Dental practice ownership: the DSO, the fee that is misconduct in New York, and the six-month buyout at book value

A New York dental practice that pays its management company a percentage of collections is committing professional misconduct. New York’s rule reaches any payment for “space, facilities, equipment or personnel services” that is a percentage of, “or is otherwise dependent upon,” the dentist’s receipts (8 NYCRR 29.1(b)(4)), and it has no exception for dentistry. The same percentage fee is lawful in California if it is commensurate with the value of the services (Cal. Bus. & Prof. Code § 650(b)). A dental service organization running one national template across both states is legal in one and exposing its dentists to discipline in the other.

Dentistry is where the corporate-practice question is sharpest outside medicine. This page covers who may own a dental practice, how the dental service organization is built around that rule, what the dentist must keep, how the fee is policed, and the succession deadlines that most buy-sell agreements miss.

In most states only a dentist may own a dental practice, so outside investors own the company that runs everything around it.

Who may own a dental practice

Many states define dentistry to include owning the business. North Carolina says a person who owns, manages or controls an enterprise where dental acts are performed is practicing dentistry (N.C. Gen. Stat. § 90-29(b)(11)). Texas says a person practices dentistry if the person owns, maintains or operates an office in which the person employs someone to practice dentistry, or controls or influences a dentist’s independent judgment on diagnosis or treatment (Tex. Occ. Code § 251.003(a)(4), (a)(9)). California includes anyone who manages or conducts a place where dental operations are performed “as manager, proprietor, conductor, lessor, or otherwise” (Cal. Bus. & Prof. Code § 1625(e)), and California does not let an LLC render professional services at all, so a California dental practice is a dental corporation, not an LLC.

Florida states it as an employment rule: only a Florida dentist, or a professional corporation or LLC composed of dentists, may employ a dentist or hygienist in operating a dental office, control dental equipment while it is used, or interfere with a dentist’s clinical judgment (Fla. Stat. § 466.0285(1)). A violation is a third-degree felony, and a contract made in violation is void. Illinois puts the rule on the dentist, who may not provide dental services while “employed by any person other than a dentist” (225 ILCS 25/38.1).

Arizona goes the other way. It regulates dental businesses that are not dentist-owned through registration with the Board of Dental Examiners, requires each registered office to name a responsible dentist, and bars the business from any policy that may interfere with clinical judgment (A.R.S. § 32-1213). The current statute also bars dental insurers and their holding companies from owning any interest in such a business.

The dental service organization

The dental service organization, or DSO, is the dental version of the management company used in medicine. The dentist, through a dentist-owned professional entity, owns the practice and employs the clinicians. The DSO owns or leases the building and equipment, employs the non-clinical staff and supplies the business services: billing, accounting, marketing, information systems, purchasing. It charges a management fee. Investors own the DSO. The dentist’s professional entity cannot be sold to them, so the DSO usually protects its investment with an agreement restricting who may own the dentist’s interest.

What the dentist must keep is spelled out in some states and left to a general rule in others. Florida reserves to the dentist control over the course of treatment and materials, the patient records, policies on pricing, credit, refunds, warranties and advertising, and decisions on office personnel and hours (Fla. Stat. § 466.0285(2)). Illinois lists treatment selection, patient referrals, record content, final decisions on hiring dental assistants and hygienists, and the clinical content of advertising (225 ILCS 25/38.1(2)). Texas has no list; its line is any control or influence over independent judgment on diagnosis or treatment.

Florida lets a management company run the marketing department and forbids it to set the advertising policy.

Florida’s own rules do not line up. The statute reserves “office personnel” decisions to the dentist without limiting that to clinical staff. The Board of Dentistry’s rule lists staffing among the services a management company may provide, and its prohibitions speak of clinical staff (Fla. Admin. Code R. 64B5-17.013). An agreement that breaks the rule is treated as “de facto employment of the dentist by a nondentist,” which is the conduct the statute makes a felony.

The fee is where the arrangement is judged

New York treats any payment for space, equipment or personnel that is a percentage of, or otherwise dependent on, the dentist’s receipts as fee-splitting, and therefore professional misconduct (8 NYCRR 29.1(b)(4)). A New York management fee has to be fixed or tied to the cost of services, and a bonus that floats with collections fails the same test. California permits a percentage of gross revenue for non-referral services if it is commensurate with the value of what is provided (Cal. Bus. & Prof. Code § 650(b)). Florida requires the management fee to “reasonably relate to the fair market value of the services provided” and bars any link to referrals, and does not say whether a straight percentage qualifies. Illinois’s fee-splitting ban is tied to referrals.

