In California, practicing as a professional California dental corporation may bestow you with many benefits over practicing as a sole proprietor or dental partnership.
Formed under the Moscone-Knox Professional Corporation Act, a professional corporation in California is entitled to render dental services that are pursuant to a license, certification, or registration authorized by the general provisions of the California Corporations Code.
Unlike other states, California does not allow for dentists (or other professionals) to operate as an LLC or a Professional LLC.
With that being said, the California Dental Corporation is the only entity a dentist can have to shield themselves from personal liablity.
Here is a whittled list of a few benefits of incorporating a professional dental practice in accordance with the California corporation act.
A Dental Corporation’s Bylaws are the rules under which a corporation can operate. They dictate the corporation’s internal business and layout rules and procedures for all of its affairs.
The board of directors or shareholders may add, remove, or change provisions of the bylaws upon a satisfactory vote.
Unless there are less than three shareholders, a Dental Corporation Bylaws must have at least three directors. It is very common for dental corporations in California to have only a single shareholder, in which case they are only required to have one director.
Many California Dental Corporations are owned by a single shareholder.
In this situation, a sole shareholder Dental Corporation must:
Generally, a professional corporation normally is limited to rendering professional services in only one profession. It’s shareholders, directors, and officers must be licensed in the profession the corporation is to practice.
However, California dental corporations may have shareholders, officers, directors, or professional employees who are licensed in specified similar professions and who may provide services in their own professions.
They must, however, meet the following two requirements:
The professionals listed below are eligible to take hold of a California dental corporation provided they follow the two rules listed above:
As a general rule, the names of professional corporations must reflect 1) the nature of the professional practice in which the corporation will engage; and 2) the name of the professional who owns the corporation.
Most professional corporation names must contain and be restricted to the last name of one or more of the present, prospective, or former shareholders or of persons who were associated with a predecessor person, partnership, or other organization and must include wording or abbreviations denoting the corporate existence such as “Professional Corporation,” “Prof. Corp.,” “Corporation,” “Corp.,” “Incorporated,” or “Inc.” Bus. & Prof. Code §§ 1054 .
Any name that complies with either one of the following:
OR
In summary, The name of a dental corporation name must contain:
** We are using the name Odgers for demonstration purposes, When setting up a dental corporation you will use the dentist’s last name.
Every dentist who treats patients in California for profit under a fictitious name must file a fictitious business name statement [Bus. & Prof. Code § 17910].
They must file in the county in which they see patients as well as with the California Dental Board.
So what is a Fictitious Business Name?
According to Bus. & Prof. Code § 17900(b).(c), a Fictitious business name is one of the following:
The total income of the dental corporation is taxable by the federal and state governments’ corporation tax rates. If there are any distributed dividends to shareholders, it must be reported, and this income will also be subjected to income taxes. This taxation of dividends is also commonly referred to as ‘double taxation’.
(Elect after setting up corporation)
One common way to avoid this double taxation is to elect to be treated as an S-Corp, which allows for pass-through taxation. When dental corporations elect to be treated as an S-Corp, the dentist will pay himself or herself a reasonable salary and will take additional compensation in the form of an owner distribution or draw.
While the owner’s salary is subject to self-employment taxes, the draw distribution is not, Thus, the dentist will save the roughly 15% self-employment tax on all distributions taken as a draw.
A shareholder can readily transfer stock to the new owner if there are no shareholder agreement restrictions.
But, the ownership change must be made only to a licensed dentists or individuals permitted to own such shares in a Dental Corporation.
Currently, it takes roughly 1-2 weeks for the California Secretary of State to process an newly formed dental corporation.
The cost to set up a dental corporation varies by firm, however we charge a flat rate of $1500 that includes all secretary of state filing fees.
To know more about the formation, management and termination of California professional Dental Corporation, schedule an appointment with the leading California dental attorney.
