome more Virginia Dental Association member-dentists to the R. K. Tongue family! Here’s the full endorsement announcement from VDA Services / Virginia Dental Services Corporation (VDSC).

Mar 6, 2019

Effective April 15, 2019

The Virginia Dental Services Corporation (VDSC) Board of Directors is pleased to announce that effective April 15, 2019, RK Tongue, Co. Inc., a family-owned, multi-generation insurance agency based in Baltimore, Maryland will become the endorsed insurance agency for VDA members.

For the past 19 years, the VDSC has recommended B&B Insurance Associates, Inc. of Burke, Virginia. Over that time, the B&B team has served and guided VDA members with their insurance needs. Recently, the agency leadership made the difficult decision to close B&B this spring. Upon learning about the impending closure, the VDSC Board began a thorough review of respected insurance agencies to succeed B&B Insurance as the VDSC endorsed insurance agency.

Importantly, VDA members that are current clients of B&B do not have to worry about any impact on their current insurance policies with the eventual closing of the agency. Dr. Stephen Radcliffe, President of the VDSC Board of Directors, commented on the transition by saying “Ensuring a smooth experience for VDA members throughout this process is the VDSC’s highest priority at this time.” The teams at RK Tongue and B&B are already working together to make the eventual transition nearly seamless for clients.

“In RK Tongue, Co., Inc., the VDSC has found a partner with a very strong presence in Virginia, and notably within the dental profession. The Board was impressed with RK Tongue’s breadth of experience and their commitment to serving VDA members throughout this transition and in the long-term. I have complete confidence in their ability to provide excellent customer service and insurance expertise to all members,” noted Dr. Radcliffe. With over 1,000 dental clients already in Virginia, RK Tongue and their team of dedicated professionals are looking forward to working with even more members of the Virginia Dental Association and providing the excellent customer service that their clients have enjoyed since the agency’s founding in 1911.

With endorsements from both the DC Dental Society and Maryland State Dental Association, RK Tongue has demonstrated a strong commitment to supporting organized dentistry and they have developed expertise in the unique insurance needs of dental professionals. Ed Gerner, President at RK Tongue commented, “We are honored that the VDSC chose to recommend our agency, we appreciate and respect the great responsibility that comes with this endorsement. We have a long history of serving dentists in Virginia and we look forward to building on that experience to serve the members of the VDA.”

VDA members are welcome to contact either B&B (877-832-9113) or RK Tongue (800-638-6353) at any time during the transition to discuss current policies, review coverage or receive a quote for a new policy. Please note RK Tongue will not have direct access to B&B/VDA Services client policy data until after April 15, 2019.

Together, VDA Services/VDSC and RK Tongue are looking forward to providing an excellent long-term benefit for our VDA Members.

VDA Services is a service mark of the Virginia Dental Association. VDA Services is a program brought to you by the Virginia Dental Services Corporation, a for-profit subsidiary of the Virginia Dental Association.

Hurricane and Disaster Preparation Resources

Hurricane season is at its peak.  If you aren’t already well-prepared for the impacts of deadly and destructive storms like Hurricane Florence, use these resources from our insurance program and carrier partners to prepare and respond:

Resources Courtesy of CNA

www.cna.com/prepwise

Hurricane Florence preparation and recovery resources

Resources Courtesy of Travelers

Storm Preparedness for Boat Owners

Emergency Preparedness for Disasters of All Types

Resources Courtesy of the Professional Protector Plan® for Dentists (PPP)

PPP temporary dental services

PPP Direct Claims and Risk Management Resources  – Claims should be reported directly to R.K. Tongue by calling 410-752-4008 whenever possible.  If you are a dentist and need to report a claim or obtain assistance outside of business hours, or if R.K. Tongue’s operations are interrupted by disaster conditions, please take advantage of these helpful resources

For more information, contact your R.K. Tongue Co., Inc. agent or client service specialist

Dental Malpractice Insurance News

The R. K. Tongue Co., Inc. team is thrilled to announce that the Professional Protector Plan® for Dentists (PPP) is transitioning to a new financial underwriter/insurer, Aspen American Insurance Company (AAIC). The change comes with benefits including bigger discounts for PPP risk management seminar or online course attendance and a pipeline of other innovative policy enhancements that we can hardly wait to share.

