Form a California Dental Corporation- Secure your Practice (2025 Update)

Here is a whittled list of a few benefits of incorporating a professional dental practice in accordance with the California corporation act.

1. Limits personal liability of dentists against creditors and lawsuits
2. Allows you to build corporate business credit which may allow you to avoid a personal guarantee
3. Minimizes the self-employment taxes of shareholders (If you elect S-Corp Treatment)
4. Ability to opt into fringe benefits such as medicare, retirement plans and more

Dental corporation bylaws dictate internal business rules and procedures. They can be amended by the board of directors or shareholders with a satisfactory vote. A dental corporation must have at least three directors unless it has fewer than three shareholders.

Many California Dental Corporations are owned by a single shareholder. 

In this situation, a sole shareholder Dental Corporation must:

• Be owned by a person licensed to practice dentistry in California; and
• Serve as both president and treasurer
• The other corporate officers are not required to be licensed to practice dentistry. [see California Corp. Code § 13403].

In California, only licensed dentists can own and operate a dental practice. However, certain entities, like professional dental corporations, can also own a practice provided they comply with specific regulations. The Dental Board of California is an authoritative source to understand the regulations before making the decision to own a practice. 

Similarly, federal law including the Moscone-Knox Professional Act which governs professional corporations in California generally. Dental Corporations generally would fall under this.   

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 members of these similar professions cannot own more than 49 percent of the total stock of the California dental corporation.

The non-dentist owners cannot outnumber the licensed dentists in the corporation.

The professionals listed below are eligible to take hold of a California dental corporation provided they follow the two rules listed above:

• Registered dental assistants
• Accredited dental assistants in extended functions
• Dental hygienists in extended functions
• Registered dental hygienists in alternative practice
• Licensed and certified physicians
• Licensed surgeons

The name must reflect the nature of the practice and include the professional’s name and a corporate designation like “Professional Corporation” or “Inc.” It should contain the last name of one or more current, prospective, or former shareholders. It must also indicate the dental nature of the business, such as including “dental” or dental degree initials like “DDS” or “DMD.”

• Odgers Dental Corporation
• Odgers Dental Inc.
• Odgers DDS Inc.
• Odgers DDS Corp.
• Odgers Dental Prof. Corp.

** 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:

• 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 there actually are.

Dental Corp taxed as a C-Corp (Default)

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’.

Dental Corp taxed as an S-Corp

(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.

Filing Articles of Incorporation of a Professional Corporation with the California Secretary of State is the official first step in forming a California dental corporation.

This is cited in the California Corporations Code 13403. This should be the first doucment to clear to ensure a successful transaction of forming a dental corporation.

We also consider following the other documents below which are crucial to acquire in succession of forming a dental corporation:

• Dental Specific Bylaws
• Organizational meeting minutes
• Dental Corp Share Certificates
• EIN Number (IRS Form SS4)
• Optional: S-Corp Election (IRS Form 2553
• Register Corp with Dental Board
• File a beneficial ownership report with FinCEN.

Operating as a dental corporation in California is not merely about owning a business; it’s about leveraging a structure that is conducive to professional growth and stability. Dental corporations offer distinct advantages such as protecting personal assets from business liabilities, potential tax benefits, and compliance with state regulations specific to dental practices. These corporations are recognized entities that, when formed and managed correctly, can lead to prosperous and secure professional practices.

The intricacies of forming a dental corporation necessitate professional legal guidance. From ensuring accurate and compliant documentation to offering strategic advice on operational best practices, a law firm is an indispensable partner in this process. Legal experts can navigate the maze of regulations, assist in drafting essential agreements, and provide ongoing support for various corporate formalities. Their involvement could be the difference between a rocky start fraught with legal complications and a seamless launch of your professional entity.

S Corp vs. C Corp: Choosing the Right Structure for California Dental Corporations

When establishing a dental corporation in California, one critical decision is selecting the appropriate corporate structure. Two prevalent options are S Corporations (S Corps) and C Corporations (C Corps). Both offer distinct advantages and considerations, particularly concerning taxation, ownership, and operational requirements. Understanding the differences between an S Corp and a C Corp is essential for dentists looking to maximize their practice’s financial efficiency and legal compliance.

Note: When you set up your corporation it will be treated as a C Corp by default. In order to to be treated as an S-Corp you will need to file IRS Form 2553.

