PROFESSIONAL PRACTICES – Part 2 – Dentist Business Structures by BPE Law Senior Attorney D. Keith B. Dunnagan

In our last article, I introduced BPE Law’s new professional practices corporate
practice. It is a full service practice representing and assisting dentists and
other professionals navigate the laws and business world of California. Today we
are going to discuss one of the most important aspects of a professional business
entity, the entity structure.

California has a complex set of rules and regulations governing business entities.
However, when it comes to professional practices, the formation of a business structure
is a more complicated structure. With most businesses, the owner is looking at the
relative merits and risks associated with corporate structures, partnerships, limited
liability companies or sole proprietorships. They are weighing the tax implications,
third part liability protection, flexibility in the entity structure, business names,
venture capital requirements and other issues that go into selecting a most appropriate
corporate structure for a business.

For professionals and dentists in particular the number of available entity options
is limited.Various statutes including but not limited to Business and Professions
(B&P) Code Sec. 1800 et seq, B&P Code Sec 1701 et seq, and Corporations Code Sec.
13400 et seq restrict not only the entity structures available but also who may
be a member or owner of the entity. For the most part professionals and dentists
included are limited to forming either a partnership, professional corporation
or acting as a sole proprietor. Currently the law does not allow for professionals
in the state of California to form professional limited liability companies, which
is a departure from other states.

While most general corporate structures involve discussions about third party liability
and protecting the owners from personal liability associated with business transactions,
such protections are generally not available to dentists or other professional practices.
The distinct difference is that a professional’s malpractice liability may not be
limited by the business structure.Nonetheless, it is important for any dentist or
professional to understand what liabilities can be protected with the proper selection
of a corporate entity.

Additionally, ownership of a professional business is strictly regulated and limited.
Only licensed dentists may have an ownership stake in a dental business. Non-dentists,
including a dentist spouse may not have an ownership stake in the business. Understanding
the concepts of the structure is why succession planning, which will be addressed
in a later article becomes important. Selecting a structure is almost as important
as the quality of your practice itself. Your structure guides your business decision
making over the course of your career.

The attorneys at BPE have a significant amount of experience in business formation,
entity selection and business counseling experience and is familiar with the issues
facing today’s dentists and professionals in the ever changing business world. If
you would like to know more, please feel free to contact me by e-mail at
or call our main office at 916-966-2260 to schedule
a low-cost Consultation appointment either in our Fair Oaks or Sun City Lincoln

The information presented in this Article is not to be taken as legal advice. Every
person’s situation is different. If you are facing a legal issue of any kind, get
competent legal advice in your State immediately so that you can determine your
best options.