Originally Published by Today’s Veterinary Business, December 2018
Use of the internet, particularly social media, can be a double-edged sword, especially in the workplace. On the plus side, it can be a wonderful vehicle for marketing your practice and otherwise connecting with clients and potential clients. On the darker side, what happens when an employee posts content that can have a negative impact on the practice? Should you respond? If so, how should you respond? If a post is offensive, do you have the option of disciplining, even firing, that employee?
Because people in general are so openly sharing thoughts and opinions on social media, it’s not surprising that many experts believe that terminations based on employees posting inappropriate content will continue to increase. Handling this type of issue at your practice can be challenging for your human resource team, given that this is a fairly new type of problem to tackle – but, finding the right approach is crucial, given that just one post has the potential to blow up into a public relations and human resource disaster.
So, how do you respond to, say, a sexist-sounding post on an employee’s page? Although you don’t want to over-react or react emotionally in the moment, and you don’t want to micro-manage your employees, here’s the crux of the situation, distilled into just one sentence. How much potential damage could a particular post have on your practice’s reputation?
What’s important is that you respond fairly, not allowing one person who, say, has a knack of being humorous in his or her posts more leeway for the same type of material that another employee posts in a more serious manner. And, if you choose not to respond, be aware that you’re still really responding – giving the message that you either are fine with the posts or you aren’t concerned with the messaging. And, although a non-response is sometimes the right choice, in today’s business environment, your practice could also be harmed by this more passive approach.
What You Can – and Cannot – Do
At a minimum, you should create a policy about your employees’ use of social media while at work. Be clear about what an employee can and cannot do, and then consistently adhere to that policy. You have the option of banning social media use entirely while on the job. If, of course, someone’s job includes posting for the practice, you’ll have to clearly delineate what is and isn’t permissible during work hours.
However, you cannot ban employees from talking about work-related issues online when they aren’t at work, and they are legally permitted to discuss topics with one another on social media that fall within protected concerted guidelines. Employees can, for example, discuss their dissatisfaction about management style at the practice, how much they’re getting paid and so forth on Facebook or Twitter, as just two examples.
Employees are not protected and can be fired, though, when they discuss these issues online with someone outside of the practice, as this no longer falls into the category of co-worker dialogue about the workplace. They can also be terminated for sharing information that is deemed confidential, including but not limited to trade secrets.
Employees aren’t protected when talking about a workplace topic that isn’t related to employment terms. If someone calls a manager “lazy,” that communication may ultimately be protected. If the employee posts, though, that the manager is “fat,” then that may open the employee up for termination. Or if an employee posts that “my veterinary office is full of ugly people,” this is leaving the realm of employment-related discussions.
It can be difficult to discern when a post crosses the line, so your practice may need help with an attorney experienced in this type of law to determine legalities of particular posts. Note that laws can differ by state so, if your company has practices in more than one of them, you may not be able to make blanket social media policies. Employee protection is especially strong in California, Colorado, Louisiana, New York and North Dakota. Also, be aware that employee protection about social media postings applies to unionized as well as non-unionized employees.
Hate Speech and Protected Classes
You can fire employees who engage in hate speech. Sometimes a post clearly contains hate speech, while at other times, it is borderline. Hate speech is defined as communication that has no purpose or meaning other than expressing a feeling of hatred for a particular group, perhaps focused on race, ethnicity or gender, sexual orientation, national origin, religion and so forth.
When Creating a Social Media Policy for Your Practice
Your policy should contain clear guidelines about what is and isn’t permitted while at work, and also explicitly state that trade secrets and the like must remain confidential. The policy should ask employees to not use social media to post defamatory material that could create a hostile work environment. It is also reasonable to ask them to preface any social media remarks made about the practice online with a disclaimer that you don’t represent your employer’s point of view. It makes good sense to be proactive, too, and run your social media policy past your practice’s attorney.
As a creative solution, some companies are providing social media breaks for their employees throughout the day, perhaps 15 minutes in length, a couple of times per day. This can give everyone a chance to relax and refresh their minds. The goal isn’t to completely restrict your employees from ever using social media (which isn’t do-able, anyhow) but to encourage moderate use in appropriate ways. If you want to use this strategy, outline specifics in your social media policy.
