Examples:

• • After practicing as a sole proprietor for years, Dr. Lewis formed a dental corporation to reduce potential risks when adding new associates and expanding.
  • Dr. Martinez was able to structure her PC as an S-corporation, helping her strategically pay herself a reasonable salary and dividends for optimal tax savings.
  • Facing retirement, Dr. Choi easily sold shares in his PC to a new dentist-owner, streamlining the transition of the practice.

How to Proceed:

• • Familiarize yourself with the California Corporations Code (particularly Sections 13400-13410) and the Business & Professions Code for dentists.
  • Assess if a professional corporation structure fits your specific goals—liability protection, partnership expansion, and branding might be key motivators.
  • Research S-corporation vs. C-corporation tax treatment, or consult an accountant to identify which suits your practice long-term.

FAQs:

• • Is it mandatory to form a professional corporation as a dentist? In California, dentists cannot use a general stock corporation for practice—state regulations require a professional corporation.
  • Will forming a PC fully protect me from malpractice claims? No. Corporate structures generally help protect personal assets from business debts/obligations, but professional negligence is typically a personal liability.
  • Can non-dentists be shareholders in a dental PC? California law generally limits ownership to licensed dentists (with a small allowance for certain allied professionals), and total non-dentist ownership is capped at a percentage.

Examples:

• • Dr. Patel ensured “Patel Dental Corporation” was available and not conflicting with another practice’s name before filing with the Secretary of State.
  • To expedite the process, Dr. Wilson used a business filing service specializing in professional corporations, avoiding errors in the initial paperwork.
  • Dr. Alvarez and Dr. Grant, both licensed dentists, formed a two-shareholder dental corporation, each owning 50% of the shares.

How to Proceed:

• • Confirm your chosen business name’s availability through an online search and the Secretary of State’s database.
  • Draft and file Articles of Incorporation specifically for a professional dental corporation (Form ARTS-PC).
  • Apply for an EIN from the IRS at IRS.gov, which you’ll need for banking, payroll, and tax filings.
  • Develop corporate bylaws and hold an organizational meeting to adopt them, appoint directors, issue stock, and document minutes.
  • Register with the Dental Board of California—each licensed dentist must remain in good standing.

FAQs:

• • What’s the difference between a general corporation and a professional corporation? Professional corporations exist to provide professional services requiring a state license. In California, dentists must use a professional corporation form to comply with the law.

Examples:

• • Dr. Wilson used an S-corp structure, paying herself a reasonable $150k salary and taking additional profit as distributions.
  • A high-earning multi-location practice, Dr. Gardner’s group structured as a C-corp to reinvest profits into expansions and more robust benefits.
  • After switching from a sole proprietorship, Dr. Perez appreciated the payroll tax savings from her S-corp, despite filing some additional paperwork.

How to Proceed:

• • Consult a CPA or tax attorney to determine if an S-corporation or C-corporation election aligns best with your income level and growth goals.
  • Familiarize yourself with the reasonable salary guidelines from the IRS, especially if you select the S-corp route.
  • Plan around California’s $800 minimum franchise tax. Even if your practice is new or not profitable, you’ll owe this annual fee.
  • Consider adopting retirement or health benefits programs to maximize deductions and attract/retain staff.

FAQs:

• • Do I pay self-employment tax on all S-corp earnings? Only on wages you pay yourself. Distributions generally aren’t subject to self-employment tax, but must reflect a “reasonable” salary portion first.
  • What if I want to convert from S-corp to C-corp (or vice versa) later? Changing elections is possible but can trigger tax consequences. Discuss with a CPA before making any shifts.
  • Do corporate tax laws differ for professional corporations vs. regular corporations? Generally, tax treatment is similar for professional and standard corporations, but professional rules regarding ownership and licensure still apply.

Examples:

• • Dr. Lee diligently schedules quarterly board meetings to formally document dividends, expansions, and any changes to practice protocols.
  • Dr. Rivers forgot to file her PC’s Statement of Information for two years, racking up penalties and nearly getting suspended by the Secretary of State.
  • During the annual renewal process, Dr. Nguyen discovered the malpractice insurance policy offered premium discounts for group coverage with other associates.

How to Proceed:

• • Mark your calendar (or use a service) to ensure timely filing of annual reports, franchise taxes, and license renewals.
  • Hold regular board meetings, keep corporate minutes, and segregate personal and business finances to preserve liability protection.
  • Invest in malpractice coverage that meets or exceeds the minimum recommended limits for your practice scope.
  • Enroll in continuing education courses and track your hours to maintain your license in good standing with the Dental Board.

FAQs:

• • What happens if I don’t hold board meetings or keep minutes? You risk “piercing the corporate veil,” endangering your personal liability protection if the corporation is challenged legally.
  • Must all shareholders have malpractice insurance? While not explicitly required by the state for each shareholder, it’s highly recommended each practicing dentist carry adequate coverage or a shared group policy.
  • Can I skip paying the $800 minimum tax if my PC is inactive? Generally no—California imposes this tax as long as the corporation is registered, though there are some first-year exemptions and specialized exceptions.

Examples:

• • Dr. Vega’s PC expanded to add an orthodontist partner. They properly notified the Dental Board of the new shareholder, who also held a valid license.
  • Dr. Price fell behind on CE hours, risking licensure lapses that could invalidate the corporation’s authority to operate.

