If you’re a dentist in California, you SHOULD form a professional dental corporation taxed as an S-Corporation.
If you’re a dentist, you’re prohibited from forming an LLC or a traditional corporation for your dental practice and instead must register as a Professional Corporation.
If done incorrectly, your Professional Corporation can be rejected by the Secretary of State, leaving you vulnerable to potential lawsuits and fines from various government agencies, and even the Dental Board of California.
As a Business Lawyer for Professionals, I’m assisted hundreds of dentists just like you start their Professional Corporation and I can definitely help you start yours.
Professional Corporations for Dentists
If you’re a dentist in California, you must form a Professional Corporation, as designated by the California Secretary of State, to practice your profession as a dentist or to open your dental practice.
Learn more about Professional Corporation here.
3 Steps to Starting a Dentistry Professional Corporation
The 3 steps to starting a Dentistry Professional Corporation are:
- File the Articles of Incorporation of a Professional Corporation with the Secretary of State to form the Professional Corporation
- Notify your Profession’s state agency that manages your profession, hold a Board of Director’s Meeting and appoint directors, get your Professional Corporation Bylaws drafted, apply for your EIN, file your Statement of Information, file Form 2553 for S-Corporation tax election, pay California corporate taxes to the California Franchise Tax Board, register with the EDD if you will be hiring employees, and apply for local business registration and licenses.
- Do all the steps above yourself or hire a Business Lawyer to do everything for you.
Professional Dental Corporations Requirements
To open a professional dental corporation, you must be licensed by the Dental Board of California.
According to the California Corporations Code 13401(b), all professional corporations must be registered with the corresponding government agency that is tasked to manage their profession.
California dental corporations must register with the Dental Board of California and must currently have a eﬀective certificate of registration from the Dental Board of California under the Professional Corporations Act.
Who Can Be A Shareholder Of A California Dental Corporation?
Typically, a professional corporation is normally limited to rendering professional services in only one profession. Its shareholders, directors and oﬃcers must also be licensed in the profession the corporation is to practice.
However, California dental corporations may have shareholders, oﬃcers, directors or employees who are licensed in similar professions as long as they do not own more than 49% of the total stock of the dental corporation. Also, the number of non-dentist shareholders cannot outnumber the number of licensed dentists in the corporation.
The professionals who are able to be shareholders within the California dental corporations are:
- 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
What Are The Benefits Of Starting a Professional Dental Corporation?
There are plenty of benefits of incorporating a professional dental corporation in California.
Correctly starting a dental corporation in California will limit your personal liability against creditors and lawsuits, minimize the self-employment taxes of the shareholders, pass profits and losses through the shareholders to avoid double taxation, allow you to build corporate business credit, and much more.
Name Requirements For Dentistry Professional Corporation
The name of the dental professional corporation must contain the name or the last name of one or more of the present, prospective, or former shareholder and must include the words “dental corporation” “Professional Corporation” “Prof. Corp.” “Corporation” “Corp.” “Incorporated” or “Inc.”
Can A Professional Dental Corporation in California Use A Fictitious Business Name?
Yes, if you will be opening your professional dental corporation under a fictitious name, you must file a fictitious business name statement in the county which you will be seeing patients as well as the California Dental Board.
What Is Considered A Fictitious Business Name?
According to the Business and Professions Code 17900(b)(c), a fictitious business name is 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 To Form A California Professional Dental Corporation?
Here are the 10 steps you must take to form the California Professional Dental Corporation:
- File the Articles of Incorporation with Secretary of State and pay the filing fee. The filing fee is currently $100. You must also state within its Articles of Incorporation that its purpose is “Dental.”
- Register the professional dental corporation with the Dental Board of California at https:// dbc.ca.gov/
- Conduct a corporate meeting where you will issue shares and elect oﬃcials and directors for the Professional Dental Corporation
- Create custom Dental Corporation bylaws
- Apply for an EIN
- File the Statement of Information with the Secretary of State
- File Form 2553 for S-Corporation Tax Election for the Professional Dental Corporation
- Pay California Corporate Taxes and Fees to the California Franchise Tax
- Register with the EDD if you will be hiring employees
- Apply for local business registration and licenses
What Happens If A Shareholder In The Professional Dental Corporation Is Disqualified Or Has Died?
If a shareholder in the professional dental corporation becomes disqualified from rendering professional services in California or dies, the corporation must acquire all the shares of the shareholder.
If the disqualified shareholder or the representative of the deceased shareholder does not transfer all the shares to the corporation, to another shareholder of the dental corporation, to a person licensed to practice the same profession, or to a licensed person, within 90 days following the date of disqualification, or within six months of the shareholders death, the certificate of registration of the dental corporation may be suspended or revoked.
Are The Shareholders Of The Professional Dental Corporation Liable For The Debts And Obligations Of The Corporation?
Generally, a shareholder of the professional dental corporation are not liable for the debts and obligations of the corporation, unless the shareholder:
- Personally guarantees a debt or obligation,
- Engages in tortious conduct,
- Receives improper distributions of the professional corporation’s assets,
- Intermingles personal and corporate matters (alter ego; piercing the corporate veil), or
- Breaches a duty owed to other
Can A California Dental Corporation Be Owned By A Single Shareholder?
Yes, a California Dental Corporation may be owned by a single shareholder. If that is the case, the shareholder must be a person licensed to practice dentistry in California and must serve as both president and treasurer for the corporation. The other oﬃcers of the corporation do not need to be licensed to practice dentistry.
How Are Professional Dental Corporations Taxed In California?
California Dental Corporations are generally by default taxed as a C-Corp, which means that its total income are taxable by both the federal and state governments at corporation tax rates. If the dental corporation is distributing dividends to shareholders, the shareholders must report the dividends as income, which is taxed both at the federal and state income tax levels. This is referred to “double taxation”.
That’s why Professional Dental Corporation should instead elect to be taxed as an S- Corporation. See below on how to do that.
How Should Professional Dental Corporations Be Taxed?
To avoid double taxation, California dental corporations are urged to file Form 2553 for S- Corporation Tax Election.
By being treated as an S-Corporation rather than a C-Corporation, the dental corporation will be treated as a pass through entity. The dentist will pay himself a salary and will take the rest as owner distribution or draw.
What To Do Next
While these following these steps above might seem straight forward, one mistake while creating your dental corporation can cause your corporation to be rejected by the Secretary of State.
As a Business Lawyer for Professionals, I’ve assisted hundreds of dentists just like you start their California Dental Corporations and I can definitely help you with yours.