If you’re a dentist planning to open your own practice in California, you’ve likely discovered that you can’t simply form a standard LLC or regular corporation like other business owners. California law requires that dental practices operate through professional corporations governed by the Moscone-Knox Professional Corporation Act, with additional oversight from the Dental Board of California. This structure exists to ensure that dentists—not investors, management companies, or lay owners—maintain control over clinical decision-making and the delivery of dental services.
This guide walks you through the entire process of forming a California dental corporation, from understanding the ownership restrictions that differ significantly from medical corporations to navigating hygienist co-ownership questions, tax elections, and the ongoing compliance obligations that keep your corporate status in good standing with both the Secretary of State and the Dental Board.
Why California Requires Professional Corporations for Dental Practices
California’s restrictions on who can own and control dental practices stem from the same policy concerns that drive the Corporate Practice of Medicine doctrine—ensuring that licensed professionals, subject to disciplinary authority and bound by ethical obligations, retain control over professional services rather than delegating that control to business interests focused primarily on profits.
The Moscone-Knox Professional Corporation Act (Corporations Code Sections 13400-13410) establishes the framework for dentists to practice through corporate entities while maintaining professional autonomy. Under this framework, a dental corporation is a professional corporation authorized to render professional services as defined in the Dental Practice Act (Business and Professions Code Sections 1600-1976), but only if it satisfies strict ownership and governance requirements.
Business and Professions Code Section 1800 specifically defines a “dental corporation” as a corporation organized under Moscone-Knox for the purpose of rendering professional services, where the dentists, physicians and surgeons, and dental auxiliaries who are shareholders, officers, directors, or professional employees hold valid California licenses and comply with the Dental Practice Act. This means your corporate structure isn’t just a business formality—it’s a regulated framework that the Dental Board actively monitors.
The practical implications extend beyond regulatory compliance. The professional corporation structure provides meaningful liability protection for commercial obligations (office leases, equipment financing, vendor contracts) while maintaining personal accountability for professional negligence. It creates a recognized legal framework that satisfies insurance credentialing requirements, lease negotiations, and bank underwriting. And for group practices, it enables multiple dentists to share ownership while clearly delineating professional responsibilities.
Understanding Ownership Rules: The 51% Dentist Control Requirement
One of the most distinctive aspects of California dental corporation formation is understanding exactly who can own shares and in what proportions. Unlike regular corporations where anyone can be a shareholder, dental corporations face strict limitations codified in Corporations Code Section 13401.5(n) and implemented through Dental Board regulations.
The foundational rule requires that licensed dentists must hold at least 51% of the outstanding shares of the corporation and must numerically outnumber the non-dentist shareholders. This dual requirement—both percentage control and headcount majority—ensures that dentists maintain voting control over corporate decisions and that non-dentist ownership remains clearly subordinate.
Corporations Code Section 13401.5(n) specifies exactly which non-dentist licensed professionals may own the remaining 49% of shares in a dental corporation. The permitted minority shareholders include licensed physicians and surgeons, dental assistants, registered dental assistants (RDAs), registered dental assistants in extended functions (RDAEFs), registered dental hygienists (RDHs), registered dental hygienists in extended functions, and registered dental hygienists in alternative practice (RDHAPs). This list is exhaustive—no other license categories qualify.
This creates interesting structural possibilities that don’t exist for medical corporations. You could theoretically have a dental corporation where a dentist owns 51% and an RDH owns 49%, though the dentist must still maintain clinical control over all dental services. Or a group of three dentists could bring in two RDAs as minority shareholders, provided the dentists collectively hold at least 51% and outnumber the RDAs. The flexibility is meaningful for practices that want to incentivize key team members with equity participation.
Title 16 California Code of Regulations Section 1060 implements these ownership rules at the regulatory level. The regulation requires that shares only be issued to persons who qualify as “licensed persons” for dental corporations under the statutory scheme. Any attempted transfer to a non-qualified person is void. More importantly, your corporate bylaws must include mandatory provisions requiring the corporation to repurchase shares from any shareholder who becomes disqualified (loses their license, lets it lapse, or dies) within a specified timeframe—typically 90 days. This ensures the corporation can maintain compliance even when shareholder circumstances change unexpectedly.
