Legal structure is not just an exercise in compliance, but rather growing and protecting your largest asset.

Strategically defining your dental organization’s legal structure has multiple significant implications on your company’s ability to grow and scale in many facets of your business, including:

• Ability to bring on additional owners, both licensed and unlicensed
• Number of financial books, payrolls, and tax returns necessary for compliance
• Identify, track, and reconcile insurance payments

These are just a few simple facets, but they dictate how you will fund your future growth and what scalable processes you can implement to maximize PROFITABLE growth, all while running your business(es) in a compliant manner that protects in in the event of any audit or investigation by a regulatory body.

How Legal Structure Strengthens Patient Care

Appropriate legal structure ensures that the delivery of patient care is properly insulated from the business side of running a profitable dental organization so that patient care is not sacrificed in the name of profit. Dentistry can be very profitable, and ultimately great dental care translates to great profitability.

These two principles can, and should coexist in every dental organization. Without profitability, there is little incentive for owners to take on debt or otherwise fund investments to employ a large number of team members and deliver a vital service to their communities. 

Which Structure Makes the Most Sense?

Dental regulations can vary by state. Therefore, there is no one-size-fits-all structure to adopt. There are many dental organizations that are completely dentist-owned and dentist-led. However, as dental organizations grow, it is often ideal to bring in non-licensed dentists due to unique skills and experiences they can bring the organization. To attract top talent, it often requires an opportunity for ownership that they would have access to in other industries. This may be in concert with, or in addition to growth capital needed in excess of current capacity that can be more easily attained through non-dental licensed owners. 

Regardless of the reason, at this point it is important to transition to a more typical Dental Service Organization (“DSO”), whose structure is dictated by Management Services Agreements, which identify the services provided by the DSO and the fees paid by the Practice(s) for those services. Although putting in proper legal structure to firewall the practice of dentistry from the management of the practice adds a certain layer of cost and complexity, it is a small price to pay compared to losing your practice(s) for being in violation of state dental regulations.

Making Adjustments

Many dental groups grow organically from a single owner/single location where a single legal entity makes sense. Very often, with each additional office they build or acquire, they grow and add another payroll process, another tax return, and another set of financial records. This can cause much confusion in managing cash positions between entities, more difficulty in offering consistent benefits to all team members, and difficulty in consolidating financial reports to be able compile and analyze overall financial results. 

It is never too late to adjust legal structures to allow for better scale and growth. Knowing the implications as you grow will help you make the most informed decision to save you headaches down the road.