If you are one of R. K. Tongue’s 3,000+ PPP-insured dentists, you will notice at renewal that your PPP coverage has been automatically rewritten to AAIC with no additional action on your part. You will seamlessly continue to enjoy PPP program coverage and R.K. Tongue Co., Inc. expertise and service that you deserve and have come to expect.

About AAIC:

Aspen Insurance Holdings Limited is a leading company in the industry, with assets of $12 billion at the year ended 31 December 2016 and over 1,600 employees across 11 countries.

Founded in 2002, Aspen has been listed on the New York Stock Exchange since 2003 (NYSE:AHL). Aspen American Insurance Company, the new writing company for the PPP program, is A.M. Best “A (Excellent)” rated.

About The Professional Protector Plan® for Dentists: 

Through our network of specialized agents, the Professional Protector Plan®  for Dentists (PPP®) has continuously served dentists nationwide since 1969. This comprehensive insurance program was developed holistically for the dental practice by providing insurance protection through professional liability insurance, general liability insurance, employment practices liability insurance, and property insurance products. The PPP is available in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. It is offered locally by exclusive insurance agents, or State Administrators, chosen for their expertise and their commitment to your practice needs. The underwriting companies who partner with the PPP are chosen for their experience and expertise in this field. Combining unparalleled claims handling with unique, innovative risk management programs, your practice and your reputation are given top priority. The PPP is continuously re-examined and enhanced to address the unique concerns of the dental profession. Our National Advisory Board, consisting of  prominent practicing dentists, plays an integral role in our continued development of the program.  The PPP is endorsed by more state dental associations than any other dental professional liability insurance program.

Physicians Protector Plan®/Aspen Insurance rate advantages appear in MD Insurance Administration Med-Mal study

The highly competitive Maryland premium rates of The Physicians Protector Plan®/Aspen Medical Malpractice Insurance program are on public display in The Maryland Insurance Administration’s “2016 REPORT ON THE AVAILABILITY & AFFORDABILITY OF HEALTH CARE MEDICAL PROFESSIONAL LIABILITY INSURANCE”  Access a full copy of the study here.

In the case of some specialties, Physicians Protector Plan®/Aspen Medical Malpractice Insurance program premium rates are 30% lower than those of the largest Med-Mal insurers and risk retention groups in Maryland:

“The Physicians Protector Plan® is a Medical Professional Liability Insurance Program with a singular focus on [physicians] and surgeons working in solo to small group practices. The Physicians Protector Plan team understands the needs of health care professionals working in today’s rapidly evolving health care landscape. Our value proposition is simple — We bring together the best of what the insurance industry has to offer and make it easily accessible to [physicians]” said a spokesperson for The Physicians Protector Plan®

The Physicians Protector Plan®, underwritten through Aspen American Insurance Company, an admitted A.M. Best ‘A XV’ rated carrier with over $11.1B in total assets (as of 12/31/15), entered the Maryland medical malpractice insurance market in 2013 after identifying an opportunity to offer a robust malpractice insurance policy at a lower cost compared to other major insurers.

As stated in the MD Insurance Administration Study, medical malpractice claims are less frequent now than in the preceding decade, yet major medical malpractice insurers and risk retention groups have left rates unchanged: “In Maryland, insurance premium rates increased significantly between 2002 and 2005 before declining in 2006 and remaining relatively stable since then. The largest writer of medical malpractice insurance, an admitted carrier, has not requested any change to its rates between 2013 and 2016. Premiums appear stable, there has been a decrease in closed claims, and a decrease in the number of lawsuits filed.”

R. K. Tongue Co., Inc. is a leading insurance intermediary specialized in professional liability (malpractice) insurance and all other types of insurance and benefits for physicians, surgeons, dentists, lawyers, and professional service professionals.  R. K. Tongue is proudly partnered with the Physicians Protector Plan® wherever it is offered.

