TO LLC OR NOT TO LLC: THAT, IS THE QUESTION!

nat rosasco • January 9, 2013

Limited Liability Companies, or “LLC” as they are more commonly known, have been the “entity du jour” over the past decade, and I’ve been asked by many a client what the real reasons are to choose an LLC over, for example, an S-Corporation, a Partnership or a traditional C-Corporation.  Choosing the most appropriate structure for […] The post TO LLC OR NOT TO LLC: THAT, IS THE QUESTION! appeared first on GGHH Law.

Limited Liability Companies, or “LLC” as they are more commonly known, have been the “entity du jour” over the past decade, and I’ve been asked by many a client what the real reasons are to choose an LLC over, for example, an S-Corporation, a Partnership or a traditional C-Corporation.  Choosing the most appropriate structure for your business can be confusing even for the most learned legal practitioner, and I find that most attorneys know which entity they should recommend but don’t necessarily know why.  In this article we’ll explore the differences between two of the most popular business structures, the LLC and the Subchapter S Corporation, or “S-Corp”.

The LLC and S-Corp are popular business structures for a variety of reasons, some of which the two have in common.  Both the LLC and the S-Corp are creatures of statute, meaning they are separate legal entities created by a state filing and subject to state-mandated formalities, such as filing annual reports and paying periodic filing fees.  Both entities are taxed like sole proprietorships (in the case of a single owner or shareholder) and partnerships (in the case of multiple owners or shareholders), meaning the company itself doesn’t pay federal taxes, but rather all company profits and losses are “passed through” to the individual owners, who report these tax attributes on their individual federal tax returns.  These two business structures also share another key feature in that they have the ability to separate the liabilities of the business from the personal assets of the owners, thereby shielding those assets from business obligations.  Despite the similarities, LLCs and S-Corps do differ in several ways, including their operational flexibility, administrative requirements, profit-sharing and employment tax implications, all of which we will explore in this article.

WHAT IS AN LLC ANYWAY?

According to the Internal Revenue Service, an LLC is an entity “designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership”.  Although many times you will hear practitioners refer to an LLC as a “limited liability corporation”, you should note that an LLC is not actually a corporation.  While both corporations and LLCs are created as a matter of state law, they are separate entities with entirely different governing rules and regulations.  Nevertheless, the LLC is a flexible form of business enterprise that combines elements of both the corporate and partnership structures.  As a pass-through entity, all profits and losses generated in an LLC are reported by the individual owners, or “members” as they are called, on their individual federal tax returns.  What differentiates the LLC from a partnership, however, is the limit of the liability for which a member is responsible, which in most cases will be limited to such member’s investment in the company.

HOW ABOUT AN S-CORP?

Like a C corporation, an S-Corp is a corporation organized pursuant to the laws of the state in which it is formed.  As in the case of an LLC, however, S-Corps resemble partnerships in the manner in which they are taxed, meaning all aspects of income, deductions and tax credits flow through to the shareholders, regardless of whether cash distributions or contributions are made.  S-Corps must make an affirmative election under Subchapter S of Chapter 1 of the Internal Revenue Code to be taxed as a partnership and the following requirements must be met in order to do so:

–        The entity making the election must be a domestic corporation;

–        The entity making the election may only have one class of stock;

–        The entity making the election may not have more than 100 shareholders;

–        Shareholders of the entity making the election must, subject to certain limited exceptions, be U.S. citizens and natural persons; and

–        Profits and losses allocated to the entity’s shareholders must be in proportion to each  shareholder’s interest in the business.

SO WHICH ONE IS RIGHT FOR MY BUSINESS?

As indicated above, LLCs and S-Corps differ in several ways, including but not necessarily limited to their operational flexibility, administrative requirements, profit-sharing and employment tax implications.  Understanding the differences will dictate which of these two popular entities are right for your business.

One of the primary differences between an LLC and an S-Corp is the amount of administrative formality that is required to maintain an S-Corp.  Remember, an S-Corp is in fact a corporation and therefore requires compliance with certain administrative formalities such as formation of a board of directors, annual reporting and other mandatory business filings, adopting by-laws, issuing stock, annual shareholder and director meetings with mandatory record keeping and other administrative requirements that a typical small business may not be prepared to deal with, particularly one with a single owner.  An LLC on the other hand requires far fewer forms for registration and generally lower start-up costs.  Limited Liability Company’s are not generally required to have formal meetings nor maintain minutes of meetings, though record keeping is still highly recommended.  With fewer administrative formalities to maintain, LLCs may be more difficult to penetrate by those seeking to challenge its shield of liability protection.  Generally, as long as the members of the LLC do not “co-mingle” funds, imposing liability beyond the LLC itself may be very difficult.

