In California, practicing as a professional California dental corporation may bestow you with many benefits over practicing as a sole proprietor or partnership.
Formed under the Moscone-Knox Professional Corporation Act, a professional dental 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.
Benefits of the California Dental Corporation
Here is a whittled list of a few benefits of incorporating a professional dental practice in accordance with the California corporation act.
- Limits personal liability of dentists against creditors and legal suits
- Once you build up corporate business credit you may be able to avoid providing a personal guarantee
- Minimizes the self-employment taxes of shareholders
- Fringe benefits such as medicare, retirement plans and more
Who Can Own A California Dental Corporation?
Any professionals who are licensed to practice dentistry are able to be a shareholder of a California dental corporation. However, other licensed officers and directors with a share total not more than 49% in the corporation can also own a professional dental corporation. The professionals listed below are eligible to take hold of a California dental corporation.
- 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
How to Form a California Dental Corporation
A California Dental Corporation can be formed by submitting articles of incorporation with the California Secretary of State. Currently, the filing fee for articles of incorporation is $100. Here is a timeline of events for setting up a California Dental Corporation:
- File the Articles of Incorporation with the Secretary of State
- Draft custom Dental Corporation Bylaws
- Have initial corporate meeting where you will issue share and elect officers and directors
- File initial statement of information
- Obtain an EIN number (Tax ID)
- If applicable, elect to be treated as an S-Corp with the IRS
- Open up a new corporate bank account
Naming a California Dental Corporation
As a general rule, the names of professional corporations must reflect the nature of the professional practice in which the corporation will engage. 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 .
The name of a dental corporation name must contain:
- The last name of one of the shareholders.
- The word Dental Corporation, or some abbreviation. Abbreviations can be “Prof. Corp.,” “Corporation,” “Professional Corporation,” “Corp.,” “Incorporated,” or “Inc.”
Some dental corporation name examples are**:
- 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.
Dental Corporation Taxation
The total income of the dental corporation is taxable 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’.
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 owners 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.
Sole Shareholder California Dental Corporation
Many California Dental Corporations are owned by a single shareholder. In this situation, the sole shareholder must:
- Be 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.
Changes in Ownership
A shareholder can readily transfer a stock to the new owner if there are no shareholder agreement restrictions. But, the ownership change must be made only to another licensed dentists or individuals permitted to own such shares in a Dental Corporation.
To know more about the formation, management and termination of California professional Dental Corporation, schedule an appointment with the leading California dental attorney.