New Dental Malpractice Claim Report Now Available

Dental Malpractice Claim Report 2016 imageThe flagship, exclusive dental malpractice insurance program that R.K. Tongue administers in the Mid-Atlantic, the Professional Protector Plan® for Dentists (PPP), just published a hugely insightful dental malpractice claims study.  Download the study here.  The press release and a link to the study follows:

CHICAGO, Feb. 22, 2017 CNA and the Professional Protector Plan® for Dentists (PPP) today announced the release of the Dental Professional Liability 2016 Claim Report, the first report analyzing dental professional liability claims published by CNA and PPP. The Dental Professional Liability 2016 Claim Report examines trends, provides case studies and offers risk management strategies to help dental professionals strengthen their patient safety and risk mitigation efforts.

The Dental Professional Liability 2016 Claim Report includes three sections: Parts 1 and 2 analyze dental professional liability claims, as well as claims resulting from state regulatory civil investigations, within the January 1, 2011, to December 31, 2015 timeframe. Part 3 offers risk management best practices and resources for the dental office, including an assessment worksheet.

The Dental Professional Liability 2016 Claim Report also offers dental professionals an opportunity to learn valuable techniques to enhance their risk management and patient safety efforts, through its focus on the following:

1. Claim frequency and severity for various dental procedures

2. High risk procedures and associated allegations

3. Important patient injury trends

4. Dentist and patient demographic findings

5. Dental procedures associated with licensing board actions.

“CNA is committed to providing tools and resources that will help the dental profession in its mission to provide safe, effective and evidence-based oral healthcare,” said Ronald Zentz, R.Ph., D.D.S, Dental Risk Control Consulting Director, CNA. “The critical first step in reducing exposure is to know the risks, with the ultimate goal of strengthening patient safety and risk mitigation.”

A cross-functional team with extensive experience in dental and healthcare professional liability created the Dental Professional Liability 2016 Claim Report. It represents the most recent addition to the CNA series of claim reports addressing the healthcare industry, which also includes claim reports on aging services organizations, hospitals, nurses, pharmacists and physical therapists.

For more than 30 years, CNA has been a leading underwriter of insurance programs for dentists. In partnership with the Professional Protector Plan® for Dentists, CNA provides professional liability insurance coverages and solutions for approximately 30,000 general dentists and dental specialists throughout the United States, Puerto Rico and the Virgin Islands.

To download the full report, visit: www.protectorplan.com/dental-claims/

5 Ways to Lower Your Future Tax Bills

In case you missed it, 5 Ways to Lower Your Future Tax Bills by E. Andrew Gerner, CFP® was originally published as part of the Maryland State Dental Association’s April 2016 e-mail newsletter.

April 1, 2016

5 Things You Can Do Right Now to Lower Your Future Tax Bills

By E. Andrew Gerner, CFP®

I take pride that the Maryland State Dental Association refers its membership to me and my firm for investment and financial advisory matters.  I wish I could work personally with every member, and I’ll never stop trying to do so.  But I’m a realist and the best I can hope to do is work with a reasonable percentage of Maryland Dentists and MSDA members.  If you work with Tongue | GERNER Financial Services, LLC and me now or plan to do so in the future, thank you.  For everyone else who reads this message, I offer some free analgesic for the sting of tax season.

 

1. Establish and fund a qualified or tax-advantaged retirement plan

If you are an employee dentist at a practice that offers a group retirement plan, chances are that you can make tax deductible contributions of at least $12,500 per year to that plan.  Even better, most employer-sponsored retirement plans will offer some amount of matching contribution to your account.

If your employer offers no group retirement plan, you can establish an IRA and contribute $5,500 ($6,500 if you’re age 50 or older) on a pre-tax basis.

Are you an independent contractor?  If you are, you can establish a SEP IRA and contribute as much as 20 – 25% of your adjusted earned income up to $53,000 on a pre-tax basis.  For a dentist in the highest marginal income tax bracket, the maximum SEP IRA contribution could save him or her nearly $21,000 in federal income tax for the year of the contribution.

