By Daniel J. Schulte
MDA Legal Counsel
From the July 2005 issue of the Journal
Question: Can someone who is not licensed to practice dentistry own a part of my dental practice?
Answer: Except in the case of a dental practice organized as either a partnership or a non-profit corporation, the answer is no.
Dental practices are almost always organized as either a sole proprietorship, professional corporation or a professional limited liability company. A sole proprietor consists of only one individual. If this individual is providing services that are within the scope of the practice of dentistry, the individual must be a licensed dentist.
If your dental practice is organized as either a professional corporation or professional limited liability company, Michigan law prohibits ownership by anyone who is not a licensed dentist (the Professional Service Corporation Act, MCL 450.221 et. seq., in the case of a professional corporation and Article 9 of the Limited Liability Company Act, MCL 450.4901 et. seq., in the case of a professional limited liability company). Section 4(4) of the Professional Service Corporation Act states that if a professional corporation is organized to provide a professional service that is subject to Michigan’s Public Health Code (which obviously includes dentistry) then all the professional corporation’s shareholders must be “licensed or legally authorized” in Michigan to provide the same professional service — i.e., dentistry.
An identical restriction is contained in Section 904(2) of the Limited Liability Company Act. Therefore, all shareholders of a professional corporation and all members of a professional limited liability company organized in Michigan for the purpose of providing dentistry services must be licensed or legally authorized to practice.
Similar restrictions apply to professional corporations and professional limited liability companies formed in Michigan to provide other “professional services.” Professional services are defined as any type of personal service to the public that requires as a condition prior to the rendering of the service the obtaining of a license (for instance, CPAs, attorneys, professional engineers, veterinarians, and so forth).
Michigan’s Professional Service Corporation Act and the professional service section of Michigan’s Limited Liability Company Act exist as a result of the Corporate Practice of Medicine Doctrine. This doctrine, which has existed in Michigan for which has existed in Michigan for decades, prohibits a general business corporation or limited liability company from being organized for the purpose of providing dentistry and other medical services. The courts in Michigan and most other states have inferred this doctrine from Michigan’s licensure laws that restrict the practice of dentistry and the other health professions to individuals licensed to provide the service — not to entities such as corporations and limited liability companies. Michigan enacted our Professional Service Corporation Act and Article 9 of our LLC Act to provide an exception to the Corporate Practice of Medicine Doctrine, so that dentists and other health professionals could join together in an entity and provide their services to the public.
The two exceptions that would allow someone not licensed to practice dentistry to own a dental practice apply when the dental practice is operated through a non-profit corporation or a partnership (whether a general partnership or limited liability partnership). A non-profit corporation may be organized to provide dentistry and other health services. This is typically how hospitals and charity care clinics that employ dentists and other health care professionals are organized. The prohibition on a profit motive, however, makes operating as a non-profit corporation impractical for most dentists.
Even though there are not similar restrictions on ownership contained in Michigan’s partnership law, ethical and licensing implications more often than not require that dentists and other health professionals not share ownership in a partnership with someone who is not licensed to practice dentistry. Thus, the practice of one of the health professions through a partnership such as this is very rare in Michigan.