Another distinguishing feature between the LLC and the S-Corp is the operational and management flexibility inherent in an LLC versus the rigid structure of an S-Corp.  Most matters relating to governance of an LLC can be handled in one document, typically termed an “Operating Agreement” or “Limited Liability Company Agreement”, which is the governing document of the company.  Most state codes in fact allow members of an LLC to essentially override the LLC statute by otherwise agreeing in the operating agreement how the LLC will be governed.  The owners of an LLC can decide to be self-managed (or, “member-managed” as it is otherwise known) or manager-managed.  When member-managed, the LLC is run in the same manner as a partnership where the partners handle the day-to-day operations of the company.  When manager-managed, the LLC is run similar to a corporation, where the members may elect one or more people to handle the day-to-day decisions of the company.  S-Corps on the other hand, have directors and officers, where the board of directors makes major decisions and officers are elected to manage the company’s daily business.  Of course, an LLC also has the flexibility to “elect” officers if they so choose, but many business owners appreciate the simplicity of their businesses being managed by a manager they have the authority to appoint or remove in their sole discretion.

When organizing a new company involving more than one owner, particular attention should be paid to the allocation of the company’s profits and losses as well as the distribution of available capital.  S-Corporations, which are restricted to one class of stock, must allocate profits and losses pro-rata to its shareholders based on their relative share of ownership.  Thus, a shareholder who owns 25% of the company’s stock reports a distribution of 25% of the company’s year-end taxable profit or loss, as the case may be, on the shareholder’s individual federal tax return.  The one class of stock restriction governing S-Corps does not apply to LLCs, thereby allowing flexibility in planning distributions and allocations of profits and losses.  A business organized as an LLC may allocate profits and losses disproportionately among its members, taking into account factors such as sweat equity, preferred returns for members contributing more capital and other arrangements forming the basis for so-called “special allocations”.  The IRS may scrutinize such special allocations to ensure members are not attempting to evade taxation by allocating larger losses to members in higher income tax brackets, thus it is important to structure the allocations so that they have what the IRS terms “substantial economic effect”.  Consider the case of four members who form an LLC where three members put up an equal amount of cash while the fourth member signs a note to contribute his or her share in installments over the first five years of the business.  The operating agreement may provide that the first three members receive a larger distributive share of profits and losses for those five years during which the fourth member’s note is outstanding, even though all four members may each have an equal 25% ownership interest in the company.  The IRS should respect this arrangement given there is a legitimate financial basis for the special allocation (i.e., it has “substantial economic effect”).  It should be noted that an LLC’s structural flexibility would allow an operating agreement governing the foregoing company to provide for other restrictions, such as a limit on the fourth member’s ability to vote on certain issues affecting the company until the note is paid in full.  It is this structural flexibility that motivates many  entrepreneurs to choose the LLC for their new businesses.

While not generally a significant consideration for most new small business owners, it is important to note that owners of LLCs are considered to be self-employed and must therefore pay the 15.3% self-employment tax contributions towards Medicare and Social Security (note that the rate was effectively reduced in 2012 to 13.3% but is slated to return to 15.3% in 2013).  Thus, all the income of an LLC is subject to self-employment tax whereas a corporation may retain some of that income after payment of the owner’s salary and treat it as unearned income not subject to self-employment.  Of course, nothing is free in the eyes of the IRS as any such unearned income will be taxed at some point when it is distributed to the company’s shareholders as taxable dividend income.

While LLCs have been the entity of choice in recent years, the flexibility associated with its ownership and management structure in multi-member businesses comes with a price.  That price is reflected in what can be complex operating agreements reflecting the practical realities of an agreement among the owners.  In such situations it is important to remember that an operating agreement is not an “off-the-shelf” document that a practitioner or formation service can quickly plug names into and deliver without a thorough understanding of the member’s relative expectations.  LLC operating agreements may need to combine complex provisions usually found in shareholder agreements, separate buy-sell agreements, partnership agreements and even employment agreements.  Such provisions may affect issues such as capital contributions to the business, allocation and distribution of profits and losses as described above, members’ voting rights, admitting new members or removing existing ones, restrictions on transfer of membership interests and many others.  Each member should retain their own counsel experienced in business organizations to advise them of their relative rights and obligations before entering into any such agreement.