Sharing Your Social Media Policy with Employees
How you share the news about your social media policy can go a long way in determining how well it is received. For example, you could pick a day to get some pizzas for your employees, and use that as an occasion to have a discussion on your social media policy. Explain why having the policy is so important in today’s times, and educate them on the problems that can arise when this form of communication isn’t appropriately used.
As you share the role that social media and its messaging plays in your practice’s culture and values, using a helpful approach is more likely to be successful than leaving the impression that you don’t trust your employees and plan to monitor their every message. And sometimes, by simply educating employees on privacy setting options in social media, you can help to prevent an unpleasant situation.
Share examples of appropriate/acceptable posts and ones that cross the line, and be open to questions, concerns and employee feedback. Getting employees to buy into your policy is a big step forward.
Monitoring Social Media
In general, avoid monitoring a specific employee’s social media accounts to watch for inappropriate comments. If you’re aware of a controversial comment, let that employee know how you plan to investigate and then review the situation with him or her. Then do exactly that.
When you follow up with the employee, get his or her side of the story. In some cases, the comment is so inflammatory that termination may be the only response. Other times, what the employee has to say may provide context that allows for lesser forms of discipline. Remember to be consistent and to follow up appropriately with everyone involved at the practice. As needed, update your social media policy and share it with all of your employees.
To view article on Today’s Veterinary Business, click here.
Millennials are on track to be the most educated group of people entering the workforce in history. They have been defined as “ambitious high-achievers” and, as such, it was speculated that employers would appreciate these hard workers entering the workforce. However, the Millennials’ transition into the workforce has not been as smooth as it was predicted, and misunderstandings between groups from different generations have allowed for the untapped potential from Millennials to be wasted. There are various characteristics of Millennials that when understood and properly managed by employers, can create a happy working environment for all generations.
Millennials are commonly defined as people born between 1981 and 2000, although no absolute chronological endpoint has been established for this generation. Currently, they are young adults, falling between the ages of 17-37. They will soon become the largest living generation in America with nearly 75 million constituents.
The Millennial generation has been described as confident, ambitious, independent, innovative, optimistic, adaptable and technologically advanced. Those are potentially positive traits for an employee. However, as it happens with every generation, there has been some friction as the Millennials have entered the workforce. Criticisms are arising, perhaps to the largest inter-generational degree to date, as new perspectives clash with old ones. This is happening, in large part, because Millennial perspectives on information, job security, and leadership tend to be diametrically opposed to those of older, existing workers.
As Baby Boomers and Generation Xers are retiring, Millennials have been entering the workforce at increasing rates, with Millennials recently surpassing Generation Xers and Baby Boomers to become the largest component of the U.S. labor force, comprising 34.6% in 2015. By 2020, they are projected to comprise 46% of the labor force. Competitive employers will therefore be trying to attract and retain Millennial workers to create an edge for their business to succeed, and the best way to attract any demographic group is to understand what they want and then provide it. To understand Millennial motivation, one must look to the big influences on their generation to see what has shaped and helped to define them.
Millennials, just like with preceding generations, have been shaped by the events of the world as they grew up. Events that occur during formative years tend to have a significant impact on people as they mature, with some sociologists saying that people are disproportionately influenced by events that occur between their late teens and mid-twenties. Others believe that the range of influencing years is broader. Most agree that by their late twenties and early thirties, people become more set in their beliefs. By this definition, the big influencers for the Millennial generation would include helicopter parents, digital media, terrorist attacks, and economic recessions, including the burst of the dot-com bubble and the subprime mortgage crisis.
Millennials were often raised by parents who scheduled everything for them. Their schedules outside of school were frequently packed with everything from sports practice to music lessons. Many parents of Millennials had no trouble petitioning a coach for more playing time or a teacher for a better grade for their child, making Millennials a more micromanaged generation. Notably, this packed schedule often involved group activities, frequently making Millennials great team players. Plus, Millennials are often very close with their parents and rely upon them as a source of advice and wisdom.
On top of their highly involved parents praising them, Millennials often received trophies for participation in their activities. This has fostered expectations that they deserve an award simply for showing up. On the plus side, Millennials want to continue receiving these awards, which can help them to focus on developing the talents and skills that will help them win coveted awards. This means they are often setting new challenges for themselves, which could be very useful in the workplace if properly harnessed. However, this has also led many Millennials to believe they are unduly special; 54% of them believe the workplace should adapt to them and it is therefore unnecessary for them to conform to company culture.