Beyond shareholders, the licensing requirements extend to directors and officers. Under Corporations Code Section 13403 and the Moscone-Knox overlay, every director and every officer (except assistant secretary and assistant treasurer positions) must be a licensed person. For dental corporations, this means dentists and the specific allied health professionals listed in Section 13401.5(n). You cannot appoint an unlicensed office manager, consultant, or family member to serve as president, secretary, or treasurer. The assistant secretary and assistant treasurer exceptions provide limited flexibility for administrative convenience, but core governance positions must be held by appropriately licensed individuals who satisfy the 49% cap.
The Dental Board takes these ownership requirements seriously. If your corporation’s ownership structure drifts out of compliance—say, a dentist-shareholder retires and sells their shares to a hygienist, inadvertently pushing non-dentist ownership above 49%—the corporation violates the Dental Practice Act. This can trigger disciplinary proceedings against the individual dentists, potential corporate suspension, and questions about malpractice insurance coverage validity.
Naming Your Dental Corporation: Requirements and Fictitious Name Permits
Your dental corporation’s name must satisfy requirements from multiple authorities: the California Secretary of State, the Moscone-Knox Act, and the Dental Board of California. Under Moscone-Knox, professional corporations must designate themselves appropriately, typically by including language like “Dental Corporation,” “A Professional Corporation,” “Prof. Corp.,” or similar designations that identify the entity as a professional corporation.
Business and Professions Code Sections 1701 and 1701.5 add dental-specific naming restrictions. These provisions restrict the use of terms like “clinic,” “institute,” or “center” if they might mislead the public about the nature of the practice, imply public or charitable status, or misrepresent the services offered. The Dental Board scrutinizes corporate names to ensure they don’t create confusion about scope of practice, specialization, or ownership structure.
If you want to operate under a name other than your personal name followed by professional corporation designation—for example, “Pacific Coast Dental Group” rather than “John Smith, DDS, A Professional Corporation”—you’ll need to obtain a Fictitious Name Permit (FNP) from the Dental Board of California. The FNP process requires demonstrating that your proposed name complies with statutory restrictions, doesn’t mislead the public, and that your ownership structure satisfies the 51% dentist control requirement.
The Fictitious Name Permit application involves submitting documentation of all shareholders’ licenses, ownership percentages, and the proposed fictitious name. The Dental Board reviews the application to ensure compliance before authorizing the name. You’ll also need to coordinate with the county clerk’s office for any required DBA filings and ensure consistency between your articles of incorporation, FNP, signage, and marketing materials. Inconsistencies can create compliance issues and potential disciplinary concerns.
When selecting your corporate name, first check availability through the Secretary of State’s business search tool at BizFile Online. Name reservation is available if you want to secure a name before completing formation paperwork, though this adds another step. Consider how the name will appear on insurance credentialing applications, patient statements, and marketing materials. A name that’s too generic might not distinguish your practice, while one that’s too specific might limit future growth or service expansion.
Step-by-Step Formation Process
Step 1: Strategic Planning and Professional Consultation
Before filing any paperwork, clarify your practice structure and goals. Are you forming a solo practice or bringing in partners? Will you eventually want to add hygienist or RDA equity participants? Do you plan multiple office locations? Will you elect S-corporation tax status? These decisions affect your formation documents and can be expensive to restructure later.
Consider engaging both a healthcare attorney familiar with Dental Board regulations and a CPA experienced with dental practice taxation. The formation filing itself is straightforward, but your bylaws need to address mandatory share repurchase provisions required by Title 16 CCR Section 1060, your articles need appropriate professional corporation language, and your tax elections have timing requirements. An hour of professional consultation now prevents restructuring costs and compliance headaches later.
Step 2: File Articles of Incorporation
California dental corporations are formed by filing Articles of Incorporation of a Professional Corporation (Form ARTS-PC) with the Secretary of State. The current filing fee is $100 for standard processing. You can file online through BizFile Online at bizfileonline.sos.ca.gov or submit paper forms by mail.
Your Articles must include the corporate name (complying with professional corporation naming requirements), the statement that you are forming a professional corporation, the name of the licensing board under whose jurisdiction you provide professional services (Dental Board of California), your registered agent information (a person or entity authorized to receive legal documents at a California street address), and the incorporator’s signature.
Online filing typically processes within 2-3 business days. Expedited processing is available for additional fees ($350-$750) if you need faster turnaround. Upon approval, the Secretary of State issues a file-stamped copy of your Articles, officially creating your dental professional corporation.