Are you an employer?  If your personal taxable income, including profit from the practice is under $150,000, a SIMPLE IRA plan is a generally inexpensive and relatively easy-to-administer way to make tax-deferred retirement contributions of $12,500 annually ($15,500 if you’re age 50 or older)

If you are a practice owner with more than $150,000 of personal taxable income, a 401(k) profit-sharing plan may be a great option.  Such plans allow pre-tax deferrals of $18,000 ($24,000 if you’re age 50 or older).  On top of deferrals, employer matching and profit-sharing allocations can allow up to a maximum of $53,000 of tax-deferred contributions.

If you have sufficient income, need to catch-up on your retirement savings, and are looking for even more tax-deferral on retirement contributions, a defined benefit pension plan, when properly designed and administered, can allow up to an additional $210,000 of tax-deferred contributions.

 

2. Implement active tax management in your taxable investment account

If you have brokerage investment accounts or even savings accounts or CDs with sizeable balances, you will generally pay earned income-tax rates on interest. Qualified dividends and capital gains from brokerage accounts are typically taxed at more favorable rates.  Does your financial advisor offer tax management programs designed to lower the effective rate and amount of tax due for the gains and income in your accounts?  If you have $500,000 or more in brokerage account assets, you may be able to benefit from a reduction to the amount of tax due on income and gains in your taxable accounts by utilizing tax management strategies.
3. Hold a portion of your assets in life insurance or an annuity

To the extent that you have a need for the insurance, holding a portion of your investable assets in life insurance or annuities generally provides the benefit of tax-deferral on income and gains, which can help lower your tax liability every year.  Of course, insurance policies provide certain guarantees and charge additional expenses.  A financial professional, and preferably a fiduciary such as a CERTIFIED FINANCIAL PLANNER TM can help you navigate the complex landscape of hybrid insurance/investment products.

 

4. Consider alternative investments with unique tax features

Certain alternative investments, in addition to providing diversification, can offer tax benefits.  Oil and gas development programs, for instance, usually provide for deductibility of the initial amount invested due to payment of intangible drilling costs.  Real Estate Investment Trusts (REITs) with cost segregation features may pass capital depreciation deductions along to investors, thus reducing the tax that would otherwise be due on income derived from the REIT.  It should be noted that many of these programs involve significant risk of loss of principal and are therefore only suited to sophisticated and accredited investors.

 

5. Consider a strategic Roth conversion

If you have significant positive cash-flow but are showing very little taxable income due to a recent practice purchase or start-up, and you have traditional IRA assets, you may be an ideal candidate for converting traditional IRA assets to a Roth IRA.  Such a conversion requires current payment of ordinary income tax on the value of the converted investment assets, but once in a Roth IRA, no additional income tax is due for withdrawals after normal retirement age.

Want more information about any of the topics discussed in this article?  Contact the author:

eagerner@tgadvisor.com

410.752.4008

 

Disclosures:

Neither Woodbury Financial Services, Inc., nor its registered representatives or employees provide tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.  Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary.  Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.

Securities and Investment Advisory Services offered through Woodbury Financial Services, Inc., Member FINRA/SIPC and Registered Investment Adviser. Additional Insurance Services offered through R.K. Tongue Co., Inc., independent of Woodbury Financial. Tongue | GERNER Financial Services, LLC and Woodbury Financial Services, Inc., are not affiliated entities.

 

Starting or Buying a Business

Planning for your own business

Before you start your own business or buy an existing business, you should do some initial planning. You may have already decided what type of business you want–your own restaurant, retail outlet, service, or manufacturing plant. You need to choose a suitable location–can you work from home, or do you need a separate facility? You should assess your financial requirements, schedule daily activities, and plan for contingencies, which may be included in your business plan. Planning your business usually requires the help of any number of professionals–an attorney or accountant, for example. The success or failure of your business may depend on your initial planning, but how do you plan and what do you plan for?

Factors to consider when starting your own business

Legal structure

You will have to decide upon the legal structure of your business. For example, will you conduct business as a sole proprietor, or will you instead create an entity separate from yourself, like a corporation, partnership, or limited liability company? Each type of entity has its own characteristics, and the structure you choose will depend on which ones you need. Certain forms of business entity offer limited liability protection, allowing you to protect your personal assets from lawsuits involving the business.