In summary, the helicopter parent influence on Millennials shaped them to be team oriented, externally motivated and confident, and has also led many of them to believe they are “special.”
Millennials were the first generation to grow up surrounded by the instant gratification technology of digital media. Because technology was integrated into so many aspects of their lives, from cell phones to IMs to personal computers, they are technologically savvy. They are therefore also experts at multitasking and have become accustomed to getting what they want, such as answers to questions, when they want it. Millennials also witnessed the birth of social media, which has allowed the world to shrink exponentially; through improved access, Millennials are exposed to more ideas, cultures and opinions. This has made them more open-minded and more networked than past generations. Having access to many opinions with the click of a button has also helped to shape this generation into a collaborative group.
The digital media influence has shaped Millennials to be team oriented as well as technologically savvy, open-minded, globally conscious, multitaskers and networked.
A bulk of this generation was still in school at the time of the 9/11 attacks, and they experienced an increase in helicopter parenting following this event. This fostered the generations’ dependence on technology, with personal cell phones being given to children so parents could contact them at any time. Due to close ties with their parents, Millennials also experienced a reinforcement in the value of a sense of community.
During this character-forming time in the Millennials’ youth, they witnessed a senseless act of violence that demonstrated the fragility of human life. Thus, a sense of urgency seems to permeate this generation. They live their lives with borderline-delusional courage, unconventional work ethics and a ferocious need to customize their futures because they watched as other futures were cut short. They are therefore driven by their passions more than past generations and live more in the moment because of these events. This influence also helped to mold Millennials to be family oriented and passionate about making a difference.
The 1990s were a time of steady economic growth and expansion; the mid-to-late 1990s saw optimistic entrepreneurs pursing new internet ventures, influenced by successes such as eBay and Amazon. Many internet companies called “dot-coms” were launched, and investors financed these start-ups. However, these ventures were not as profitable as originally assumed and many of the companies crashed, leading to a stock market crash. During the final decades of the 20th century, 30 million U.S. workers were laid off. For the Millennials, this meant seeing their parents lose their jobs. They were imprinted as children by a period of diminished job security and weakening ties between the employer and the employee. Company loyalty did not mean as much as it once had.
After seeing their parents bear the brunt of the dot-coms, Millennials experienced a recession themselves just as they were entering the workforce. This “Great Recession” lasted from 2007 to 2010, in large part because of mortgage credit being offered to subprime borrowers. When these borrowers defaulted on their loans, the housing market crashed, which affected the overall economy. It decreased wealth and consumer spending, lowered construction, limited the ability of firms to lend money, and limited the funds firms could raise.
The group of people who were affected most by this crisis were the Millennials who were just entering the workforce, particularly the graduating class of 2008. They had trouble finding jobs, much less jobs with high enough wages to offset their massive student debt. This caused many young adults to postpone major adult milestones such as marriage, or the purchase of their own car or home.
Even several years after the recession, Millennials are still having some difficulty finding jobs. Statistics from Pew Research indicate that 25-34-year-olds made up 48% of the unemployed population in 2015. Additionally, it has been harder for Millennials to access credit, which has caused some of them to settle for jobs they don’t want, with people from this generation frequently looking for new potential employment opportunities. They have seen layoffs or been in a position where they themselves could not find a job. Thus, many have responded with the mindset that they will not let the same things happen to them or are determined not to have them happen again; they are therefore constantly looking ahead.
These economic recessions made Millennials ambitious and stressed, and they have contributed to this generation’s external motivation.
Tips for Optimizing Success Based on Millennial Traits
Based on the major influences of the times, certain traits within Millennials arose that shape their motivation. These traits give insight as to what is important to Millennials, and thus, how they can be managed and fostered in the workplace to optimize success. Millennials are team oriented, family oriented, externally motivated, “special,” confident, ambitious, technologically savvy, open-minded, globally conscious, networked, multitaskers, passionate about making a difference, and stressed. Here are a few ways you can harness these traits to optimize workplace success.