Step 3: Obtain Your Federal Employer Identification Number
Your corporation needs an Employer Identification Number from the IRS for opening business bank accounts, filing tax returns, and establishing payroll. Apply online at irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online. The online application is free and provides immediate EIN issuance for domestic applicants with Social Security Numbers.
If you’re considering S-corporation tax election, coordinate your EIN application timing with your Form 2553 filing. S-corp election must be made within 75 days of formation (or by March 15 for the current tax year for existing corporations), so having your EIN ready facilitates timely election.
Step 4: Adopt Professional Corporation Bylaws
Your bylaws are the internal governance document establishing how your corporation operates. Unlike the Articles which are public record, bylaws are internal documents that don’t get filed with government agencies. However, for dental corporations, specific bylaw provisions are legally required under Title 16 CCR Section 1060.
Your bylaws must include mandatory share repurchase provisions requiring the corporation to buy back shares from any shareholder who becomes disqualified (loses their license) or dies, typically within 90 days. They should specify that all directors and officers (except assistant secretary/treasurer) must hold appropriate licenses, establish procedures for verifying ongoing licensure compliance, and define how the corporation handles shareholder changes while maintaining the 51% dentist control requirement.
Standard corporate bylaws templates won’t suffice for dental professional corporations. Either work with an attorney familiar with Dental Board requirements or use a template specifically designed for California dental corporations. Improperly drafted bylaws can create compliance problems that surface during Dental Board inquiries or when you need to demonstrate corporate good standing for credentialing purposes.
Step 5: Hold Organizational Meeting
After your Articles are filed and bylaws adopted, hold your initial organizational meeting. At this meeting, you’ll elect directors (who must hold appropriate licenses as discussed), appoint officers (president, secretary, treasurer, and any vice presidents), issue shares to initial shareholders (documenting share amounts, consideration paid, and confirming each shareholder’s license status and compliance with the 51% requirement), adopt your bylaws formally, authorize opening a corporate bank account, and handle other initial business matters.
Document this meeting with detailed minutes. Corporate formalities matter significantly for maintaining the liability protection your professional corporation provides, and organizational meeting minutes serve as the official record establishing your corporation’s proper formation.
Step 6: File Statement of Information
Within 90 days of incorporation, you must file a Statement of Information (Form SI-550) with the Secretary of State. This form provides your corporation’s business address, names and addresses of the Chief Executive Officer, Secretary, Chief Financial Officer, and all directors, your registered agent information, and a brief description of your business type (dental services).
The filing fee is $25. Unlike LLCs which file biennially, corporations must file their Statement of Information annually thereafter, with subsequent filings due during the anniversary month of your original filing. Mark your calendar—failure to file results in corporate penalties and potential suspension.
Step 7: Apply for Fictitious Name Permit (If Using Brand Name)
If you plan to operate under any name other than your individual dentist name followed by professional corporation designation, submit your Fictitious Name Permit application to the Dental Board of California. The application requires documentation showing ownership percentages, copies of all shareholders’ current licenses, and your proposed fictitious name.
Processing times vary, so submit this application promptly after formation if you intend to market under a brand name. Operating under an unapproved fictitious name violates the Dental Practice Act and constitutes unprofessional conduct under Business and Professions Code Section 1680.
Step 8: Local Business Licenses and Permits
Contact your city and county offices to determine required local business licenses. Requirements vary significantly by jurisdiction—some cities require general business licenses, others have specific permits for dental offices. Your local health department may have additional requirements depending on services provided (radiography registration, nitrous oxide permits, etc.).
Use CalGOLD (calgold.ca.gov) to identify required permits and licenses for your specific location and business type. This state tool aggregates permit requirements across agencies, helping you identify obligations you might otherwise miss.
Step 9: Establish Employment and Payroll Infrastructure
If hiring employees (including yourself as a dentist-employee of your corporation), establish compliant payroll systems. This includes proper tax withholding (federal and California state), workers’ compensation insurance (required by California law for all employers), compliance with California employment regulations (meal and rest breaks, overtime calculations, required notices), and correct employee classification.
Many dental corporations engage professional payroll services given California’s complex employment requirements. The cost is usually justified by avoiding classification errors, missed deposits, and penalty exposure. Your payroll service should understand dental-specific issues like hygienist compensation models and bonus structures.
