Who Can Own a Dental Practice?

March 01, 2021

By Erick Cutler CPA

To practice dentistry in the United States, a dentist needs a valid license. But does one need a dental license to own and operate a dental practice? In some places, the answer is a resounding “yes.” In others, it’s “no.”

At one time, most states prohibited corporations from owning dental or medical practices. This stemmed from the theory that only a person could be licensed to practice medicine or dentistry and, therefore, only a person with the proper license could own a medical or dental practice. This belief is known as the “corporate practice of medicine doctrine” or the “corporate practice of dentistry doctrine.” And as time changed, so did the belief in this doctrine.

As it stands now, changes in the laws of some states have limited, and in some cases completely eliminated, the application of this doctrine to medical and dental practices. According to an article on bizlawdds.com, “these changes often came at the request of physicians and dentists who wanted to obtain the tax and liability benefits of corporate status for their practices.”

Eventually, all fifty states passed laws that would create a service, professional or professional service corporation, designed specifically, and exclusively, for dental and other professional service practices. These corporations generally limit the ownership of the corporation to people holding the same professional license, or a license in a related field, such as health care.

The policy behind these laws was to prevent unlicensed people from interfering with a licensed dentist’s professional judgment. States such as California and Texas believe that it’s vital for a dentist to have sole control over all health care decisions such as:

  • The number of patients the dentist sees;
  • How many hours a day the dentist is required to work;
  • Hiring and firing of dental associates, technicians and assistants;
  • Setting the parameters for insurance contracts;
  • Coding and billing procedures;
  • Selecting dental equipment and supplies;
  • Content of advertising for the practice.

In states that uphold the service, professional or professional service corporation, dentists cannot delegate any of these health-related decisions to an unlicensed person, including a management service company. Additionally, dentists can’t consult with an unlicensed person or corporation when making these types of decisions.

But this does not mean that an unlicensed person can’t work in, or with, the dental practice. A license isn’t needed to provide administrative assistance or to sell goods or services to the practice.

For example, a non-licensed person can lease office space and certain dental equipment to the practice. A license isn’t required to provide back-office administrative services including accounts payable and billing services, help with traditional marketing or to provide staffing of non-licensed personnel. However, non-licensed employees must receive compensation directly related to the goods and services they provide, not from net profits of the practice.

By employing a management service company to fulfill the duties legally appropriate for someone without a license, dentists are able to focus on patient care. Contracts link the management service company with the dental corporation, providing the terms of service and compensation.

But what about the states that do not have this rule of separation in place? In these cases, a non-dentist who owns a dental practice must still hire licensed dentists to perform all of the dental work. But otherwise, the only limitation on the ownership of dental practices is a statute that prohibits a contract of employment that requires a dentist to act in a manner that violates professional standards.

About Erick Cutler

Erick Cutler is a Partner in the Private Business Services Group, with nearly 25 years of public accounting experience including health care and the real estate industry.