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 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.
How to Form a California Dental Corporation (8 steps)
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 Articles of Incorporation with the Secretary of State
- Draft custom Dental Corporation Bylaws
- Conduct 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
- Register with the Dental Board of California
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 lawsuits
- Allows you to build corporate business credit which may allow you to avoid a personal guarantee
- Minimizes the self-employment taxes of shareholders (If you elect S-Corp Treatment)
- Ability to opt into fringe benefits such as medicare, retirement plans and more
California Dental Corporation Bylaws
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.
Sole Shareholder Dental Corporation
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 Corp. Code § 13403].
Who Can Own A California Dental Corporation?
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 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
Naming a Dental Corporation
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 .
Acceptable Name for a California Dental Corporation:
Acceptable Name – Any name that complies with either one of the following:
- Any name that contains (and is restricted) to one or more persons’ name(s) or last name(s) and the words “dental corporation” or other words or abbreviations denoting corporate existence. (Their name may also be preceded by “Dr.”).
- A persons’ name may include one or more initials indicating a dental degree such as D.D.S., D.D.Sc., D.M.D., B.D.S or “Dentist.” If one of the noted a dental degree is included in the name, they may also add additional non-dental degrees such as M.P.H., P.H.D., M.S., and M.D.S.
- Any name that contains the family name of one or more of the past, present, or prospective associates, partners, shareholders or members and the words “dental office,” “dental practice” or “dental group.”
In Summary, The name of a dental corporation name must contain:
- The last name of one of the shareholders.
- An indicator that the corporation is a dental related (either the word “dentistry”, “dental” or initials from the owner dentist’s dental degree “DDS”, “DMD” etc..
- The word Corporation, or some abbreviation. Abbreviations can be “Prof. Corp.,” “Corporation,” “Professional Corporation,” “Corp.,” “Incorporated,” or “Inc.”
- 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.
When do Dental Corporations Need to File a Fictitious Business Name Statement in California?
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.
How are Dental Corporations Taxed in California?
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’.
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.
Changes in Ownership in a Dental Corporation
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.
To know more about the formation, management and termination of California professional Dental Corporation, schedule an appointment with the leading California dental attorney.