Hygienists and Dental Auxiliaries: Employees vs. Equity Participants
One of the more complex questions in dental corporation structuring involves the role of dental hygienists and other auxiliaries. Unlike medical corporations where the allied health co-ownership options are relatively limited, dental corporations can have RDHs, RDAs, and RDAEFs as minority shareholders. Understanding the implications requires examining both the corporate ownership rules and the scope-of-practice limitations that remain regardless of ownership status.
Under Business and Professions Code Article 9 (Sections 1900-1966.6), registered dental hygienists operate under defined scope-of-practice rules with specific supervision requirements. RDHs can perform scaling, root planing, prophylaxis, and certain other procedures, but they cannot diagnose dental conditions, develop treatment plans, prescribe medications, or perform surgical procedures. These scope limitations don’t change when an RDH becomes a shareholder in your dental corporation.
If you bring in an RDH as a 20% minority shareholder, they gain equity participation and potentially vote on corporate business decisions, but they still cannot control clinical decisions, treatment planning, or diagnostic determinations. Those responsibilities remain exclusively with the dentist-shareholders. Your corporate governance documents should explicitly preserve this distinction, making clear that non-dentist shareholders participate in business decisions (office location, equipment purchases, marketing budgets) but not clinical protocols or treatment recommendations.
Similarly, registered dental assistants and RDAEFs have defined duties under Business and Professions Code Article 7 (Sections 1740-1777) and Title 16 CCR regulations. RDAEFs can perform certain extended functions under direct supervision (taking impressions, placing cord, etc.), but they remain auxiliaries to the dentist’s practice, not independent practitioners. An RDAEF shareholder owns equity in the business but doesn’t gain expanded clinical authority through that ownership.
This creates interesting practice design possibilities. A dentist wanting to build long-term loyalty with key team members could offer minority equity participation to a senior hygienist or lead RDA. The equity stake aligns their financial interests with practice success while the 51% dentist control rule and scope-of-practice limitations ensure clinical decisions remain with appropriately licensed dentists. However, this structure requires careful documentation to avoid any appearance that non-dentist owners are directing clinical care.
The Dental Board scrutinizes arrangements where non-dentist ownership might translate into clinical control. Business and Professions Code Section 1680 defines unprofessional conduct to include “permitting any person to perform dental operations who is not authorized to do so” and entering into arrangements where unlicensed persons “direct, control, or interfere with the dentist’s professional judgment.” If your hygienist-shareholder starts dictating treatment recommendations or your RDA-shareholder controls scheduling in ways that affect treatment decisions, you risk disciplinary action regardless of the formal corporate paperwork.
Contrast this with Registered Dental Hygienist in Alternative Practice (RDHAP) corporations under Business and Professions Code Sections 1967-1967.4. RDHAPs can form their own professional corporations where the RDHAP must own the majority of shares. These are entirely different entities—not dental corporations—authorized for limited independent practice in certain underserved settings (nursing homes, schools, homebound patients). An RDHAP corporation cannot provide full-scope dental services; it’s limited to the RDHAP scope of practice.
For a hygienist weighing options, the choice depends on goals. Minority equity participation in a dentist-owned dental corporation provides investment upside tied to full-scope dental practice success, while the RDHAP corporation route provides practice ownership but only for limited-scope hygiene services in specific settings. These are fundamentally different business models with different risk and return profiles.
Professional Liability and the “Thin Veil” of Dental Corporations
One primary reason dentists form professional corporations is liability protection, but understanding exactly what protection the corporate form provides—and doesn’t provide—is crucial for realistic expectations.
Under general professional corporation doctrine reflected in Moscone-Knox, each licensed professional remains personally liable for their own professional negligence regardless of the corporate structure. Your dental professional corporation does not shield you from malpractice claims arising from your own clinical conduct. If you negligently perform an extraction and injure a patient, your personal assets remain at risk for that malpractice judgment. The corporation provides no protection against your own professional negligence.
What the dental professional corporation does protect are your personal assets from the corporation’s commercial and operational liabilities. If your corporation signs a five-year office lease and later defaults on rent, the landlord pursues corporate assets, not your personal home (absent a personal guarantee you signed). If the corporation defaults on equipment financing, the creditor’s recourse is limited to corporate assets. Employment claims (wrongful termination, discrimination, harassment) name the corporation as defendant, not you individually (unless you engaged in personal intentional misconduct).