Jordan Uditsky is a partner in the corporate practice of Garelli, Grogan, Hesse & Hauert.  He brings a diverse legal and business background to the firm, with a particular emphasis on the representation of startups and emerging companies, commercial real estate transactions, tax and estate planning.  He advises businesses in a broad range of general corporate and corporate transactional matters, including business organizations and choice of entity issues, financing and private equity, mergers, acquisitions and joint ventures as well as business restructurings.  Mr. Uditsky also employs his experience as a business owner to advise companies on regulatory issues and compliance matters, employment policies and legal issues related to their general operations and business strategy.

Garelli Grogan Hesse & Hauert offers sophisticated yet cost effective, practical solutions to our clients’ legal challenges.  We strive to understand not only the legal issue but our clients’ business goals as well and craft tailored solutions to help them succeed.  Our attorneys represent businesses and individuals throughout the Midwest in matters that include commercial litigation, securities, business counseling and transactions, commercial real estate, estate planning and family law.  For more information contact Jordan Uditsky at (630)833-5533 x12 or juditsky@gghhlaw.com.

Speak to an Attorney

Related Posts

Getting in Sync: The Practical Challenges of Integrating Your Practice With a DSO

By Jordan Uditsky • October 21, 2026
Getting in Sync: The Practical Challenges of Integrating Your Practice With a DSO  Almost all mergers, whether they involve two giant corporations or two new spouses, present a multitude of challenges. Each party has their own way of doing things, each may possess capabilities or infrastructure that are duplicative of the other, and each will need to get used to a new dynamic that may, at first, cause some friction and pushback. Such is the case when an independent dental practice must integrate its operations, policies, and affairs with those of a far larger dental service organization (DSO) after the latter acquires the former. While the management services agreement (MSA) and other documentation behind a DSO acquisition may address a broad spectrum of issues, including those affecting integration, the practical, on-the-ground realities of combining two businesses can make the transition difficult for the practice and the DSO alike. An MSA that may look straightforward on paper can become much more complicated once the practice is operating within the DSO's platform. The most successful integrations recognize such issues early and establish clear lines of responsibility between the clinical practice and the DSO. Are you interested in speaking with one of our attorneys? Click here to contact us now. Aligning the MSA With Day-to-Day Operations The MSA should clearly identify the services the DSO will provide, such as billing, human resources, accounting, procurement, information technology, marketing, and facilities management. But the parties should also understand how those services will actually be delivered, including such granular but critical matters as: Who must approve expenditures Who hires and terminates nonclinical employees Who controls the practice's bank accounts Who manages payer enrollment and credentialing Who owns the patient records and other data Who is responsible for regulatory compliance Ambiguity can lead to disputes, particularly when the parties have different expectations about the DSO's role. A well-drafted MSA should be supported by practical integration procedures that translate contractual provisions into everyday operations. Employee and Staffing Integration The practice owner and the DSO may be the only parties with their signatures on an MSA, but the document also plays a big role in the fate and future of the practice’s employees. Compensation structures, benefits, payroll systems, timekeeping, job responsibilities, and reporting relationships may all change. Before integration, the parties should determine whether employees will remain employed by the professional practice, become employees of another affiliated entity, or transition under another arrangement permitted by applicable law. Counsel should also carefully review existing employment agreements and restrictive covenants to ensure that those documents are not in conflict with any relevant provisions of the MSA. Another common issue is the integration of compensation systems. A DSO may use standardized compensation models, bonus structures, or productivity metrics that differ from those historically used by the practice. Those changes should be reviewed not only for employment-law considerations but also for potential implications under healthcare fraud-and-abuse laws and applicable fee-splitting restrictions. Technology, Data, and Patient Records The technological infrastructure of a dental practice is complex enough on its own, but integrating its practice-management software, electronic records platform, accounting system, or communication tools to systems used throughout the DSO takes that complexity — and related risks — to another level. Patient records must remain accurate and accessible, and the parties must address applicable HIPAA privacy and security obligations when patient information is transferred, accessed, or stored by DSO personnel and vendors. The integration plan should address data ownership, access rights, cybersecurity responsibilities, backup procedures, retention requirements, and procedures for responding to security incidents. A rushed technology conversion can disrupt patient care and lead to costly but avoidable compliance problems. Branding and Patient Relationships DSOs frequently seek to standardize branding, marketing, websites, telephone systems, and patient communications. While consistency can be valuable, practices should consider how these changes affect existing patient relationships. Patients may be confused if a familiar practice suddenly adopts a new name, website, phone number, or communication style. The integration plan should provide a thoughtful transition that explains changes without undermining patient confidence. Counsel should also review marketing materials for compliance with applicable advertising rules. Dental practices remain subject to professional obligations even when a centralized DSO team manages marketing and communications. Financial Integration and Revenue Cycle Management Another major integration issue is the transition to the DSO's accounting and revenue-cycle systems. Differences in billing procedures, collection policies, payer relationships, and financial reporting can produce surprises after closing. The parties should establish clear procedures for accounts receivable, refunds, patient balances, insurance claims, write-offs, and reconciliation. They should also determine how financial information will be reported to the practice and its owners. These issues are especially important where the selling dentist continues to own the professional entity or retains an economic interest in its operations. Consider and Address Practical Integration Issues Before Closing It’s one thing for a newly cohabitating couple to combine their kitchenware, furniture, and checking accounts; it’s quite another to merge two operationally complex, heavily regulated, and technologically dependent businesses with each other. Perhaps the most important lesson is that dental practice/DSO integration should not be treated simply as a matter of documentation or an administrative project that begins after the transaction closes. It should be part of the transaction planning process. Before closing, the parties should identify critical systems, personnel, vendors, contracts, licenses, payer relationships, technology platforms, and regulatory requirements. They should establish an integration timeline and assign responsibility for each major task. The parties must ensure that the legal structure, MSA, operational procedures, technology, employment arrangements, and clinical responsibilities work together. For dentists selling to or partnering with a DSO, experienced legal counsel can help identify integration risks before they become post-closing problems. If you are considering selling your dental practice to a DSO, please call Grogan Hesse & Uditsky at (630) 833-5533 or contact us online to arrange for your free initial consultation. We Focus on You So You Can Focus on Your Patients At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.

