There has been little growth in the number of service companies formed by partnerships of professionals, ie doctors, dentists, lawyers, architects, accountants etc. Generally, professional bodies do not object to the use of a service company to handle certain operations of a partnership. Some of the more important functions that a service company can take over are:
- providing all non-professional staff services to the practice; this would include office boys, clerks, typists, telephone operators etc;
- providing the use of furniture, equipment, vehicles, library and other assets necessary for the operations of the practice;
- maintaining the office records and accounts, providing stationery and other allied services, arranging for sending out bills and collecting debts, etc;
- providing office premises and paying all the rents, rates and other expenses connected with the premises.
The above arrangements would result in the employees of the service company carrying all the non-professional work, leaving the professional man only with his own personal staff, ie, private secretary, nurse, etc.
Generally, a service company is looked upon as a method of hiving-off a professional’s income to a company. A service company also provides more time for a professional to a devote to his practice.
The operational costs of a partnership of professionals with or without a service company are virtually the same and there is therefore no advantage in this area. When the operations, however, become more streamlined, there is decentralisation of manpower, control and finance and these can provide for greater efficiency.
Another advantage is that a company’s liability is limited, and this can be useful where professional misconduct charges arise and damages are claimed.
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