The corporate form may also provide protection from malpractice of other dentist-shareholders, assuming you weren’t supervising their care. If your partner in a two-dentist corporation commits malpractice on their patient while you were treating a different patient in a different operatory, their professional liability exposure doesn’t automatically become yours. This inter-professional protection is one significant advantage of corporate structure for group practices.
However, the Dental Board will look past the corporate form—effectively piercing the “veil”—to discipline individual dentists where corporate structures mask prohibited conduct. Business and Professions Code Section 1680 defines unprofessional conduct broadly, including aiding unlicensed practice, improper corporate arrangements, fee-splitting, and allowing non-licensed persons to control professional judgment. If your corporate structure, MSO arrangement, or equity distribution results in non-dentists directing clinical decisions, the Dental Board disciplines the individual dentist license holders, not just the corporation.
This concern becomes acute in investor-backed dental practice structures. If a management company or private equity investor (operating through an MSO model) effectively controls clinical protocols, staffing ratios, patient scheduling, or treatment recommendations, the dentist-shareholders risk disciplinary action for unprofessional conduct even though the formal corporate paperwork shows dentist majority ownership. The substance of control matters more than the form of ownership.
Business and Professions Code Sections 1800-1808 authorize the Dental Board to require malpractice insurance or other security as a condition of dental corporation operation, implemented through Title 16 CCR regulations. While California doesn’t mandate malpractice insurance for individual dentists generally, practicing through a corporate structure may trigger specific insurance requirements. Verify current requirements with the Dental Board and ensure your coverage satisfies those requirements as part of formation compliance.
Tax Considerations: C-Corporation vs. S-Corporation Election
Your dental professional corporation starts as a C-corporation by default, subject to California’s 8.84% corporate tax rate on net income plus federal corporate income tax. This creates double taxation: corporate profits are taxed at the entity level, then taxed again when distributed to shareholders as dividends.
Many dental corporations elect S-corporation tax treatment to avoid double taxation. With S-corp election, the corporation’s income passes through to shareholders’ personal tax returns, avoiding entity-level federal income tax. California imposes only a 1.5% tax on S-corporation net income (compared to the 8.84% C-corp rate), and the pass-through treatment generally produces overall tax savings for owners.
S-corp election requires satisfying strict requirements: no more than 100 shareholders, all shareholders must be individuals (not other corporations or certain trusts), all shareholders must be U.S. citizens or residents, and only one class of stock is permitted. Most dental corporations satisfy these requirements, making S-corp election attractive from a tax perspective.
The S-corp election must be filed on IRS Form 2553 within 75 days of formation (or by March 15 of the tax year for existing corporations wanting to elect for that current year). California requires a separate election on Form 3560. Missing these deadlines means waiting until the following tax year for the election to take effect, potentially costing significant tax dollars. Coordinate with your CPA to ensure elections are filed correctly and timely.
Regardless of C-corp or S-corp status, California imposes a minimum annual franchise tax of $800 on all corporations. New corporations are exempt from this minimum in their first taxable year, but the $800 minimum applies annually starting the second year. This minimum applies even if your corporation has no income, making it an unavoidable ongoing cost.
For S-corp dentist-shareholders, the IRS scrutinizes compensation to ensure “reasonable salary” standards are met. You must pay yourself a reasonable salary for services performed before taking additional distributions. Setting an unreasonably low salary to minimize payroll taxes while taking large distributions triggers IRS audit risk. What constitutes reasonable compensation depends on specialty, geographic location, hours worked, and comparable compensation data. Your CPA should help establish a defensible salary that satisfies IRS requirements while optimizing your overall tax position.
Management Services Organizations and Practice Control Issues
Private equity interest in dental practices has increased substantially, leading to widespread use of Management Services Organization (MSO) structures. An MSO is a separate entity (typically an LLC) that provides non-clinical administrative services to the dental professional corporation under a management services agreement. The MSO handles billing, marketing, human resources, facility management, equipment procurement, and other operational matters, while the dental corporation retains control over all clinical decision-making.
When structured properly, MSO arrangements allow outside investors (including non-dentists) to participate in the business aspects of dental service delivery without violating the prohibition on non-dentist control over dental practice. The MSO can be owned by anyone—dentists, non-dentists, or private equity—and earns returns through management fees rather than direct ownership of the dental practice.