Millennials are all about work and life. Nearly six in 10 (57%) of them say work-life balance and personal well-being in a job are “very important” to them. Not surprisingly, then, lack of flexibility was cited among the top reasons Millennials quit jobs. And nearly 40 percent of young workers, male or female, in the United States are so unhappy with the lack of paid parental-leave policies that they say they would be willing to move to another country.
So, what options can you offer Millennials? Can you offer flexible scheduling, including but not limited to telecommuting elements? What is your parental leave policy? Should you take a second look at what you offer? When you talk to the Millennials at your practice, what options do they say are important to them?
Millennials prefer to work in teams, in part because they perceive group-based work to be more fun, but also because they like to avoid risk. Millennials also report that working and interacting with other members of a team makes work more pleasurable. Millennial workers like to be actively involved and fully committed to whatever projects they take on, and they contribute their best efforts to the organization when their work is performed in a collaborative workgroup or team.
What team structures do you have in place at your practice? Have you sat down with your employees to find out ways in which they would like more teamwork to exist? What changes can you make now? In the future?
Because they fear risk, knowing that health insurance is available and affordable is important to this generation. What are you able to provide them? Are there voluntary benefits you can offer them? Because this is a generation with significant student debt, increasing numbers of companies are offering loan repayment assistance. Have you investigated that option?
Millennials appreciate the opportunity to learn and grow. Have you sat down with them to talk about promotion possibilities and the best way to get the education and training needed for a desired promotion?
These are just some of the ways in which you can optimize Millennial performance at work and retain your best employees. It’s important, too, to avoid pigeon-holing any employee, assuming you know what someone wants because of the year of his or her birth. For employees of any age or generation, the way you can learn the most about their desires, fears, needs and wants is open and honest communication. Set aside time to learn more about your employees as individuals and help them with their unique career paths – and you will all benefit.
Written By:David McCormick, MS Simmons Mid-Atlantic & Great Lakes
Stephanie McGinness, DVM Candidate, 2012
What are the key factors you should consider when assessing practice value? Profitability and appraisals are both important parts of the process and the following is a list of guidelines and topics to help guide your future research.
- Profits drive the value of a practice. They are the return on owning the practice and it is the return that is being purchased. The greater the return, the greater the value. Practices have appraised for anywhere from 110% to 15% of gross revenue.
- “Profits” are what you would get if you owned the practice only – meaning you don’t work there and you don’t own the real estate (i.e., fair market compensation for your veterinary work, fair market rent and clean financials).
- If a practice is financially healthy, it will have profitability in the range of 14-18% of revenues.
- If a practice is financially healthy (14-18% profitability) then it will probably have a value that will end up being between 55% to 80% of revenue.
- Asking what a practice will go for is like asking what the cost of surgery is; it is such a broad range that it’s tough to be accurate. The recent average of a practice sold by Simmons has a value of roughly 72%, however, they’ve been sold in a range from 30% to 95% and there’s even one on the market now at 110% that will close this month (June 2011).
- The average practice these days has a profitability in the 8-11% range and thus is likely has a value that will end up being between 30% and 50% of gross revenues (if that).
- Practice values in general have been decreasing. There’s greater pressure on profitability: increased support staff costs, increasing benefit costs, higher-end pharmaceuticals that can’t be marked up as much, etc.
- The economy has also impacted values. If the practice was managing for revenues instead of profitability then typically the revenues *and* the profitability took a hit. Profits go down – so does the practice value.
Assessing Profitability & Practice Appraisals
- It is best to have your practice appraised every 3-5 years for management and planning purposes. If the value is low, the profits were low. If the profits are low it has to be a revenue and/or expense issue and we can help identify the problem(s). Fixing the profitability improves the practice’s cash flow, increases the practice profitability and its financial health, and increases the overall practice value.
- An appraisal is an opinion of value – and anyone can give you “an opinion”. These are big decisions. If you want a good opinion you need to know where it’s coming from and select a qualified veterinary appraiser.
- To assess a potential appraiser, request veterinary references and inquire about their experience level (particularly in the veterinary industry), accreditation and credentials (i.e. ASA, CBA, CVA, AVA, AIBA) with the understanding that they don’t guarantee competency, and compare their report to those prepared for you by previous appraisers to assess their report writing competence.
- Any decision on value should be defendable and is based on the appraiser’s judgment, the financial analysis, and the conditions in the market for that area (assuming here that the goal is fair market value).