Overview of S Corporations and C Corporations:

1. S Corporation (S Corp):

   • Taxation: S Corps are pass-through tax entities. They do not pay federal income taxes at the corporate level. Instead, the corporation’s profits and losses are passed through to shareholders, who report them on their personal tax returns. This structure avoids the double taxation often associated with C Corps.
   • Ownership Restrictions: S Corps have certain limitations. They cannot have more than 100 shareholders, and all shareholders must be U.S. citizens or residents. Additionally, S Corps can only have one class of stock, which can limit capital-raising efforts.
   • Formal Requirements: Like C Corps, S Corps are required to follow certain formalities, such as holding annual meetings, maintaining corporate minutes, and others.

2. C Corporation (C Corp):

   • Taxation: C Corps are subject to corporate income tax. Profits are taxed when earned and taxed again when distributed to shareholders as dividends, creating a scenario commonly referred to as “double taxation.”
   • Ownership Flexibility: C Corps can have unlimited shareholders, multiple classes of stock, and no restrictions on foreign ownership. This flexibility makes it easier to raise capital and can be advantageous for a growing practice.
   • Employee Benefits: C Corps can offer a range of tax-deductible benefits to employees, potentially resulting in tax savings.

Making the Choice for Dental Corporations in California:

When deciding between an S Corp and a C Corp for a dental practice, several factors should be considered:

• Tax Strategy: If maintaining a pass-through tax status is preferable to avoid double taxation, an S Corp may be more suitable. However, if the goal is to reinvest profits back into the practice without distributing them as dividends, a C Corp could be advantageous.

• Future Growth and Investment: For dental practices planning significant expansion or seeking investment, the flexibility of a C Corp in terms of stock options and ownership might be more appealing.

• Regulatory Compliance: Dental corporations in California must comply with specific regulations, including those set forth by the California Dental Board. It’s crucial to consider how each corporate structure impacts compliance and professional licensing.

• Personal Liability and Asset Protection: Both S Corps and C Corps offer liability protection, safeguarding personal assets from business debts and liabilities. Evaluate the level of protection in the context of potential risks associated with dental practices.

Choosing between an S Corp and a C Corp is a pivotal decision that affects a dental corporation’s taxation, growth potential, and legal obligations.

Each has unique offerings that can align with different business strategies and goals. Consulting with a legal or financial advisor is strongly recommended to understand the implications for your specific situation fully.

By making an informed choice, you can position your dental corporation for operational success and financial health in California’s competitive landscape.

Dentists should consider forming a dental corporation when they are employed as independent contractors, starting a new practice, or purchasing an existing practice. For independent contractors, forming a corporation can offer significant tax advantages and liability protection. When starting a practice, a dental corporation helps establish a professional identity, manage liability, and streamline business operations. Similarly, purchasing an existing practice through a corporation can facilitate a smoother transition, provide legal protections, and optimize financial benefits. Forming a dental corporation can be a strategic decision to enhance financial stability, mitigate risks, and ensure long-term success in the dental profession.

If you sell your dental practice, whether or not to dissolve your dental corporation depends on your future plans and any remaining obligations. If you plan to retire or leave the dental profession, dissolving the corporation might make sense to simplify your affairs and eliminate ongoing administrative requirements. However, if you intend to maintain the corporation for other business activities, investments, or future ventures, keeping it active could be beneficial. It’s also important to consider any liabilities, contracts, or tax implications associated with dissolution. Consulting with a dental practice broker or a dental law attorney can help determine the best course of action tailored to your specific situation.

A dental corporation is a legal entity that owns and operates dental practices. Corporate dentistry refers to a business model where corporations manage the business side of dental practices. The main difference is that a dental corporation is a type of ownership, while corporate dentistry describes the management style.

Yes, you can own a dental practice without being a dentist in many states, including California. However, you must hire licensed dentists to provide the actual dental care. Non-dentist owners handle administrative and business operations.

The Moscone-Knox Professional Corporation Act is a California law that lets professionals, like dentists, form their own companies. This law gives dentists a way to run their practice as a business, while still following certain rules.

Here’s what you need to know:

1. Who Can Own It: To form a dental corporation, all owners, directors, and officers must be licensed dentists in California. This means only dentists can run the business, not investors or non-dentists.

2. What the Business Can Do: A dental corporation can only provide dental services. The company can’t offer other types of services that don’t involve dentistry.

3. Protecting Your Assets: A dental corporation can protect a dentist’s personal assets, like their home and savings, from business debts or lawsuits. This does not apply in malpractice cases.

4. Following the Rules: Dental corporations must follow the California Dental Board’s rules. These rules cover things like how the business can be named and what it can advertise.

The Moscone-Knox Act helps dentists organize their business, get tax benefits, and plan for the future, while making sure they stick to high standards.