However, California authorities and the Dental Board scrutinize these arrangements closely. An MSO arrangement crosses into prohibited territory when the MSO exercises control over clinical decisions: dictating treatment recommendations, controlling dentist hiring and termination based on production metrics, setting clinical protocols, determining patient scheduling in ways that affect treatment quality, or imposing productivity requirements that compromise professional judgment.
Red flags that suggest improper control include MSO agreements giving the MSO power to hire and fire dentists, MSO fees structured as high percentages of revenue (creating profit-sharing that incentivizes MSO involvement in clinical decisions), MSO control over the number of patients dentists must see daily, MSO dictation of materials or treatment approaches, or MSO involvement in peer review or clinical credentialing decisions.
Business and Professions Code Section 1680 explicitly identifies unprofessional conduct to include entering arrangements where unlicensed persons “direct, control, or interfere with the dentist’s professional judgment.” If your MSO arrangement, regardless of formal documentation, effectively gives the MSO control over clinical matters, individual dentist license holders face disciplinary exposure.
If you’re considering an MSO structure for outside investment or operational efficiency, ensure the management services agreement clearly delineates that the dental corporation retains exclusive authority over all clinical matters, dentist hiring and termination decisions, clinical protocols, patient care decisions, and professional ethics. MSO fees should generally be fixed amounts or based on fair market value for actual services rendered, not high percentages of revenue that create incentives to influence clinical decisions.
Recent scrutiny of dental service organizations (DSOs) and private equity-backed dental chains means these arrangements face heightened regulatory attention. The structure can be legally compliant, but requires careful drafting and ongoing monitoring to ensure the line between administrative services and clinical control isn’t crossed.
Insurance Requirements for Dental Professional Corporations
Maintaining appropriate insurance coverage protects both your dental corporation and your personal assets. Your insurance portfolio should include multiple coverage types addressing different risk categories.
Professional liability insurance (malpractice coverage) is fundamental. Both the dental corporation and individual dentists should maintain appropriate coverage. Policy limits vary by practice type, risk tolerance, and state requirements, but underinsuring in this area can be catastrophic. Most dental malpractice policies are “claims-made” rather than “occurrence” based, meaning you need tail coverage if you leave practice or dissolve the corporation to protect against claims filed after departure for incidents that occurred during coverage.
General liability insurance covers premises risks: patient slip-and-fall injuries, property damage, and non-professional liability. This is standard business insurance that any dental office needs regardless of corporate structure.
Employment Practices Liability Insurance (EPLI) protects against claims from employees alleging discrimination, wrongful termination, harassment, or other employment-related wrongs. Given California’s employee-protective legal environment and the dental industry’s staff management challenges, EPLI coverage is strongly recommended.
Directors and Officers (D&O) insurance covers claims against directors and officers for decisions made in their governance capacity (business judgment claims, not malpractice). This becomes particularly relevant for multi-shareholder dental corporations where governance disputes or business decisions might be second-guessed.
Workers’ compensation insurance is required by California law for all employers. If you have any employees—hygienists, assistants, front office staff, associates—you need workers’ compensation coverage. Penalties for non-compliance are severe, including potential criminal liability.
Cyber liability insurance has become increasingly important given electronic health records, digital imaging systems, and patient data protection requirements. A data breach affecting patient records creates notification obligations, potential regulatory penalties, and significant remediation costs. Cyber coverage addresses these exposures.
Business interruption insurance protects against income loss if your practice cannot operate due to covered events (fire, natural disaster, etc.). This coverage helps maintain financial stability during recovery periods.
Ongoing Compliance Calendar
Maintaining your dental professional corporation requires attention to recurring compliance obligations. Unlike formation, which is a one-time process, these obligations continue annually or at regular intervals throughout the corporation’s existence.
The Statement of Information (SI-550) must be filed annually with the California Secretary of State. Your filing window is during the calendar month in which your corporation originally filed its Articles, and the fee is $25 each year. Late filing results in penalties and potential corporate suspension—a suspended corporation cannot transact business in California until penalties are paid and filings brought current.
Franchise tax payments to the Franchise Tax Board are due by the 15th day of the 4th month of your taxable year (April 15 for calendar-year taxpayers). The minimum franchise tax is $800 annually (no exemption after the first year), and estimated tax payments are required quarterly if you expect to owe more than $800.