- Free resources for estimating your practice profitability are available on the NCVEI.org website. Find the Profitability Estimator under the Benchmarking tools. It was developed by the Veterinary Valuation Resource Council (VVRC) and is free. It helps you go from the practice tax return to an estimate of your true practice profitability. This is a similar practice to what we do in the No Lo Workshops hosted by VVRC at the major conferences.
- If you’d like more in depth information, please visit the VetPartners website at www.avpmca.org
What happens when you die? Will your heirs receive a fair price, or any price for your investment in the practice? Will they remain locked into that investment forever? Will your heirs collect profits from the practice? What if the other partner (who is getting paid under his practice employment contract) has voting control and decides not to distribute profits?
If your heirs are to be bought out, who sets the purchase price? How and by whom is it paid? If part of the purchase price is paid with a promissory note, is same secured? How? What if the practice is not profitable enough to pay the note?
What happens when your partner dies? Your deceased partner’s heirs are now your new partners.
Barring a fluke, your new partners will not be veterinarians. Does your State permit non-veterinarian practice owners? Will they want to be bought out or stay and collect profits from the practice? (Without contributing to profit generation of course.) If the deceased partner was a large shareholder, or the majority interest holder, the heirs will also inherit your deceased partner’s voting rights. Do you want to share practice management with, or be managed by, such persons? What if the heirs squabble among themselves, leading to management paralysis and/or litigation? Do you fancy having the practice run by a court-appointed receiver?
If the heirs are to be bought out, who determines the purchase price? How and by whom is it paid? If there’s a note, is it secured? How?
What if you are permanently disabled? Will you receive a fair price, or any price for your investment in the practice? Will you remain locked into your investment forever? Will you collect profits from the practice? What if the remaining partner decides not to distribute profits?
If you are to be bought out, who sets the purchase price? By whom and how is it paid? If there’s a note, is it secured? How?
What if your partner is permanently disabled? Will your disabled partner want to be bought out or stay and collect practice profits (without generating any of same)? A disabled partner’s interests will be different then yours, so if he was the managing and/or majority partner, how will he run the practice? Will he be able to run the practice? What if the disabled partner is mentally disabled?
If your disabled partner is to be bought out, who determines the purchase price? How and by whom is it paid? If there’s a note, is it secured? How?
What if your partner goes nuts? You don’t want a mentally unstable person practicing veterinary medicine. But if such partner is the majority partner you can’t fire him, because he, not you, controls the practice entity. The same problem arises for equal partners. Sure your mentally disabled partner could voluntarily remove himself, but can you rely on that? What if the majority partner has a guardian? How will the guardian run the practice? What if the majority partner or guardian fires you?
What if your partner should be fired as veterinarian-employee? Suppose your partner becomes lazy or his child becomes ill and decides to work significantly less hours or stop working altogether. Suppose your partner becomes a substance abuser and consequently unfit to practice veterinary medicine. Or he steals from the practice. Or he harasses employees and/or abuses clients and/or patients. The foregoing would be grounds for terminating a veterinarian employee. But if your partner is the majority or an equal partner you can’t fire him (as explained in the preceding paragraph).
What if you no longer get along? Should the practice be dissolved? If not, who should leave? At what price should the departing partner be bought out? How and by whom is it paid? If there’s a note, is it secured? How?
In a 50/50 practice how are disagreements handled? What happens when each party has equal voting/management rights and a serious disagreement arises? How will the resulting deadlock be resolved?
What if your partner wants to drop out, buy a boat and sail around the world? Should your partner be permitted to withdraw? If not, how do you keep your partner from just resigning as an employee (in light of the constitutional prohibition of involuntary servitude)?
What if your ex-partner discovers he’s chronically sea-sick and comes back to set up a veterinary practice next store (using the client list he kept when he left)?
If a partner is permitted to withdraw, who determines the purchase price? By whom and how is it paid? If there’s a note, is it secured? How?
What if your partner divorces? If the divorced spouse has, or is awarded, a portion of your partner’s practice equity interest, the divorced spouse becomes a partner. Ménages à trois make great literature and film themes but ALWAYS end badly.
What if your partner goes bankrupt? Do you fancy your partner’s creditor as your new partner? It won’t be fun to have a bank running, or having a say in running, the practice. Worse, the bank likely will want to sell your partner’s share to a competitor.