The difference shows up in the numbers. Take a Florida practice collecting $2,000,000 a year with $1,100,000 of non-clinical expenses. A fee of cost plus 15% pays the DSO $1,265,000 and leaves $735,000 for the dentist’s entity to pay its clinicians and keep. A fee structured as everything above a fixed draw for the dentist leaves the dentist’s entity close to nothing in every year, and that shape, a dentist whose economics are entirely set by the management company, is what the Florida rule calls de facto employment.

A management fee that leaves the dentist’s entity nothing but a fixed draw is the shape regulators read as the DSO employing the dentist.

California added a second layer in 2025. SB 351, effective January 1, 2026, bars private equity groups and hedge funds involved with physician or dental practices from interfering with professional judgment and from controlling listed decisions, including patient records, hiring of clinical staff, payer contract terms, and coding and billing, according to the Senate Judiciary Committee’s analysis of the bill. A percentage fee that is lawful under § 650(b) can still sit inside an arrangement that violates SB 351 if the management company controls the billing decisions that drive the percentage.

Texas makes the DSO register

Texas does not tell a DSO what it may do. It requires it to say who owns it. Any company that provides two or more listed business support services to a Texas dentist, including office space, staffing, marketing, billing and accounting, is a dental support organization and must register with the Secretary of State by January 31 each year, or within 90 days of its first agreement (Tex. Bus. & Com. Code ch. 73). The registration lists every dentist served and every non-dentist who owns 10% or more of the DSO. Failure to register carries a civil penalty of up to $1,000 a day. The statute says it does not limit non-clinical business services, so it is a disclosure rule, not a permission.

When the owner dentist dies

The succession rules are where a dental practice’s value is most often lost, because the licensing clock and the entity clock run separately.

Texas lets the executor of a deceased dentist’s estate employ a licensed dentist to continue the practice for a reasonable period, which the Board of Dental Examiners has set at no more than 12 months (Tex. Occ. Code § 260.001; 22 Tex. Admin. Code § 101.11). California allows the estate to contract with dentists to continue the practice for up to 12 months, with notice to the Dental Board. Illinois allows one year, extendable by up to three more years, but only where the dentist was the sole owner (225 ILCS 25/38.2). Arizona allows one year, after which an estate that keeps running the practice must register as a business entity (A.R.S. § 32-1270).

The entity statutes run on their own, shorter clocks. A California professional corporation must transfer a deceased shareholder’s shares within six months (Cal. Corp. Code § 13407). A New York professional LLC must purchase or redeem a deceased member’s interest within six months after the executor is appointed, at book value as of the end of the preceding month, unless the operating agreement sets another price or a shorter period (N.Y. Ltd. Liab. Co. Law § 1210).

In New York, a dental PLLC with no price clause must buy out a deceased member at book value, which usually leaves out the goodwill that is most of the practice’s worth.

Florida has no continuation window. Its board rule requires the estate to place the patient records with another Florida dentist within 90 days and publish notice to patients, and Florida law lets only dentists or dentist-owned entities employ dentists.

The structuring consequence: a dental buy-sell agreement has to be written to the shortest clock that applies, which is usually the entity statute rather than the board’s continuation window, and it has to set the price, because in New York the default is book value.

The bottom line

Most states let only dentists own or control a dental practice, and several define ownership of the business as practicing dentistry.

Investors own a dental service organization that runs everything around the practice, and the dentist keeps the decisions each state reserves.

A percentage-of-collections management fee is professional misconduct in New York and lawful in California if it matches the value of the services.

Florida’s statute and board rule conflict on whether a management company may control non-clinical staff.

Texas requires every dental support organization to register each year and list its non-dentist owners of 10% or more.

Succession deadlines differ between the dental board and the entity statute, and a New York PLLC with no price clause buys out a deceased member at book value.

What this page does not cover

The management company model in medicine, and the 2025 California and Oregon laws on it, are on medical practices. The four ownership models across licensed businesses are on who is allowed to own a licensed business. Dental practice as a business, apart from licensing, is in the dental playbook. Buy-sell drafting generally is on transfers and buy-sell.

Last verified October 2026.