Transitioning Into a Practice
Updated: Nov 3
Medical school prepared you to save lives. But did it prepare you to run a business?
Whether you like it or not, if you're in the medical profession, you are a business owner. You've got turnover, staff, payroll, COIDA, Department of Labour compliance, and admin, the time of hiding from this reality is long gone.
In our latest video, APS Africa co-founder Johan Riekert walks you through everything you need to know about transitioning from public service into private practice, and treating it like the business it truly is.
Remember: You are running a business. You are a business owner. It's time to start treating it like one.
Choosing the right practice structure
Not all structures are created equal. Johan breaks down the three most common options:
Sole Proprietor
Easy to start with no registration required
Short-term cash flow benefits
But: No asset protection, no income splitting, and a potential 45% tax rate
Best suited for early-stage practices with turnover under R2.3 million
Partnership
Cost-effective and simple to manage
Share expenses like rent, equipment, and staff
But: Still no asset protection, and your personal assets are at risk for your partner's problems too
Like a marriage: bliss with the right person, hell with the wrong one
Incorporated (Our Favourite)
More compliance and higher operating costs upfront
But: Asset protection, scalability, the ability to build and sell a brand, and advanced tax planning opportunities
Reduces your marginal tax rate from 45% to something far more manageable legally
The Taxes You Need to Know
Transitioning into private practice means understanding your tax obligations:
Tax Type | Rate |
Personal Income Tax (PAYE) | Up to 45% |
Corporate Income Tax | 27% |
Value-Added Tax (VAT) | 15% |
Dividend Withholding Tax | 20% (effective rate above 40%) |
Capital Gains Tax | 40% inclusion (individuals) / 80% inclusion (companies) |
Important: You must register for VAT once your turnover reaches or is expected to exceed R2.3 million in a 12-month period.
And don't think you can hide from SARS. With access to your bank data and AI-powered processing, discrepancies are being picked up faster than ever. The best approach? Stay compliant and plan within the law.
Understanding Your Financial Reports
You don't need to be an accountant, but you do need to understand the basics.
Profit & Loss Statement
Shows total money made and spent over time
Profit doesn't equal cash in the bank; if patients aren't paying, you're still taxed on income you haven't received
Review monthly with your accountant to catch discrepancies early
What to Watch For:
Material movements month-to-month
"General expenses" line items (that's lazy accounting)
Large net profits that need tax planning
Balance Sheet
A snapshot of your financial health
Formula: Equity = Assets - Liabilities
If equity is decreasing, you've got a problem
Red Flags:
Suspense accounts (these should be cleared monthly)
Debit loan accounts, if you owe your own business money, SARS may deem it a dividend, triggering up to 20% tax on the full amount
Liabilities exceeding assets
The Most Important Takeaway: "If your loan account is in debit, you need to speak to your accountant immediately."
A R3 million debit loan account could trigger R600,000 in dividend withholding tax. Reviewing your financials monthly prevents small issues from becoming major problems.
Ready to Transition with Confidence?
At APS Africa, we're specialist accountants for the medical profession. We know your business because it's the only thing we do.
If you're preparing to move from public to private practice or you're already in private practice and want to optimise your structure, we're here to help.
Johan Riekert
Co-founder | APS Africa
