Should I Start an LLC for My Dental Office?

Starting a limited liability company (LLC) for your dental office can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a dental office, lawsuits can arise from things like medical malpractice and negligence allegations (e.g., a procedure causes a patient to experience complications and seek additional treatment).

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your dental office seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Dental Office?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Dental Office

By starting an LLC for your dental office, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Dental offices will benefit from liability protection because dental service and orthodontics practices, including dental offices, face a variety of risks associated with clients visiting the office location and having their teeth worked on.

Example 1: After one of your hired dentists fails to prescribe adequate treatment, your client files a negligence lawsuit against your LLC. Regardless of the validity of the lawsuit, your personal assets will remain protected since your business is registered as an LLC, and you didn’t personally commit the negligent act.

Example 2: When a patient faces complications following your treatment, he claims that you breached your duty of care and files a medical malpractice lawsuit against your LLC. Presuming you didn’t act negligently or recklessly, limited liability will shield your personal assets regardless of how the claim progresses in court.

Example 3: After a boost in customers, you decide to take on a large business loan in order to hire two more dentists for your dental office. If your business is unable to pay the loan back, the creditor will not be able to sue you in order to recoup their investment unless you personally guaranteed the loan.

Example 4: A client sues your dental office for malpractice claiming that they received permanent nerve damage from a procedure.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Dental Office

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a dental office owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Dental offices rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a trusted LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

Yes. LLCs need to purchase business insurance in order to protect their business assets. This is because the limited liability offered by an LLC structure protects the owners’ personal assets only, not the business’s.

Moreover, limited liability does not protect the owners’ personal assets against tortious or negligent acts that they’ve personally committed.

Common Situations Business Insurance May Cover for a Dental Office

Example 1: One of your patients is walking to the restroom when she slips on a wet spot on the floor and falls. She breaks her wrist and demands you pay for her medical treatment because the wet area was not marked. Your general liability insurance would likely cover this cost.

Example 2: You have begun to use a new logo for your dental business that you really like. Unfortunately, one of your competitors decides that it is too similar to his logo and files a lawsuit against your business. With general liability insurance, you have protection against such lawsuits. Your insurer will pay for your legal defense costs, including the cost if you need to settle out of court.

Example 3: One of your dental assistants is late to work and comes rushing into the back of the building. In her haste, she does not see a patient and knocks her over. The patient sustains a concussion and sues your business over the accident. Your general liability insurance will pay for your legal fees, including the cost of an attorney and the cost of a settlement if one is necessary.

Other Types of Coverage Dental Offices Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all dental offices should obtain:

Professional Liability Insurance

As a dentist, you regularly give professional advice and perform duties related to your professional training and certifications. Professional liability insurance protects you from negligence claims based on mistakes or failure to perform. If a patient sues you, claiming that your treatment caused them harm, your policy would pay for your legal defense and for a settlement if you settle out of court.

Commercial Property Insurance

The dental equipment and supplies you have invested in would be costly to replace if you were to lose them in a fire or similar event. With commercial property insurance, you can file a claim with your insurer and get financial help with replacement costs as long as the loss was caused by a covered event.

Workers’ Compensation Insurance

Most states require employers to carry workers’ compensation insurance. If an employee is injured while working, they can get their medical treatment paid for through workers’ comp. It will also cover some lost wages while they take time off to recover from their injuries.

Commercial Umbrella Insurance

The general liability insurance policy you carry will be sufficient for most circumstances, but it is possible that the limits of your policy could be exceeded — like if you lose a major lawsuit. But if you have commercial umbrella insurance, you have the extra protection that kicks in when the general liability insurance stops paying. If your general liability insurance limits are reached, the umbrella policy pays for the remaining damages.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, medical malpractice insurance, workers’ compensation insurance, and commercial property insurance.

Read our Business Insurance article for more info.

Starting a dental office can be quite expensive, generally costing anywhere between $250,000 and $500,000. This is because you’ll need to purchase equipment, lease out an appropriate office space, and hire trained staff.

Your main ongoing expenses will include labor costs, supplies, and rent.

Visit our How to Start a Dental Office guide to learn more about the costs of starting and maintaining this business.

Ongoing expenses for dental offices will include the cost of rent, supplies, and employee wages.

Learn more about running a dental office.

Dental offices make a profit by charging clients different rates for a variety of dental services provided on a situational basis.

Learn more about starting a dental office.

Dental offices are involved in providing preventative and correctional dental services to clients based on their individual needs and desires. While some clients are there for simple preventative hygiene services, dental offices also provide a variety of services including crowns, caps, fillings, and corrections for existing dental problems.

General dental practitioners have the ability to profit over six figures in a year.

Learn more about starting a dental office.