Steps to Incorporating a Dental Practice in California
There are two other articles that discuss topics before getting to this point (Sole Proprietor vs. Incorporating: What’s Best for a Dentist? and The S-Election).
Assuming you’ve made the decision to incorporate your dental practice, here are the steps required to move forward.
You’ve got choose a name, and unfortunately you don’t have quite as much flexibility as you may like. The CA Business and Professions Code requires that the name comply with either one of the following:
Any name that contains and is restricted to one or more persons’ name(s) or last name(s) and the words “dental corporation” (or abbreviations such as “Inc”). A name may include dental degrees such as DDS or DMD and may be preceded by “Dr.”
Any name that contains the family name and the words “dental office”, “dental practice”, or “dental group”.
You should reference B&P Code § 1701.5(c) to ensure your name complies with the Code. Any nonconforming names will be rejected by the Secretary of State.
It’s possible to pay to reserve a name in advance of actually preparing the Articles of Incorporation. However, this is usually a superfluous step due to the extremely unique name and degree combinations used with a dental corporation. That being said, at a minimum you’ll want to check the Secretary of State online database to ensure your proposed name is not already taken.
Prepare & File Articles of Incorporation
Typically, a dental practice is going to be organized as a “professional corporation” in CA, which is not a standard corporate filing and has it’s own form. Keep in mind that the Articles become public record, so all names and addresses will be available to any interested parties. As such, if your corporation doesn’t yet have a business address, it can be beneficial to use your attorney or accountant’s office address to avoid having to publish your home address. Another consideration is how many shares of stock to authorize, which is important because this amount is not easily changed. Once your form is completed, it’s signed and sent off along with the filing fee. It usually takes at least a few weeks for the Articles to be processed and filed, but this can also be expedited when needed.
Prepare Bylaws, etc.
Although they aren’t filed to anyone, you’ll need to prepare your corporation's’ Bylaws and have the initial corporate meeting to elect the various Officers and to decide a number of other things about the authorized corporate actions.
File Statement of Information (SOI)
Each year a corporation has to disclose it’s Officer(s) and Director(s) for public inspection, and the first SOI is due within 90 days of incorporating. Additionally, you have to provide an “Agent for Service of Process”. If someone wants to sue a corporation, they can’t serve legal papers to a Post Office box, so you have to publicly disclose a person or corporation with a street address to whom legal service could occur. Again, you can use your attorney or accountant for this role if they so agree. Just like the Articles of Incorporation, all names and addresses become public record, so it’s better to use your business address instead of your home address when possible.
Obtain a Federal Employee Identification Number (EIN)
In order to open a corporate bank account, to pay employees, and to file a corporate tax returns, you’ll need to have an IRS-issued EIN. This should be obtained shortly after you’ve been notified of the successfully-filed Articles of Incorporation.
Make the S-Election
Assuming that you’ve made the decision for the corporation to be treated as an “S-Corporation”, you’ll need to formally make the election with the IRS. This has to be completed within two-and-a-half-months from the date of incorporation, although there is a remedy for late filings if needed.
Set-Up Business Accounts
With the Articles and EIN, you’ll want to get a corporate checking account set-up with your bank. Incorporation and other expenses that were incurred before this point should be tracked such that the owner can be reimbursed as appropriate.
Move Forward as a Corporation
Once incorporated, you’ve got to ensure your business activity remains within the structure, and that you “act” like a corporation. That means corporate funds aren’t intermingled with personal funds, and you complete all required filings and activities including your annual corporate meeting.
Dave Sholer, CPA, MBA works exclusively with dentists in California, offering full-service accounting & tax solutions for dental practices of all sizes.
Want more info? Dave offers a no-cost, zero obligation consultation to answer whatever questions you have and/or to review your books, tax returns, and payroll situation. He can review your unique situation to determine if incorporation makes sense, and can even get your corporation set-up if it is the right move. Additionally, Dave’s full-service model includes all annual corporate filings such that there’s no burden on your life.