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Overview: Dental Professional Corporations

California requires dentists to practice through specific business entities. Under Corporations Code Section 13401 and Business & Professions Code Section 1800.5, dental practices must be organized as sole proprietorships, general partnerships, or professional corporations to maintain compliance with the Dental Board of California.

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Why Form a Dental PC?

A professional corporation provides significant advantages over operating as a sole proprietor:

  • Limited liability for business debts and contracts
  • S-Corp tax election reduces self-employment tax
  • Professional credibility and permanence
  • Facilitates practice sale or transition
  • Multiple dentist ownership possible
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Regulatory Framework

Dental corporations are governed by multiple authorities:

  • Dental Board of California (DBC)
  • CA Corporations Code § 13401-13410
  • Business & Professions Code § 1800.5
  • Dental Practice Act regulations
  • Secretary of State filing requirements
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Business Structure Options

Dentists in California may practice through:

  • Sole proprietorship (DBA)
  • General partnership (GPs only)
  • Professional corporation (PC)
  • Dental corporation (DC)
  • LLCs are NOT permitted for dental practice
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Liability Considerations

Professional corporations have specific liability rules:

  • Malpractice liability remains personal
  • Corporation shields from business debts
  • Director/officer liability still applies
  • Personal guarantees override protection
  • Insurance remains essential

💡 LLC Prohibition for Dental Practices

Unlike some other professions, California does NOT allow dentists to form LLCs or PLLCs for dental practice. Business & Professions Code § 1800.5 specifically limits dental practice to sole proprietorships, partnerships of licensed dentists, and professional corporations. This prohibition applies regardless of whether the dentist holds licenses in states that permit dental LLCs.

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Ownership & Shareholder Requirements

California strictly regulates who may own shares in a dental professional corporation. These rules ensure that dentists maintain control over clinical practice and prevent unlicensed corporate ownership of dental practices.

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Permitted Shareholders

Only the following may hold shares:

  • Licensed California dentists (DDS/DMD)
  • Licensed dental hygienists (RDH)
  • Trust for benefit of licensee
  • Estate of deceased shareholder (limited time)
  • Multi-specialty groups with dentists
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Prohibited Shareholders

The following cannot own dental PC shares:

  • Unlicensed individuals (spouses, family)
  • Other corporations or LLCs
  • Investment groups or private equity
  • Non-dentist healthcare professionals
  • Foreign-licensed dentists (CA license required)

⚠️ Dental Hygienist Ownership Limitations

While RDHs may own shares in a dental PC, they cannot own a majority. Business & Professions Code § 1800.5 requires that dentists maintain majority ownership and control. Additionally, RDH shareholders cannot perform procedures outside their scope of practice or make clinical decisions reserved for dentists.

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Multi-Dentist Ownership

Multiple dentists may own a single PC:

  • All must hold active CA dental licenses
  • Ownership percentages are flexible
  • Buy-sell agreements recommended
  • Death/disability provisions important
  • Consider employment vs. shareholder roles
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Director & Officer Rules

Corporate governance requirements:

  • All directors must be licensed shareholders
  • President must be licensed dentist
  • Secretary may be unlicensed (admin role)
  • CFO may be unlicensed (financial role)
  • One person may hold multiple offices

✅ Estate Planning Considerations

If a dentist shareholder dies, their shares may temporarily pass to their estate or trust. However, the estate must dispose of shares to a licensed dentist within a reasonable time (typically specified in bylaws). Include mandatory redemption provisions in your shareholder agreement to handle this situation automatically.

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Formation Process: Step by Step

Forming a California dental professional corporation involves coordination between the Secretary of State, Dental Board of California, and various tax agencies. Here's the complete process.