Annual tax returns must be filed with both the IRS (Form 1120 for C-corps or 1120S for S-corps) and California Franchise Tax Board (Form 100 or 100S). S-corporations issue Schedule K-1s to shareholders reporting their share of corporate income for inclusion on personal returns.
Dental Board license renewals for all dentist-shareholders and other licensed professionals (RDHs, RDAs, etc.) must be maintained continuously. If any shareholder loses their license or lets it lapse, the corporation’s ownership structure falls out of compliance. Your bylaws should require immediate notification and trigger the mandatory share repurchase provisions.
Continuing dental education requirements must be satisfied for all licensed shareholders to maintain their licenses. California dentists need 25 hours of CE every two-year renewal period, with specific requirements for infection control, law and ethics, and other topics. Failure to complete CE results in license non-renewal, which triggers your mandatory share repurchase provisions.
Corporate meeting minutes should be maintained annually documenting director and shareholder meetings, major business decisions, officer elections, and significant corporate actions. These formalities matter for maintaining the liability protection your corporate structure provides and demonstrate proper corporate governance if ever questioned.
If you have a Fictitious Name Permit, it may require periodic renewal depending on Dental Board requirements. Monitor your FNP status and renew before expiration to avoid practicing under an unauthorized name.
Any changes in shareholders, directors, or officers should be reflected in updated corporate records and potentially trigger new Statement of Information filings with the Secretary of State. Share transfers must comply with the 51% dentist control requirement and your mandatory share transfer bylaw provisions.
Dissolution, Restructuring, and Exit Planning
Practice circumstances change over time. You might bring in associate dentists as partners, sell your practice to a larger group, or decide to retire. Understanding how your dental professional corporation can be restructured or dissolved helps plan for these transitions.
Bringing in a new dentist-owner involves either issuing additional shares or having existing shareholders sell some of their shares to the new dentist. The new dentist must hold a valid California dental license, and you must ensure the transaction maintains the 51% dentist control requirement and that non-dentist shareholders (if any) remain numerically in the minority. Update corporate records, amend bylaws if necessary, and file updated Statement of Information reflecting any new officers or directors.
Selling your practice to a dental service organization (DSO) or larger group typically involves either an asset sale (where the buyer acquires practice assets—patient records, equipment, contracts—but not the corporate entity) or a stock sale (where the buyer acquires the shares of your corporation). Corporate practice restrictions mean buyers must be entities authorized to provide dental services, which limits potential acquirers. Many DSO acquisitions are structured as asset purchases where the acquiring entity’s professional corporation absorbs the practice, often combined with employment agreements for the selling dentist during a transition period.
Dissolution of your dental corporation requires filing a Certificate of Dissolution with the Secretary of State, settling all corporate debts and obligations, distributing remaining assets to shareholders according to their ownership percentages, filing final tax returns with both IRS and FTB, and notifying the Dental Board as appropriate. You must also address patient record retention requirements (California requires maintaining dental records for a minimum period after treatment), provide appropriate notice to patients of practice closure, and arrange for records transfer or storage ensuring continuity of care.
If a shareholder dies or becomes disqualified, your bylaws’ mandatory share repurchase provisions (required by Title 16 CCR Section 1060) specify the procedure. Typically, shares must be transferred to an eligible licensed person within 90 days. Life insurance on key shareholders can provide liquidity for the corporation or remaining shareholders to purchase the deceased shareholder’s shares from their estate at fair market value.
Frequently Asked Questions
Can a registered dental hygienist own a majority stake in a dental corporation?
No. Under Corporations Code Section 13401.5(n) and the 51% dentist control requirement, dental hygienists can only own shares as minority shareholders, and their number cannot exceed the number of dentist-shareholders. If an RDH wants majority ownership of a professional services practice, they would need to form a Registered Dental Hygienist in Alternative Practice (RDHAP) corporation under Business and Professions Code Sections 1967-1967.4, which is a different entity type with limited scope of practice (primarily serving underserved populations in alternative settings). An RDHAP corporation cannot provide full-scope dental services.
What happens if I let my dental license lapse while owning shares in the corporation?
