In the highly regulated world of dentistry, forming the right corporate entity for a dental practice is not just a matter of preference but often a legal necessity. At Wood & Morgan, we guide dentists through the statutes and regulations governing dental practice formation.
Our dental corporate formation lawyers ensure dentists comply with all relevant laws, thereby protecting themselves from potential legal challenges and maximizing the benefits of corporate formation.
Navigating Legal Requirements and Entity Formation
If you are a dentist, you know how complex and challenging the legal aspects of your profession can be. You must follow specific rules and regulations that affect how you can structure your business. You can’t use common options like LLCs, LLPs, or corporations for your dental practice in many states.
That’s why you need our firm’s guidance in choosing the right legal entity for your situation. Our dental business attorneys don’t just ensure you comply with the state Dental Board requirements. We also protect your personal and professional assets from potential lawsuits and tax liabilities. We understand that a wrong or careless decision can expose you to serious risks and consequences. That’s why we offer a comprehensive and customized solution that meets your needs and goals.
Forming Your Dental Practice
For dentists branching out to start their own practices, there are several critical steps to take. These include choosing the most suitable legal structure, selecting and registering a business name, and filing necessary paperwork. Additionally, finding and securing a location, whether through purchase or lease, involves drafting agreements and contracts that are legally sound and beneficial for the dentist.
Choosing the Right Business Structure
Selecting the right business structure is a decision that significantly impacts a dentist's liability, tax obligations, and operational flexibility. The common structures for dental practices include:
Sole Proprietorship (DBA)
A Sole Proprietorship, also known as Doing Business As (DBA), is one of the simplest forms of business entity for individual dental practitioners. This structure is often favored by dental professionals venturing into solo practice due to its ease of setup and minimal regulatory requirements. In a sole proprietorship, the dentist and the dental practice are legally considered the same entity.
One of the primary advantages of a Sole Proprietorship is the complete control it offers. The dentist has the autonomy to make all business decisions, which can lead to streamlined operations and quick decision-making. Additionally, the financial setup is straightforward, as all income and expenses of the practice are directly reported on the dentist's personal tax return, potentially simplifying tax preparations.
However, a significant drawback of this entity is the lack of personal liability protection. In a sole proprietorship, the dentist's personal assets can be at risk in the event of business debts or legal judgments. If the practice faces a lawsuit or incurs substantial debt, the dentist's personal property and finances might be tapped to satisfy these obligations. Therefore, while the simplicity and control of a sole proprietorship are appealing, dentists must carefully consider the potential risks associated with this business structure.
Professional Limited Liability Company (PLLC)
A Professional Limited Liability Company (PLLC) is a specialized form of LLC designed for licensed professionals, including dentists. Available in some states, a PLLC provides a blend of liability protection and operational flexibility. Unlike a sole proprietorship, this structure generally protects the dentist's personal assets from the practice's liabilities, such as business debts or malpractice lawsuits. This separation is important for dentists seeking to protect their personal finances from business-related risks.
PLLCs also offer tax advantages. They typically allow for pass-through taxation, where the business's profits and losses are passed directly to the dentist's personal tax return, avoiding the double taxation that can occur in other corporate structures. This structure can also be less burdensome administratively compared to a traditional corporation, as it often requires less paperwork and formalities.
However, it's important to note that the rules and availability of PLLCs can vary by state, and dentists must ensure that forming a PLLC complies with their state's regulations governing professional practices.
A Professional Corporation (PC) is a corporate structure designed for licensed professionals, including dentists. This entity is particularly suitable for single dentists forming a practice. In a Professional Corporation, the dentist’s income is separate from the practice’s profits and income, offering liability protection and tax advantages.
One of the key advantages of a Professional Corporation is the separation of personal and business finances. This structure also provides a layer of protection for the dentist’s personal assets against business liabilities. The protection exists if the dentists properly maintain corporate formalities and separation.
From a tax perspective, Professional Corporations can offer several benefits. They can provide more opportunities for tax planning compared to sole proprietorships or PLLCs. For example, the dentist may take advantage of certain corporate tax deductions, potentially reducing the overall tax burden. Additionally, Professional Corporations can have caps on self-employment taxes, which can be advantageous compared to other business structures.
However, Professional Corporations require adherence to more formalities and can involve more paperwork, including the need for formal annual meetings and compliance with specific corporate governance rules. They may also be subject to corporate franchise taxes, adding to the operational costs.
Each of these structures has its unique advantages and limitations. Our role is to help dentists understand these nuances and choose the structure that best aligns with their professional goals and personal circumstances.
The Role of Our Dental Business Lawyers in Your Practice Formation
Our dental attorneys at Wood & Morgan bring decades of experience in forming and structuring dental practices. We assist dentists in understanding their legal options, completing required paperwork, and ensuring compliance with local, state, and federal laws. We aim to make dental business formation efficient, effective, and legally sound, allowing our clients to focus on what they do best – providing excellent dental care.
Forming a dental practice is a significant step in a dentist's professional journey. With Wood & Morgan, dentists can embark on this venture with the confidence of experienced legal professionals guiding them every step of the way. Call us today at 800-499-1474 today to ensure your practice is on a solid legal and regulatory foundation.