In my previous blog, I wrote about medical corporations. In this blog, I want to talk about dental corporations for dentists and other dental professionals. While the dental profession is currently being impacted in the short term due to the ongoing health crisis, long term projections show that the dental field will continue to have healthy growth.
As mentioned in, there are several reasons why a licensed professional, such as a dentist, may want to form a professional corporation. One of the main reasons is that if a dental professional wants to protect themselves and their assets, they have limited choices in California regarding what type of entity they can operate under. A professional dental corporation is often the best choice. Dental professionals such as dentists need to be aware, however, that professional dental corporations have many unique rules that apply to such corporations.
A professional dental corporation must follow both General Corporation Law as well as the rules of the Dental Board of California. Like with other professional corporations, a professional dental corporation has a number of rules and regulations that must be followed, in addition to the standard corporate rules that apply to all entities.
For example, a professional dental corporation’s name must include the name or the last name of one or more of the present, prospective, or former shareholders and must include the words “dental corporation”, “Professional Corporation”, “Prof. Corp.”, “Corporation”, “Corp.”, “Incorporated”, or “Inc.”. Because these naming rules are so strict, many dental corporations choose to operate under a fictitious business name. A fictious business name is often chosen by dental practitioners because the fictious naming requirements are much less stringent. The fictious name can be any name for the practice other than the last name of the owner dentist or a name that suggests that the practice has more owner dentists than actually exist in the business. The fictitious name has to be registered in the county where the dental professionals practice, along with the Dental Board of California.
Another set of restrictions that apply to dental corporations is that (1) at least 51% of the shares of a professional dental corporation must be owned by licensed dentists, (2) the number of non-dentist owners cannot outnumber the number of dentist owners, and (3) non-licensed individuals generally cannot be owners of the corporation. Individuals licensed in similar professions, such as registered dental assistants, dental hygienists, and licensed physicians and surgeons, can own stock of the dental corporation as long as they do not own in the aggregate more than 49% of the corporation.
The law further restricts who can be an officer or director of a corporation, which professionals dentists can partner with, and what actions can be taken by shareholders of a corporation, including various restrictions related to the buying and selling of shares.
While there are many benefits to forming a professional dental corporation, be careful in how you form it. Forming the entity properly will save you time, money, and future headaches.
This blog is written as of July 27, 2020. Recommendations and legal requirements are changing rapidly, so please continue to review our legal updates or review postings on relevant government websites.
All blogs on this site are for educational purposes only, do not constitute legal advice or opinion, and should not be applied to your situation, or any specific situation, without consultation with counsel. Strategy Law, LLP does not provide any legal advice concerning any matter discussed in a blog except upon formal engagement including, without limitation, execution of Strategy Law, LLP’s formal legal services agreement, and with respect to specific factual situations. No blog constitutes a guaranty, warranty, or prediction regarding the result of any legal matter discussed in the blog or any representation.
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