How to Proceed:

• • Periodically review the Dental Practice Act and Board regulations to ensure your PC adheres to all laws and ethical standards.
  • Maintain a calendar or reminder system for each dentist’s license renewal date and CE deadlines.
  • When adding or removing shareholders, file any necessary corporate amendments and notify the Dental Board promptly.

FAQs:

• • Does the Dental Board actively audit PC compliance? Yes, the Board can request documentation or investigate complaints. Non-compliance may lead to fines or license discipline.
  • What if a shareholder’s license is suspended? They cannot practice dentistry or legally remain a shareholder. You must remove them or risk the PC’s good standing.

Examples:

• • Dr. Hart used personal checking for corporate expenses, leading to an IRS audit that questioned the legitimacy of the corporation.
  • In a malpractice lawsuit, Dr. Fuller’s minimal coverage left a large portion of the judgment unrecoverable, exposing personal assets.
  • An ex-employee reported Dr. Simmons for misclassification as a 1099 contractor, resulting in back taxes and penalties.

How to Proceed:

• • Keep separate bank accounts and credit cards for corporate business; never pay personal bills from the PC account.
  • Schedule board meetings at least annually and maintain minutes documenting major decisions, even if you’re the sole shareholder.
  • Have a thorough malpractice policy that covers all procedures you offer; re-evaluate coverage limits as your practice grows.
  • Review worker classification guidelines to ensure front-desk staff, hygienists, and associates are labeled properly to avoid EDD or IRS issues.

FAQs:

• • Do I really need a separate bank account if I’m the only owner? Yes. Mixing personal and corporate funds weakens liability protection and can create accounting nightmares.
  • Can I skip official minutes if I’m a single-shareholder PC? It’s still best practice to record meeting minutes or keep corporate resolutions. It shows you respect corporate formalities.
  • What if an employee or associate sues for misclassification? You could face legal expenses, back taxes, penalties, and possible damages for unpaid benefits. Always classify carefully.

Examples:

• • Unsure of compliance changes after hiring a new oral surgeon, Dr. Kim consulted a healthcare attorney to review updated management contracts.
  • A CPA helped Dr. Lyons set up a robust 401(k) plan and reevaluate her S-corp salary vs. distributions, maximizing tax savings.
  • After a shareholder dispute, Dr. Torres needed professional mediation to avoid costly litigation and salvage the practice’s reputation.

How to Proceed:

• • Research attorneys and CPAs who specialize in healthcare or dental professional corporations. Ask about their relevant experience and fees.
  • Prepare an overview of your practice’s current legal structure, payroll details, expansions, and future goals before scheduling consultations.
  • Compare engagement letters, seeking clarity on whether they charge flat fees or hourly rates for incorporation, annual compliance, or specialized tasks.

FAQs:

• • Do I need a lawyer if I formed my own PC online? While online filing can handle basic paperwork, a dental-specific attorney ensures full compliance with professional regulations.
  • How do I choose a CPA? Seek someone who regularly handles professional service entities (e.g., medical, dental). Ask about their track record and approach to tax strategies.
  • Is ongoing legal counsel necessary? Not always monthly—but periodic reviews or whenever major changes occur (adding a partner, big equipment purchases, new location) can prevent costly errors.

Questions: Dental PC Basics & Compliance

• • 1. Which entity is allowed for a California dental practice?
    • A) General Stock Corporation
    • B) Professional Dental Corporation
    • C) Nonprofit Corporation
    • D) Limited Liability Company (LLC)
  • 2. Which statement about S-corporations is TRUE?
    • A) They pay taxes at the corporate level on profits.
    • B) Shareholders must be U.S. citizens or residents, up to 100 owners.
    • C) Non-dentists can own >49% of the dental practice.
    • D) They aren’t required to file any corporate tax returns.
  • 3. What annual fee is typically mandatory for all California corporations?
    • A) $50 Business Registration Fee
    • B) $400 Corporate Dues
    • C) $800 Franchise Tax
    • D) No recurring fees are required
  • 4. Which of the following best protects your “corporate veil?”
    • A) Mixing personal and business finances
    • B) Holding regular board meetings and recording minutes
    • C) Ignoring annual report filings as long as you pay taxes
    • D) Operating without malpractice insurance
  • 5. What is an advantage of hiring a specialized lawyer or CPA?
    • A) They can guarantee you pay no taxes
    • B) They’ll share in any malpractice liability you incur
    • C) They monitor regulation changes and help maintain compliance
    • D) They automatically become a shareholder in your PC

Answers: Dental PC Basics & Compliance

• • 1. B) In California, a Professional Dental Corporation is the lawful entity for practicing dentistry (general corps and LLCs aren’t permitted for dentists).
  • 2. B) S-corporations are “pass-through” entities with up to 100 shareholder limit, and all must be U.S. citizens/residents.
  • 3. C) All California corporations generally owe an $800 minimum franchise tax each year, with few exceptions.
  • 4. B) Documenting board meetings and minutes is critical to demonstrate respect for corporate formalities.
  • 5. C) Professionals help you keep up with legislative changes, licensing issues, and best practices—crucial for compliance.

Disclaimer

The information presented in this article is for general educational purposes and does not constitute legal, tax, or financial advice. State laws and regulations change frequently, and application of these principles can vary based on individual circumstances. For personalized guidance regarding forming and operating a dental professional corporation in California, consult a qualified attorney or CPA who is familiar with dental practice regulations and the latest tax laws. No attorney-client relationship is established by reading this content.