1

Verify Dental License Status

Confirm all proposed shareholders hold active, unrestricted California dental licenses:

  • Check DBC License Lookup for current status
  • Verify no pending disciplinary actions
  • Confirm license is in good standing
  • New graduates must wait for license issuance
2

Select Corporate Name

Choose a compliant name for your dental corporation:

  • May include dentist name(s) or practice name
  • Can include "Dental" or specialty (e.g., "Orthodontics")
  • Must include "A Professional Corporation" or "P.C."
  • Check Secretary of State name availability
  • Cannot be misleading or imply unlicensed services
3

File Articles of Incorporation

Prepare and file Articles with specific professional corporation provisions:

  • State professional purpose (dental practice)
  • Reference Corporations Code § 13401(a)
  • Include required PC statutory language
  • File with Secretary of State (Form ARTS-PC)
  • Filing fee: approximately $100
4

Register with Dental Board

Complete Dental Board of California corporate registration:

  • Submit Fictitious Name Permit application (if using trade name)
  • Provide copy of filed Articles of Incorporation
  • List all shareholders with license numbers
  • Disclose corporate officers and directors
  • Pay applicable registration fees
5

Adopt Corporate Documents

Prepare essential governance documents:

  • Bylaws with mandatory share redemption provisions
  • Shareholder agreement (buy-sell provisions)
  • Organizational board resolutions
  • Stock certificates and ledger
  • Initial board meeting minutes
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Tax Elections and Registrations

Complete required tax filings:

  • Apply for Federal EIN (Form SS-4)
  • File S-Corp election (Form 2553) within 75 days
  • Register with CA Franchise Tax Board
  • Obtain local business licenses
  • Register with EDD if hiring employees
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Establish Practice Operations

Set up your dental practice:

  • Open corporate bank accounts
  • Obtain professional liability insurance
  • Apply for DEA registration (in corporation name)
  • Secure provider agreements with insurance panels
  • Transfer existing practice assets if applicable
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DSO & Management Structures

Dental Service Organizations (DSOs) provide non-clinical support services to dental practices while complying with California's prohibition on corporate practice of dentistry. Understanding these structures is essential for dentists considering affiliation.

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What is a DSO?

A Dental Service Organization provides administrative support:

  • Practice management and billing
  • Human resources and staffing
  • Marketing and patient acquisition
  • Equipment procurement and maintenance
  • Real estate and facility management
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Legal Structure

Compliant DSO arrangements typically include:

  • Dental PC owns clinical practice
  • DSO (LLC/Corp) provides management
  • Management Services Agreement (MSA)
  • Dentist retains clinical decision authority
  • Fair market value compensation
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Compliant DSO Services

  • Accounts payable/receivable
  • Insurance verification and billing
  • Staff training (non-clinical)
  • Equipment purchasing coordination
  • Facility lease management
  • Marketing and branding
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Prohibited DSO Activities

  • Clinical decision-making
  • Treatment planning authority
  • Hiring/firing of dentists
  • Setting clinical protocols
  • Patient fee determination
  • Ownership of patient records

⚠️ Corporate Practice of Dentistry

California strictly prohibits the corporate practice of dentistry. This means unlicensed entities cannot employ dentists, control clinical decisions, or split professional fees. DSO arrangements must be carefully structured to avoid crossing these lines. Key compliance indicators include:

  • Dentist PC sets all fees and retains control over treatment
  • DSO compensation is not tied to production or revenue percentage
  • Dentist shareholders maintain authority to terminate DSO relationship
  • Patient records remain owned by the dental PC
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Associate Dentist Arrangements

Bringing on associate dentists involves important decisions about employment status, compensation structure, and potential paths to ownership. These arrangements must comply with both labor law and dental board regulations.

