California law requires dentists to practice through a properly structured Professional Corporation, and operating outside that requirement carries real consequences. If your dental practice is structured as a sole proprietorship, a general stock corporation, or an LLC, you may be exposing your license and personal assets to risks that a compliant structure would otherwise limit. A Los Angeles dental business attorney can help you evaluate your current structure and understand what, if anything, needs to change.
What Does California Law Require for Dental Practice Structure?
California law governs how licensed dentists structure their practices more strictly than most states. Under the Moscone-Knox Professional Corporation Act, dentists are required to deliver professional dental services through a Professional Dental Corporation.
This means that two of the most common business structures entrepreneurs typically reach for — LLCs and general stock corporations — are not available to dentists for practicing dentistry in California. The Moscone-Knox Act does not permit dental services to be rendered through these entities, and the Dental Board of California enforces that requirement.
Sole proprietorships occupy a different category. California law permits dentists to practice as sole proprietors, but that structure carries its own limitations, particularly regarding personal liability and tax efficiency, which make it a less practical choice for most established practices.
What Are the Risks of Practicing Through an LLC or General Stock Corporation?
Dentists who have set up their practices as LLCs or general stock corporations face regulatory and financial risks.
Regulatory exposure. The Dental Board of California has the authority to investigate and discipline dentists whose practice structure does not comply with state law. Disciplinary action can include fines, license suspension, or, in serious cases, license revocation. Because the compliance obligation runs to the individual dentist, not just the business entity, the structure of the corporate wrapper does not insulate you from professional consequences.
Loss of liability protection. One of the reasons dentists form LLCs is to separate personal assets from business liabilities. That protection may not hold if the LLC is operating outside its permitted scope under California law. Courts have found that operating a professional practice through a non-compliant entity can undermine the liability shield the structure was intended to provide, exposing the dentist to claims they assumed the entity would absorb.
What Are the Limitations of a Sole Proprietorship?
Sole proprietorships are technically permitted in California, but they are generally not the right structure for a dental practice with employees, meaningful revenue, or long-term ownership goals. The core limitation is personal liability: as a sole proprietor, there is no legal separation between the business and the individual. Business debts, employment claims, and other liabilities attach directly to the dentist personally.
There is also a tax consideration. A Professional Dental Corporation that elects S-Corporation status for federal tax purposes can reduce self-employment tax exposure in ways a sole proprietorship cannot. For practices generating substantial income, the difference is material. While this blog is not tax advice, it is worth noting that the structure you choose has implications well beyond compliance.
How Do You Know If Your Current Structure Is Compliant?
The most direct way to assess your current structure is to review your formation documents alongside the requirements the Dental Board of California applies to professional corporations. A few questions worth asking:
- Was your entity formed specifically as a Professional Corporation under the Moscone-Knox Act, rather than as a general stock corporation or LLC?
- Does your corporation’s name and registration reflect its status as a Professional Corporation?
- Are ownership and officer roles held in compliance with California’s requirements for professional dental corporations?
- Have you filed any required notices or registrations with the Dental Board of California for your corporate entity?
If any of these questions give you pause, a legal review of your structure is a reasonable next step.
What Should You Do If Your Practice Is Not Using a Professional Corporation?
The path forward depends on your current structure. Dentists operating as sole proprietors can form a new Professional Corporation and transfer practice operations into it. Dentists operating through an LLC or general stock corporation have two main options: dissolve the existing entity and form a new Professional Corporation, or pursue a formal conversion of the existing entity into a Professional Corporation under California law.
Neither path is instantaneous, and both involve filing requirements, tax considerations, and operational transitions that benefit from coordinated legal and financial guidance. The California Secretary of State and the Dental Board of California are both involved at different stages of the process.
Review Your Practice Structure Before It Becomes a Problem
If you have questions about whether your dental practice is properly structured under California law, Polished Legal can help you evaluate your options. Connect with us today.