Who’s got the land? The small animal practice’s most valuable asset is its location, because most clients won’t travel far for pet treatment. As zoning restrictions get ever tighter, good practice locations become ever rarer (and more expensive). If, as is frequently the case, one partner owns the practice premises, what happens when he dies, is disabled, withdraws, resigns, divorces and/or goes bankrupt?
What if another veterinarian wants to buy your partner’s interest in the practice? Should your partner be allowed to sell without your approval? Should you have a right of first offer? A right of first refusal?
IF YOUR PARTNER IS NOT YOUR RETIREMENT PLAN, THEN WHO IS? If you don’t have a firm agreement with your partner to sell your practice interest to him (or someone else) upon your retirement, then how are you going to retire using your investment in the practice as your nest egg? What if both partners want to retire at the same time?
Choosing the correct structure for your veterinary practice is an important decision with consequences reaching far into the future. Selecting your practice structure is definitely not a “do it yourself” project. Substantial tax, legal and accounting expertise is required. Veterinarians nevertheless need to stay active in the process to ensure the experts’ narrow technical proposals get folded into a coherent plan that reflects your needs and goals.
- It’s Mostly About Tax. Tax considerations are the primary drivers in choosing a legal structure for a veterinary practice. The two key aspects are taxation of income/profits and taxation upon the sale or transformation of the practice. Don’t paint yourself into a corner by choosing a business structure without establishing a succession or exit strategy. Exit strategies should focus not only on your richly deserved retirement, but also on contingencies such as death or disability). Since the transformation of an existing business structures in anticipation of a sale or the buy-in of a new partner usually triggers adverse tax consequences, it is usually better to choose an initial structure with the necessary flexibility to handle new arrivals, departures and divestitures at minimum fiscal cost.
- Liability Shield. In some structures such as partnerships, the owners are personally liable on their individual assets for the debts of the business. In others their personal assets generally are not at risk. Business structures, however, do not insulate veterinarians from liability arising from malpractice claims. But the shield works for almost all other claims, which in our litigious society are increasingly frequent. Unless you are an equine or food animal veterinarian, you generally have greater exposure to claims from your client’s “slipping and falling” in your hallway, than malpractice.
- Flexibility and Formalities. Some structures allow more management flexibility and/or are less burdensome to administer than others. Veterinarians generally tend to ignore formalities which is a serious mistake. Courts regularly have looked past the liability shield and held owners personally liable when the owners have failed to observe the formalities separating their personal affairs from those of the practice entity.
The accompanying table compares the more common business structures from a liability, management and formality perspective (in simplified form). Following is a brief and much simplified overview of the tax characteristics of each entity.
- Sole Proprietorships. Since sole proprietorships are not legally separate from the single owner, there is no separate tax return. The practice’s profits are included in owner’s total income and are taxed at his ordinary income tax rate. In addition to federal and (if applicable) state income tax, the owner must also pay self-employment tax equivalent to the payroll taxes due as if the owner were an employee of the practice.
Upon the sale of the sole proprietorship practice’s assets, the IRS will recapture all depreciation/amortization deductions taken by the owner/seller thereof and tax such amount at the seller’s ordinary income tax rates. In the unlikely event that any gain remains on the assets (after adding back any depreciation/amortization to their respective “bases”) they will be taxed at the lower 20% long term capital gains rate (assuming the relevant holding period is met).
The buyer receives a “step-up” (increase) in his basis in the assets proportional to the amount of (purchase price allocated thereto) allowing him to re-depreciate/amortize them. Thus, asset sales usually are a better deal tax-wise for the buyer than for the seller, and all other things being equal, buyers will prefer to purchase assets rather than stock (in a C corp).
- Partnerships. Partnerships are “pass-through” or “flow-through” entities for tax purposes, meaning that each partner includes in his own taxable income the profits (or losses) of the partnership, which are taxed as ordinary income at the partner’s individual rate (much like the owner of a sole proprietorship). Note that each partner’s share of partnership income is taxable each year, whether such share was distributed to the partner or retained in the partnership. If the latter, then the partner may not have the cash to pay the tax.
A consequence of the pass-through principle is that the sale of partnership interests are treated for tax purposes similarly to the sale of the underlying assets of the partnership (i.e., the assets are subject to depreciation recapture as in sole proprietorships).
