LEGAL GUIDE
Written by attorney Vadim R. Alden | Feb 8, 2013

Top 10 Legal Tasks for Starting a Dental Practice in California

Starting and operating a successful dental practice is a difficult yet rewarding task. Dentists, endodontists, periodontists, pediatric dentists, orthodontists, and oral surgeons would greatly benefit from retaining competent business counsel to assist them in starting or transitioning into a new practice. The following is meant to be a general guide to help dental professionals familiarize themselves with the issues, and hopefully encourage them to have a more meaningful discussion with their business attorney.

1. Form a legal entity. A dentist should protect his or her investment by forming a separate legal entity. A corporation could help shield a dentist from liability under certain circumstances (though not professional liability), help with tax issues, and provide an easier method to expand the business through employees, partners, or investors. In California, dentists and other professionals cannot form limited liability companies (LLCs) for their business, so a professional corporation with an S status election is fairly common. There are many steps that go into forming a professional dental corporation, and it is highly recommended that a dentist retain an attorney who can explain the process and ensure all the requisite paperwork is filed with the necessary authorities, and the corporate record is preserved and maintained.

2. File an S corporation election with the IRS. This filing is only applicable if you are choosing to be an S-Corporation.

3. Obtain Requisite Tax ID numbers. Once a business entity is formed, the dentist should obtain a Federal Tax ID number from the IRS. This is a required number, which enables the IRS to identify the corporation for taxation purposes. The dentist should also obtain the California State EDD number from the Employment Development Department, which is required when hiring employees. Once the professional dental corporation has issued stock, form 25102F should be filed with the Department of Corporations.

4. Prepare Corporate Documents. Forming a corporation goes beyond simply filing the Articles of Incorporation with the Secretary of State. The Corporation must also prepare corporate bylaws, hold a meeting and document the minutes, issue stock certificates, elect directors, and file a Statement of Information with the Secretary of State within 90 days of formation.

5. Open Bank Account. If a dentist is forming a company with personal funding, this can be done with any bank. In most cases, however, a dentist usually obtains funding for the practice build-out, and it is likely that the lender could recommend a specific bank for a business account. A dentist should select a bank that is accessible for easy deposits and withdrawals.

6. Register and Protect Your Name. A dental corporation must have the name of the dentist forming the company (e.g., “John Smith, DDS, Inc."). If you want to have a different name for your business (e.g., “Braces for Faces"), then you should register a Fictitious Business Name with the Dental Board and in the area where your business is located. In order to protect that name, you should consider trademarking the name and/or any logos associated with your practice. You are building a brand with your dental business, and you should protect it accordingly.

7. Obtain Insurance. Every business should be insured. In particular, dentists need to obtain Professional Liability Insurance (to cover any allegations of malpractice), Liability Insurance for your business (including rental, equipment, etc.); Workers’ Compensation Insurance (required for business with number of employees), at the very least.

8. Business License. Apply for a business license in the city your business is located, required to legally transact business.

9. Employee Handbook. Consider what employees or contractors you will need for your business. If you are having full-time or part-time employees, you need to create a system for selection and training of employees, company policies as they pertain to work expectation, pay, vacations, termination procedure, among others. An employee handbook is a great way to have a roadmap and a system that is used by every employee.

10. Hire and Retain Employees. Once you have a system in place for hiring, you can start interviewing and looking for employees. If recruiting hygienists, RDAs, or others for your office, keep in mind that while they are trained in their field, there is no substitute for training all new employees in your own practice, using your own policies and methods.

An experienced business and employment attorney in your area should assist you in setting up your business, creating and protecting your brand, and drafting and helping you implement effective business and employment policies in your dental practice.

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