As you start your dental practice, one of the most critical matters you will need to address is deciding on the legal structure for your business. Operating as a sole proprietorship offers a simple choice for dentists, as it does not require the legal work that setting up a corporation or LLC would. Dentists operating as sole proprietors can also file DBA certificates that allow them to operate under a specific trade name.
However, practicing under a sole proprietorship or DBA comes with drawbacks you should also understand. An experienced dental attorney can walk you through the advantages and disadvantages of sole proprietorships to help you make an informed choice about how to structure your practice. Contact Mahan Dental Law for an initial evaluation to discuss whether a sole proprietorship best serves your business, legal, and financial needs and goals.
Understanding Sole Proprietorships
A sole proprietorship is a type of legal structure that does not have a separation between a business and its sole owner. Sole proprietorships differ from other types of business structures, such as corporations or LLCs, where the business has a separate legal existence. A dentist who operates their practice as a sole proprietorship owns all the assets belonging to the practice, such as a dental office space, equipment, accounts receivable, and goodwill.
Some of the reasons why a dentist may choose to practice as a sole proprietorship include:
- Simplicity: Dentists do not need to file any extra paperwork to organize their practice as a sole proprietorship.
- Direct control: Sole proprietorships do not have any formal management structures or procedures like a corporation does.
- Easier tax filing: A dentist who operates their practice as a sole proprietorship reports the profits or losses of the practice as their income or loss on their 1040.
However, sole proprietorships do have several critical drawbacks, including no liability protection and greater complexity in growing the practice through outside investment or bringing in other partners.
Understanding DBAs
A “doing business as,” or DBA, certificate allows a business to operate under a different name from its legal name. A sole proprietor may choose to file a DBA certificate to conduct business under a brand name rather than the owner’s legal name. A dentist may want to brand their practice as “Wide Smiles Dental,” for example, rather than using their own name, as a brand name can make the practice more recognizable to patients and the public. A dentist who operates multiple offices may also use DBAs to help differentiate each office for patients.
Filing a DBA does not create a separate legal entity for a business. Instead, it serves as a public record or notice that the business operates under a name other than its legal name.
Legal Considerations When Using a DBA in a Dental Practice
There are several factors to keep in mind as you consider opening your practice as a sole proprietorship and using a DBA. These include the following:
- Various registration requirements: Each state has its own requirements and procedures for registering a DBA.
- Licensing and ethics rules for dentists: State ethics and licensing rules for dental practices may prohibit a dentist from choosing a misleading DBA name, such as including dental treatments that the dentist does not have the qualifications or certifications to perform (e.g., orthodontics).
- Updating business documents and malpractice insurance: A dentist who obtains a DBA name for their practice should make sure that essential documents, such as malpractice policies, include the practice’s new trade name.
- Renewal requirements: Many states require businesses to renew their DBA registrations periodically to ensure that a business continues to use a trade name and to free up unused names for other businesses.
How Our Law Firm Helps Dentists Set Up the Right Business Structure
At Mahan Dental Law, our legal team can help you create a legal structure for your practice tailored to your needs, concerns, and objectives by:
- Providing guidance with state-specific requirements for DBA filings
- Conducting trademark searches
- Reviewing licensing and ethics rules for dental practices
- Offering long-term planning advice, including on the pros and cons of sole proprietorships and the process for transitioning to another type of business entity, or protecting your practice and assets from liability
FAQs About DBAs and Sole Proprietorships for Dentists
Below are the answers to some of the most common questions that dentists have about DBA and sole proprietorships.
Do I need a DBA if I use my name?
You may not need to register a DBA if you choose to name your dental practice after yourself (e.g., John M. Smith, DDS). However, should you ever adopt a trade name or brand name by which your patients come to know your practice, you may need to file a DBA with that brand name.
Can I switch from a DBA to a corporation?
If you started your dental practice as a sole proprietorship, you can later choose to incorporate the business. However, transferring ownership of assets belonging to the practice, such as real estate or equipment, from yourself to the corporation can involve complex legal issues. As such, it’s a good idea to seek legal assistance when incorporating an existing sole proprietorship dental practice.
Does a DBA protect my assets?
Choosing to practice dentistry under a sole proprietorship/DBA does not protect your assets, since the law does not distinguish between you and your practice. Should you need asset protection, you’d likely be better served operating as a professional corporation or limited liability company. However, even a corporation or LLC does not provide limited liability protection for dental malpractice that you may commit.
Do I need a lawyer to register a DBA?
Although there is no legal requirement to hire an attorney to file a DBA, an experienced lawyer can provide critical assistance at an important juncture. An attorney can check the local DBA database to ensure that another business does not use the name you want and conduct a trademark review to assess the risk of a potential trademark infringement claim.
Contact Our Firm Today for Help
Are you considering what legal structure to use for your dental practice? If so, an experienced attorney can help you understand the pros and cons of sole proprietorships/DBAs. Contact Mahan Dental Law today for a confidential consultation with a knowledgeable dental attorney to get the advice you need to make informed decisions about how to set up your practice.