- Corporations. All corporations must file separate tax returns.
- “S” Corporations. “S” corporations are corporations that elect to be taxed as a partnership. As “pass-through” entities, profits will be taxed in the hands of the shareholders whether distributed or not. An advantage of S corporations is that shareholders may take a portion of their profits as “S corporation profit,” free of payroll or self-employment tax (i.e., subject only to income tax). Profit corresponding to what the veterinarian shareholder would have earned as an employee is subject to payroll taxes in addition to income tax. (Sole proprietorships on the other hand must pay self-employment tax on all profits.) S corps are popular with veterinarians for this reason.
- “C” Corporations. “Plain vanilla” corporations (called “C” corporations to distinguish them from “S” corps) are not “pass-through” entities and are subject to corporate income tax, usually at the 35% rate for veterinary practices. Distributed profits (dividends) are taxed as ordinary income in the hands of the shareholders. This “double taxation” discourages the distribution of C corporation profits. On the plus side, C corp profits are not taxed until distributed, pension plan contributions are not subject to the S corp limits, and employee-shareholders’ health benefits are not taxed. Veterinarians wishing to maximize their benefits will choose a C corp over an S corp.
If the holding period requirement has been met, the sale of C corporation stock is taxed at the favorable 20% long term capital gains rate. The buyer does not receive a step-up in the basis of the underlying assets since he is buying the corporation stock. (The buyer can under certain circumstances elect to treat the transaction as an asset sale for tax purposes (a.k.a. a Section 338 election).)
- Limited Liability Companies. Limited Liability Companies are very quite tax-wise. Single member LLCs can elect to be taxed either as a C corp or a sole proprietorship. Multi-member LLCs can elect to be taxed either as a C Corp or a partnership. Unfortunately, not every state allows veterinarians for form LLC (ie, California).
- A Word Regarding Real Estate. If the practice owns its own real estate it’s better placed in a separate entity held by the owner(s) or held individually by the practices owner(s). This allows the owners to receive rent (which will be deductible from the practice’s income). Moreover, placing the real estate and the practice in the same legal entity frequently leads to problems because the buyer can’t afford to buy the real estate in addition to the practice.
Choosing the correct business structure for your practice is important. Don’t treat it lightly.
SIMPLIFIED PARTIAL COMPARISON OF DIFFERENT BUSINESS STRUCTURES
(Ex tax issues)
|Structure or Entity Type\Issue
No entity; business co-mingled with personal assets
|No liability shield
|None. Just open your door and you’re in practice!
|Corporations (“C” or “S” Corp) A Professional Corporation (“PC”) is identical to a C Corp in all respects except that only members of the same profession (e.g., vets) can own its shares
|Shareholder not liable for debts/liabilities of corporation (unless “corporate veil is pierced” because shareholders fail to separate their personal affairs from corporations (e.g. by ignoring formalities)
||Must file documents with state secretary of state. Formalities are the most cumbersome of all entities. Less formal flexibility re management/profit sharing issues
|Limited Liability Company (LLC)
(Created to provide more management flexibility than S Corp and “pass through” tax treatment )
|Member not liable for debts/liabilities of LLC (subject to piercing corporate veil doctrine)
||Must file documents with state secretary of state; but management, profit sharing can be flexible.
||Partners liable for debts/liabilities of Partnership; no liability shield
||Must file documents with state secretary of state, but management; profit sharing can be flexible.
 Salvation lies in adequate malpractice insurance.
 The basis of an asset is it’s original cost to the owner, as adjusted pursuant to IRS rules.
 Because veterinary practices usually are personal service corporations.
 Limited partnerships are different from general partnerships. An LLP generally is formed among several limited partners who are normally passive financial investors and one general partner responsible for managing the enterprise. Limited partners normally are not liable for the debts/liabilities of the LLP, whereas the general partner is. Contrary to the motion picture business, real estate or oil and gas exploration, LLPs may not be appropriate for a veterinary practice where all the members are actively engaged in the enterprise.
According to ChildTrends.org, the percentage of youth that have jobs is on the upswing, but it’s still not as high as it was in 2006, before the Great Recession hit in December 2007. When that recession occurred, teenagers took a significant portion of the brunt of unemployment.