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Employment vs. Independent Contractor

Most associate dentists should be employees:

  • W-2 employment is safest classification
  • IC status rarely appropriate in dental settings
  • ABC test applies under California law
  • Control over schedule suggests employment
  • Using practice equipment = employee
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Compensation Structures

Common associate compensation models:

  • Salary guarantee plus production bonus
  • Percentage of production (typically 28-35%)
  • Percentage of collections
  • Daily rate or per diem
  • Hybrid models combining elements
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Path to Ownership

Structuring buy-in opportunities:

  • Equity purchase over time
  • Performance-based vesting
  • Sweat equity arrangements
  • Practice valuation considerations
  • Financing options for buy-in
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Employment Agreement Terms

Key provisions for associate agreements:

  • Term and termination provisions
  • Non-compete clauses (limited in CA)
  • Non-solicitation of patients
  • Malpractice insurance requirements
  • CE/licensing maintenance

💡 California Non-Compete Limitations

California Business & Professions Code § 16600 generally voids non-compete agreements. However, you can include reasonable non-solicitation provisions that prevent associates from actively soliciting patients upon departure. Geographic restrictions on where an associate can practice after leaving are typically unenforceable in California. Focus on protecting patient relationships through professional conduct policies.

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Dental Specialties & Multi-Specialty Practices

California recognizes nine ADA-approved dental specialties. Multi-specialty practices offer comprehensive care but require careful attention to scope of practice and appropriate referral patterns.

Specialty Focus Area Additional Training
Orthodontics Tooth alignment, braces, clear aligners 2-3 year residency
Oral Surgery Extractions, implants, jaw surgery 4-6 year residency
Periodontics Gum disease, dental implants 3 year residency
Endodontics Root canals, pulp treatment 2-3 year residency
Pediatric Dentistry Children's dental care 2-3 year residency
Prosthodontics Crowns, bridges, dentures 3 year residency
Oral Pathology Disease diagnosis, biopsy analysis 3-4 year residency
Oral Radiology Dental imaging interpretation 2 year residency
Dental Public Health Community dental programs 2 year residency

✅ Multi-Specialty Practice Benefits

  • One-stop care: Patients receive comprehensive treatment without external referrals
  • Care coordination: Specialists collaborate on complex cases
  • Revenue retention: Specialty procedures remain in-house
  • Practice value: Multi-specialty practices command premium valuations
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Frequently Asked Questions

No, unless your spouse holds a California dental license or RDH license. California professional corporation law requires all shareholders to be licensed professionals. Community property rules do not override this requirement—shares must be held in the licensed dentist's name alone. Many dentists use separate property agreements or trusts to address estate planning while maintaining compliance.

Your bylaws and shareholder agreement should address this. Typically, shares transfer to your estate, which has a limited period (often 90 days) to sell them to a licensed dentist. Many dentists include key-person life insurance and disability buy-out insurance to fund these transitions. Without proper planning, the practice may need to be sold quickly, often at a discount.

No. California explicitly prohibits LLCs for dental practice under Business & Professions Code § 1800.5. Your options are sole proprietorship, partnership (among licensed dentists), or professional corporation. Some dentists form a separate LLC for non-clinical assets (real estate, equipment) and lease them to the dental PC, but the clinical practice itself must be a PC.

To add a shareholder: (1) Verify their California dental license is active; (2) Determine purchase price and payment terms; (3) Authorize and issue new shares via board resolution; (4) Update shareholder agreement and bylaws; (5) Notify the Dental Board of the change; (6) Update corporate records. Consider whether they buy existing shares (from you) or the corporation issues new shares.

They're effectively the same thing. A "Dental Corporation" is simply a professional corporation that provides dental services. The Articles of Incorporation reference Corporations Code § 13401(a), which governs all professional corporations. You may use either "Professional Corporation," "P.C.," "Dental Corporation," "D.C.," or similar designations in your corporate name.

No, a DSO cannot own shares in your dental PC—that would violate corporate practice of dentistry rules. However, DSOs typically structure deals where they own non-clinical assets (equipment, real estate) and enter long-term management agreements with the dental PC. Some structures involve "friendly PC" arrangements, but these carry regulatory risk and should be carefully reviewed by legal counsel.