To mitigate legal risk, “Dallas Skin Cancer Center” consists of two Texas LLCs:

• Texas Mohs Surgery and Skin Cancer Center, PLLC (TMSSCC) is the medical practice.
• Texas Mohs Surgery Equipment Leasing, LLC (TMSEL) is the company that owns all of the material tangible assets (cryostats, procedure chairs, furniture, computers, etc.)

TMSCC operates under the DBA of “Dallas Skin Cancer Center”.

To reduce legal risk, it is desirable for the high-risk entity, that is, the medical practice, to have minimal assets subject to a judgment creditor. TMSCC’s only potential asset for a judgment creditor is the accounts receivable. Plaintiff lawyers understand that by the time a judgment for AR is made, I would have closed the medical practice and spun up another one. There would be no AR remaining to recover. Even in the inconceivable situation where a court orders the AR frozen, I have a $120,000 debt shield, as discussed in the Financial Section.

As I mentioned above, the leasing company holds all of the tangible, material business property and leases it to the medical practice. The lease is variable and depends on tax implications. In the first years, the lease was extremely high so that TMSEL could offset the Section 179 expense (similar to depreciation). The Section 179 deduction is subject to a business income limitation, meaning the amount you can deduct cannot exceed your total aggregate taxable income.) At the time I am writing this, the Section 179 expense is complete, and the annual lease is a nominal amount to cover TMSEL expenses. TMSEL is not designed to generate income. Tax nerds will recognize the risk of the “Self-Rental Trap.” I have sent a formal letter to the IRS grouping TMSEL with TMSCC. So long as TMSEL does not experience a loss (passive), the self-rental trap is not an issue. Like TMSCC, TMSEL has a debt shield in place.