There are clear benefits for a teenager when they are employed, and there are benefits for the overall economy, but what are the benefits and challenges for employers? What about your practice? Does it make good sense for you to hire teenagers?
Here are some of the challenges, as well as the numerous benefits of hiring a teenager to work at your practice. Plus, learn some helpful tips on finding the right teen for the job.
Challenges of Hiring Teenagers
One of the most obvious challenges is their lack of experience. This means you’ll need to expend more resources training and/or supervising a teenaged worker and be patient as the learning curve takes place. You will likely need to explain tasks in more detail and answer more questions. After all, this may be his or her very first job. If not, he or she is still near the beginning of life as an employee.
Teenagers are usually more at the mercy of their family’s schedule. They may or may not have their own transportation and they may not have as much control over when family commitments take place. Plus, during the school year, they will have multiple scheduling conflicts, whether it’s because of exams or extracurricular activities. They may have parents who hover over them and this can have a negative impact on the workplace.
You may need to explain policies to them more than once, perhaps about cell phone use at work. Teenagers have likely been surrounded by cell phones for as long as they can remember, and it just feels natural for them to quickly Google something they want to know or answer a text. Policies that just feel natural to you, as an employer, may not make sense to them at all.
Teens may need guidance in how to handle pressure and/or frustration at work, and they may struggle to accept feedback if it’s the first time for them in a workplace setting. They won’t have the same perspectives as older workers, something that will serve as both a positive and a negative.
Their conditions of employment are more subject to regulations, from federal on down, from when they can work, to how many hours, to what safety considerations need to be in place. The latter includes the restrictions on some equipment usage because of hazards. Remember that state laws can be even more restrictive than federal ones, so know what your state requires and restricts. It’s important to know the youth minimum wage (currently at $4.25) and whether your state pushes that to a higher amount. It’s also important to know how long you can pay that youth rate before being required to pay the regular federal minimum wage (currently for the first 90 calendar days before changing to $7.25).
Benefits of Hiring Teenagers
Stereotypical jobs for teenagers include summer employment such as a lifeguard, a camp counselor, or at an ice cream stand. Other common jobs include working in a fast food restaurant or at a retail store during the busy holiday season. In those cases, the benefits of using teenagers are clear: extra help during peak seasons, especially at tourism sites, and/or at a lower pay rate.
Hiring teen workers can reduce your payroll costs, in part because of the youth minimum wage and in part because they are less experienced employees and would receive starting levels of pay. (Note: just because you can pay a teenager a wage lower than the federal minimum wage for a period doesn’t mean you necessarily should. If a reasonable amount of companies in your area are hiring, you may need to offer something more enticing.)
Because teenagers typically work part-time, you can save money on benefits, as well. And, depending upon where your practice is located, you may be able to claim a tax credit for employing teenagers.
Hiring teenagers provide more stability than if you rely upon temporary workers who could suddenly leave your practice if offered regular employment. And the teens you employ part-time may stay with your practice throughout their school years, perhaps even through college. If they decide to stay in the veterinary industry after finishing school, they become a source of experienced employees that are already part of your company’s culture, and trained to your specifications.
Younger employees can bring a fresh perspective to your practice. In fact, many companies today use a reverse-mentoring philosophy in which young workers share perspectives with older ones, on topics such as social media and crowdsourcing.
Young workers usually have higher levels of energy and, when harnessed in the workplace, this can help energize the workers around them. When given appropriate direction, guidance and feedback, teenagers can be extremely productive workers. They can often multi-task especially well, can be quite versatile, and aren’t set in their ways like many older employees.
How to Find the Best Teens for Your Practice
Just like with adult workers, some teens may be a better fit for your practice than others. It helps to talk to school counselors at the local high schools, vocational schools and community colleges to find out how to connect with students who are looking for jobs. They often host job fairs and may have programs to connect job-seeking students with businesses looking to hire.
Referrals from current employees and other people in your network can lead to finding the right teenagers to hire. If you are going to advertise, do so where teens are likely to be. Use social media, for example, rather than local print newspapers. Another effective way to reach young workers is through online job websites such as Indeed.com, ZipRecruiter.com and Monster.com. Regardless of how you share your employment advertisement, when you reach the right person, you will have found a new, young member to benefit your veterinary team.