Finance and valuation
Owner compensation
Owner compensation is what the owner dentist takes out of the practice for clinical work and for running the business, which may include salary, distributions and benefits.
How an owner is paid depends on the legal form of the business, so owners should talk with a CPA. The IRS, for example, explains that an S corporation shareholder who works for the company must receive reasonable compensation. It says the key to reasonable compensation is determining what the shareholder-employee did for the corporation by looking to the source of its gross receipts. For a dental owner that work includes clinical production and management. Owner pay also changes profit margin and how a buyer reads earnings in a practice valuation. Because owners often do both clinical and management work, reports may split the pay between the two.