You become immediately ineligible to own shares, and your corporation falls out of compliance with the Dental Practice Act. Under your bylaws’ mandatory share transfer provisions (required by CCR Section 1060), you must transfer your shares to an eligible licensed person within the specified timeframe (typically 90 days). If you fail to transfer and the corporation continues operating with non-compliant ownership, the corporation violates the Dental Practice Act, potentially exposing all dentist-shareholders to disciplinary action for unprofessional conduct under Business and Professions Code Section 1680, risking corporate suspension, and potentially voiding professional liability insurance coverage. Don’t let this happen—maintain license renewals and continuing education requirements diligently.
Can I form a single dental corporation and operate multiple office locations?
Yes, a single dental corporation can operate multiple office locations, subject to Business and Professions Code Sections 1658-1658.8 regarding additional offices. You’ll need to ensure each location satisfies local permit requirements, that your fictitious name permit (if applicable) covers all locations, and that your liability insurance adequately covers all practice sites. Some operational challenges arise with multi-location practices—adequate supervision of auxiliaries at each location, proper record-keeping across sites, and ensuring clinical standards are maintained consistently. For tax and liability reasons, some dentists prefer separate corporations for each location, while others prefer the administrative simplicity of one entity. Discuss the tradeoffs with your attorney and CPA based on your specific situation.
Do I need a written employment agreement if I’m the sole dentist-shareholder and only employee-dentist?
Technically, as the sole shareholder and only dentist, you’re employing yourself through the corporation. For S-corp tax treatment purposes, you need to pay yourself reasonable compensation as an employee (with proper payroll tax withholding), which creates an employment relationship even if it’s not documented in a formal employment agreement. However, having a written employment agreement clarifies compensation terms, benefits, duties, and expectations, which becomes important if you later bring in associates or partners. The documentation also supports your “reasonable compensation” determination if questioned by the IRS.
What’s the difference between a dental assistant and registered dental assistant for ownership purposes?
Both dental assistants (unlicensed) and registered dental assistants (RDAs) are listed as permitted minority shareholders under Corporations Code Section 13401.5(n). However, their scope of practice differs significantly. Unlicensed dental assistants perform limited duties under close supervision, while RDAs have completed training and examination requirements allowing them to perform additional functions under general supervision. From a corporate ownership perspective, both can own up to 49% of shares (combined with other non-dentist licensees) and cannot exceed the number of dentist-shareholders. From a practice perspective, having an RDA shareholder versus an unlicensed dental assistant shareholder means different functional capabilities within the practice, but neither gains expanded clinical authority through ownership alone.
How much does it cost to form and maintain a California dental corporation annually?
Direct government filing fees are modest: $100 for Articles of Incorporation, $25 for Statement of Information, free EIN application. First-year costs including professional fees (attorney and CPA consultation, bylaws drafting, formation documents) realistically range from $3,000 to $10,000 depending on complexity—solo practices are simpler than multi-shareholder corporations with hygienist equity participation and MSO arrangements. First-year franchise tax is exempt, but starting year two, you owe a minimum $800 annually regardless of income. Annual compliance costs (SI-550 filing, franchise tax minimum, tax preparation, bookkeeping) run $2,000-$6,000 for straightforward practices, more for complex multi-location or multi-shareholder setups. These costs don’t include your malpractice insurance, general liability, workers’ comp, and other insurance premiums, which vary significantly by practice type and size.
Conclusion
Forming a California dental professional corporation requires navigating the Moscone-Knox Professional Corporation Act’s ownership and governance requirements, the Dental Board’s regulatory oversight of dental corporations, tax planning decisions that affect your long-term financial position, and professional liability considerations that shape your risk management approach. It’s more complex than forming a standard business entity, but the structure serves important purposes: maintaining professional autonomy over clinical decisions, providing liability protection for commercial obligations while preserving personal accountability for professional conduct, and creating a recognized legal framework for practice ownership that satisfies credentialing and regulatory requirements.
Start with proper planning, engage qualified professionals (healthcare attorney and dental practice CPA), file formation documents correctly, establish compliant governance through properly drafted bylaws with mandatory share transfer provisions, and commit to ongoing compliance with annual filings and regulatory requirements. The investment in proper formation protects your practice, your patients, and your professional license.
If you’re ready to discuss your specific situation—whether solo practice formation, bringing in hygienist equity participants, or structuring a multi-dentist group—schedule a consultation to review your practice plans and develop a formation strategy tailored to your circumstances.
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