Entity Type
A legal entity is formed under state law , not federal law . Therefore , the options for different entity types varies by state . In Texas , a dental practice may be owned by an individual dentist , by a partnership of dentists ( which could be a general partnership , LP , LLP , or LLLP ), a PLLC ( professional limited liability company ), PC ( professional corporation ), or PA ( professional association ). Each option has various advantages and disadvantages , including differences in liability protection , ownership options , federal tax elections available , and exposure to state franchise taxes . In general , most dentists will have the most flexibility from using a PLLC . Many will use a PC because they want to be taxed as an S Corp ( though as stated above , this can be achieved with a PLLC ). It is also common to see dentists using a PA , primarily because a PA was not subject to franchise taxes prior to 2008 . However , all legal entities that offer any liability protection are all subject to the franchise tax , though the tax rates have been reduced as of the beginning of 2016 .
Each legal structure generally has more than one option of how it will be treated for federal income tax purposes .
Other Considerations
These are just a few of the issues that should factor into any decision-making process for setting up the legal structure for your dental practice ( or any other business that you own ). Any decision that you make will impose some restrictions and requirements that you will need to comply with , or you could be exposed to fines , penalties , civil lawsuits , and loss of legal protection . However , with proper advance planning , you can have a legal strategy that will complement your business strategy and protect it from future complications .
This article is for informational purposes only and is not intended to be legal advice . You should consult with an attorney before making any decisions that will affect your legal rights .
Jason T . Hirst is an attorney with McGregor & Oblad ’ s Dental Law Group , and handles dental transitions , startups , and commercial leases . Jason also has a special focus on tax , estate planning , and asset protection for dentists . Jason graduated cum laude in 2014 from the J . Reuben Clark Law School at Brigham Young University . Jason can be contacted at jhirst @ mcgregorfirm . com .
Multiple Owners or Multiple Entities
If you intend at any point to own more than one dental practice , to purchase real estate , or share ownership with a partner , then there are many additional planning considerations . You should have some contract governing the respective rights of you and your partner ( s ), which should cover things such as how to divide and distribute profits , how to make decisions for the company , and how to handle the departure or disqualification of a partner . If you have more than one entity , you will need to determine whether you will own the entities individually , or through some sort of parent / subsidiary relationship , and any relationships between the companies should be documented in a contract . If you are going to use a DSO ( dental support organization ) to divide ownership of professional and non-professional assets , there are numerous laws and reporting requirements that will need to be followed .
Naming your Business
Selecting a name for your business is not a complex process , but it can have long-lasting consequences . First and foremost , a thorough search should be done to identify possible challenges to your use of the name that you select . The legal name of your entity does not need to be the name you use in signs or advertisements , but any names you use to refer to your business need to be registered with Secretary of State and with your local county . Texas does not restrict the legal name of your dental practice , though state laws and the Board of Dental Examiners do impose disclosure requirements and restrict advertisements .
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