The business of dentistry in 2025 is shifting in meaningful ways. Practice ownership is no longer the presumed path for every dentist, and the traditional solo office is becoming less common. As economic conditions change and regulations tighten, many dentists are reevaluating how they structure their businesses and where they find funding. For those planning to start, expand, or restructure a practice, the choices made now have lasting legal and financial implications.
What Is the Best Legal Structure for a Dental Practice in 2025?
The foundation of any practice begins with its legal structure. In 2025, dentists are primarily choosing between professional corporations (PCs), professional limited liability companies (PLLCs), and S-corporations. State law dictates which entities are allowed for licensed professionals. Most states do not allow a general LLC or standard C-corporation for dental services. Instead, the practice must be formed as a PC or PLLC, which ensures compliance with state licensing laws and offers liability protection.
S-corporation status remains popular among dentists because it allows profits to pass through to the owners while avoiding double taxation. Dentists who opt for this election typically pay themselves a salary and take additional income as shareholder distributions. These distributions are not subject to self-employment tax, which can offer significant savings.
For practices with multiple owners, group structures are more complex. Many multi-dentist practices use a model where each partner owns a separate PLLC or PC, and those entities collectively form a partnership. This layered structure protects personal assets while clearly dividing equity and responsibilities.
Table 1: Common Legal Entities for Dental Practices
|
Entity Type |
Allowed for Dentists? |
Liability Protection |
Tax Treatment |
|
Sole Proprietorship |
Yes (not advised) |
None |
Pass-through |
|
PC/PLLC |
Yes (required in many states) |
Yes |
Can elect S-Corp |
|
General Partnership |
Yes (risky) |
Joint liability |
Pass-through |
|
MSO Model |
Yes (split entity) |
Varies |
Management fee-based |
How Are Dentists Financing Practice Growth and Ownership?
Access to capital remains the most critical aspect. Bank financing continues to be the most common source for practice purchases and expansions. Dental practices have long been considered low-risk by lenders, and in 2025, most major banks and dental-specific financing companies continue to offer 100% financing for qualified buyers.
Interest rates, however, remain elevated compared to pandemic years. This means higher monthly payments and tighter underwriting standards. Lenders expect to see strong cash flow, detailed projections, and a competent transition plan. New dentists must be prepared to show how they will maintain and grow the practice’s revenue.
Small Business Administration (SBA) loans remain a favored option, particularly the 7(a) program. These loans offer extended repayment terms and lower down payments, making them attractive for new or undercapitalized buyers. However, they require extensive documentation and come with floating interest rates tied to the prime rate.
Some dentists are turning to seller financing, particularly in smaller transactions or when traditional lenders won’t fund the full deal. This allows the seller to hold a promissory note for a portion of the purchase price, often repaid over five to seven years. While this introduces some ongoing obligations to the seller, it can also help facilitate a sale in a high-rate environment.
Table 2: Practice Financing Options in 2025
|
Source |
Typical Use |
Terms |
Considerations |
|
Bank Loan |
Acquisition/Startup |
7-10 years, 100% LTV |
Requires strong cash flow |
|
SBA Loan |
Acquisition/Real Estate |
Up to $5 million, 10-25 years |
Long documentation process |
|
Seller Financing |
Gap coverage |
3-7 years |
Needs trust and clear terms |
|
Private Equity |
Expansion/Buyouts |
Equity-based |
Requires share of control |
What Trends Are Reshaping Dental Practice Ownership?
The solo practitioner model continues to decline. According to the American Dental Association, only 36 percent of dentists now operate solo. Group practices and dental service organizations (DSOs) have gained significant ground. DSOs provide administrative support, including billing, HR, and marketing, in exchange for a share of practice revenue.
Under the management services organization (MSO) structure, a dentist owns the clinical practice while the MSO - often backed by private equity - owns and manages the non-clinical operations. This structure allows compliance with state corporate practice of dentistry laws, which bar non-dentists from owning or controlling dental practices.
DSO affiliation is especially appealing for dentists who want to focus exclusively on patient care and minimize administrative burdens. However, it requires ceding some control and understanding the contractual obligations imposed by the management company.
What Legal Developments Are Affecting Dental Business Models?
A major legal update in 2025 is the implementation of the Corporate Transparency Act (CTA). The CTA requires most business entities, including PCs and PLLCs, to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). This new rule aims to prevent misuse of shell companies but adds a layer of compliance for dental businesses.
Another issue is the evolving legal scrutiny of non-compete agreements. The Federal Trade Commission has proposed a nationwide ban on most employee non-competes, including those in healthcare. While the rule is not final, its adoption would affect how dental practice owners protect their patient base and prevent unfair competition from former associates. Some states, like California and Colorado, already ban or severely restrict such clauses.
Additionally, several states are revisiting their laws on third-party financing and corporate practice models. In Illinois, new regulations prohibit dental offices from applying for financing on behalf of patients and require full disclosure of financing terms. In California, proposed legislation would tighten oversight on private equity’s role in dental operations.
What Are the Benefits and Risks of Different Models?
Every structure comes with trade-offs. Owning a solo practice provides full control but requires the owner to manage every aspect of the business, from compliance to payroll. Group practices offer shared resources and responsibilities but require alignment among partners.
Affiliating with a DSO can reduce stress and provide access to growth capital, but it also introduces contractual restrictions and limits autonomy. The dentist may become an employee within a corporate structure and be subject to performance benchmarks or centralized decision-making.
From a financing perspective, conventional bank loans offer the benefit of full ownership but carry personal liability and rigid repayment terms. Seller financing can smooth the path to ownership but creates ongoing ties with the previous owner. Private equity investment may deliver immediate liquidity and growth capital, but it requires selling equity and may include complex exit conditions.
Legal Counsel: Where Dentists Need Help Most
Choosing the right legal structure is not a fill-in-the-blank process. A qualified dental attorney will examine state-specific requirements and help set up the proper entity, file with the dental board, and draft necessary operating agreements.
In partnership or associate-to-owner transitions, legal counsel is essential for drafting buy-in agreements, setting fair valuation methods, and protecting all parties in case of dispute. In MSO arrangements, lawyers ensure compliance with corporate practice laws, review fee structures, and safeguard clinical independence.
When considering a sale or DSO affiliation, a dental lawyer can help negotiate terms, review management agreements, and identify red flags in letters of intent or purchase contracts. From indemnification clauses to employment covenants, these documents shape the future of the selling dentist’s professional and financial life.
Closing Thoughts
Dentists looking to build or change their business in 2025 are stepping into a highly technical environment. Structuring and financing a dental practice today requires more than just clinical excellence - it demands strategic foresight, legal compliance, and financial prudence. The right decisions now will affect ownership rights, tax obligations, and liability exposure for years to come. With shifting laws and economic variables, working with experienced professionals - legal, financial, and operational - is no longer optional. It’s a necessity.
Dentists have more options than ever to grow their practices. The challenge is choosing those that support their vision while staying compliant with federal and state law. Whether setting up a solo practice, negotiating a group partnership, or exploring a DSO deal, the right legal and financial structure is the backbone of success.
