Dental and Medical Counsel Blog

While you were in dental school, you probably focused on learning how to provide the best possible care for your patients. While this is still your top priority, you will run a business as a dental professional. You need to make sure you put your business in a position to be successful, and that means reviewing your business formation options. There are a handful of legal requirements you need to meet depending on the business formation option you choose for your dental practice, but incorporation could be the best option.

You should consider incorporation for your dental practice because it can provide you with a significant shield against personal liability. There are a few important points you need to keep in mind, so learn more about the benefits and legal requirements of incorporation for your dental practice.

The Steps: Dental Corporation Business Formation

There are several steps you need to follow if you would like to incorporate your dental practice. They include:

• First, you need to file your Articles of Incorporation with the Secretary of State.
• Then, you need to draft custom bylaws for your dental corporation. These bylaws will be the rules under which your dental practice will operate.
• You will need to hold an initial corporate meeting. There, you will issue shares of your dental practice relevant parties and elect officers for your business.
• After this, you will need to file an initial statement of information with the relevant authorities.
• Taxation is also an important issue for corporations, so you will need to get a Tax ID number, which is usually called an EIN number.
• As you go through the incorporation and business formation process, you will have to decide if you would like to be treated as an S-corporation with the IRS. You should reach out to professionals who can help you decide if this is right for your dental practice.
• You will have to open a specific bank account for your corporation. You will not be able to use a personal bank account for your dental practice.
• Finally, you need to register with the Dental Board of California.

In addition to licensing issues that you need to address, you need to think carefully about how you can structure your bylaws to adhere to all legal requirements for corporations in California. You also need to think about how taxation issues could impact the revenue, profit, and overhead expenses of your dental practice.

The Benefits of Forming a Corporation for Your Dental Practice

Even though it might sound like you have a lot of steps and legal requirements that you need to meet before your dental practice can become incorporated, there are a lot of benefits you will enjoy. They include:

• If creditors come looking for you, or if you face a lawsuit, incorporating your dental practice could help you shield yourself against personal liability. This could help you protect yourself against potentially serious losses.
• As a corporation, you can improve your business credit. This means that you may be able to avoid a personal guarantee if you need to take out a loan to improve your dental practice.
• If you structure your corporation the right way, you could open the door to significant taxation benefits. For example, shareholders may be able to minimize their self-employment taxes, allowing the business to save a significant amount of money.
• You may be able to access several other benefits as well. You may have access to retirement plans that might not have otherwise been open to you, and you may be able to take advantage of Medicare benefits as well.

Even though there might be some licensing issues that you need to navigate, there are a lot of significant benefits you may enjoy if you decide to form a dental corporation. 

Forming Your Bylaws: What To Know

As you start to go through the steps listed above, you need to think carefully about what you will include in the bylaws for your dental practice. Remember that these are the rules that your corporation will follow. They will dictate the procedures you will follow for specific affairs, how the practice will be laid out, how the leadership board will be structured, and how much power the individual shareholders have.

When you set up your dental practice, you may decide that you only want to have one shareholder. In that case, you will also only be required to have one director on the board. On the other hand, if you have at least three shareholders, then you need to have at least three directors. You should think carefully about how you structure the leadership of your dental board, as it will influence how much power you have to control the daily operations of your dental practice.

Licensing Issues To Consider

There are important licensing issues you need to think about as you go through the process of forming your dental corporation. Typically, a professional corporation is only allowed to provide professional services that line up with its profession. All of the officers and directors need to be licensed in that specific profession.

While this does not necessarily mean that everyone on the board has to be a licensed dentist, it does mean that they need to be licensed in similar professions. For example, you might have some dental assistants, physicians, and surgeons on the board of your corporation. While this is allowed, these ancillary professions cannot own more than 49 percent of your dental corporation, and they cannot outnumber the licensed dentists on the board. Therefore, think carefully about how these licensing issues may impact your dental practice.

Consider Your Taxation Issues as Well

Eventually, you will be asked whether to establish your dental corporation as a C-Corp, which is the default option, or as an S-Corp, which you can elect after you have already set up your corporation. If you go with the default option, the total income of your dental corporation will be taxed in accordance with the corporate tax rates under federal and state laws. If you distribute any dividends to your shareholders, this income will have to be reported, and it will be subjected to income tax. Some people call this double taxation.

One potential way to avoid this significant tax issue is to set up an S-Corp instead. You will draw a reasonable salary for yourself, and you may be able to take some additional compensation in the form of an owner draw or distribution. You may not have to pay self-employment taxes on this distribution, which could help you save money. You should work with a professional to learn more about this option.

Incorporate Your Dental Practice With the Help of Dental & Medical Counsel

There are a lot of issues you need to address as you go through the process of incorporating your dental practice, and you need to make sure this business formation option is the best choice for your needs. At Dental & Medical Counsel, we can help you review all of the options available to you, and we can discuss the benefits and drawbacks of each choice with your team. Contact us today to get the process started.

Frequently Asked Questions

Q: What are dental corporations?

A: Dental corporations are companies that own and operate multiple dental practices. They may also provide management, marketing, and administrative support to their affiliated practices.

Q: What are the advantages of working with a dental corporation?

A: The advantages of working with a dental corporation may include access to resources and support that can help dentists manage their practices more efficiently. Dental corporations may also be able to offer more competitive compensation packages and benefits than smaller practices.

Q: What types of services do dental corporations typically offer?

A: Dental corporations may offer a wide range of services, including preventive care, restorative care, cosmetic dentistry, orthodontics, and oral surgery. Some dental corporations may also specialize in certain areas of dentistry, such as pediatric dentistry or endodontics.

Q: How do dental corporations differ from traditional dental practices?

A: Dental corporations differ from traditional dental practices in that they are typically larger and more centralized. They may have more standardized policies and procedures across their practices, and they may be able to negotiate better prices on supplies and equipment due to their size.