Taxation

Uncle Sam takes a special interest in your business! How you and your business will be taxed is an especially important factor to consider. For example, if you choose a C corporation as your legal structure, you may be subject to a double tax–one tax when the corporation makes a profit and another when those profits are distributed to the owners (shareholders). Alternatively, if you choose a partnership, only the owners (partners) are taxed. For this and many other reasons, tax considerations must be weighed carefully.

Accounting and record keeping

Contrary to what many may believe, accounting serves an important purpose. Accounting statements are used to help you and others gauge how the business is doing. To keep your accounting information up-to-date, as well as to prepare for an unexpected visit by the Internal Revenue Service (IRS), you must be sure to keep thorough records.

In addition to record keeping, you’ll need to choose a method of accounting, such as cash-basis or accrual method. Moreover, you must decide when your business’s financial or fiscal year begins and ends. Usually businesses use the calendar year (January 1 to December 31) as their fiscal year, though your accountant or the IRS may suggest otherwise.

Insurance

You will need to purchase different types of insurance. Your insurance needs may include property and casualty insurance, life insurance, and liability insurance. If you have employees, you need to think about whether to provide medical insurance and benefits; worker’s compensation insurance is typically required in most states.

Staffing

Are you going to do all the work in your business yourself? If not, whom will you hire? What skills must your employees possess? What tasks will they be responsible for? Keep in mind that the more employees you hire, the more your company will be subject to laws at the state and federal level. Some federal laws that address discrimination in the workplace are based on the number of employees in the business. Certain employee benefits may be mandatory, depending on the size of your company. You may be subject to certain tax rules when employing family members.

Marketing and advertising

Every business markets and advertises. Whether by word-of-mouth for a sole proprietor or through a global campaign in the case of a giant corporation, marketing and advertising are invaluable ingredients for success. In order to market yourself effectively, you’ll need to think strategically. It helps to have a written marketing plan. Be prepared to answer questions like: Who are your competitors and what are your company’s advantages over them? How will you price your product or service? Who is your target market and what is the best way to reach them? What is the key message you want to convey (i.e., your “value proposition”)? It might help to conduct market research before putting together a marketing strategy. This research will help you gauge market perceptions and may help you identify new opportunities for product, pricing, and promotion.

Financing

Insufficient financing is probably the most common obstacle to starting a business. In addition to calculating how much money (capital) you’ll need to start and run your business, you have to figure out where to get the funds. Will you borrow from a bank or family member (debt), or will you take money from investors in exchange for a share in the ownership of the business (equity)? If you intend to seek equity financing, you will be subject to securities regulations. Moreover, you have to decide on how to structure the financing–will you have more debt than equity, for example?

Patents, trademarks, and copyrights

How will you protect your intangible assets–your company’s name, for example (trademark)? Perhaps you have an invention you wish to protect (patent). Or maybe you’ve written a book and wish to protect your written words (copyright). Whatever your concern, you’ll need to think about protecting your creation. An experienced attorney can help you with these issues.

Licenses, permits, and registration

You may need to obtain licenses or permits, or even register with a governmental agency. For example, if you choose to create a corporation, you must register with the secretary of state. If instead you are a sole proprietor, you might be required to obtain business permits from, and/or register your business’s name with, the municipality. To find out more, contact the office of the secretary of state or the chamber of commerce in your state or municipality.

Factors to consider when buying an existing business

In addition to all of the factors to consider when starting your own business, there are other considerations when buying an existing business–is it a stock purchase or are you buying company assets? How is the business being valued? In addition to finding a business and arranging for the purchase and financing, you may also be reconsidering the form of business entity. Just because you bought the assets of a sole proprietorship doesn’t mean you can’t change the entity to some form of corporation.

Factors to consider when buying a franchise

If you are considering buying a franchise, there are important additional considerations. In exchange for assistance from the business granting you the franchise, you are obligated to pay certain fees and accept a certain level of control from the franchisor.

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly

available information from sources believed to be reliable—we cannot assure the accuracy or

completeness of these materials. The information in these materials may change at any time and

without notice.