Respect My Authority: How Dental Practice Owners Can Preserve Clinical Autonomy After a Sale to a DSO

By Jordan Uditsky • October 21, 2026
Respect My Authority: How Dental Practice Owners Can Preserve Clinical Autonomy After a Sale to a DSO Over the past several years, we have posted many articles on this blog discussing two particular topics: selling a dental practice to a dental service organization (DSO), and developments related to the corporate practice of dentistry by DSOs that stick their noses too much into a practice’s clinical operations and decision-making. At the center of the venn diagram linking these two issues is a concern that faces most dental practice owners when considering a sale to a DSO: how to maintain clinical autonomy and authority after a sale and prevent the DSO from interfering in this fundamental, non-administrative aspect of running a dental practice. While legislators and regulators debate about appropriate guardrails to put on DSOs to prevent their overreach into a dentist’s clinical responsibilities, it ultimately falls on the dental practice owner — and their counsel — to take the steps needed during negotiations to ensure that the documents governing the transaction include robust protections to preserve the dentist’s appropriate authority over clinical decisions. Are you interested in speaking with one of our attorneys? Click here to contact us now. Make Clinical Independence Explicit and Detailed in Writing One of the most important protections is an unequivocal contractual statement that clinical decisions remain under the licensed dentist's control. The purchase agreement, employment or professional services agreement, and other transaction documents should clearly distinguish between business decisions and clinical decisions. As with any contract, vagueness or lack of defined terms can plant the seeds of misunderstanding and conflict. Accordingly, a general promise that the dentist will maintain “clinical autonomy” without delineating what that actually means in practice is insufficient. The agreement should define what that autonomy means and identify decisions that cannot be dictated by non-clinical personnel, including, but not limited to: · Diagnosis · Treatment planning · Selection of appropriate treatment · Referrals · Patient communications concerning treatment · Prescribing · Use of clinical techniques and materials. Additionally, a dentist should consider provisions stating that treatment recommendations will be based on the patient's clinical needs and the dentist's independent professional judgment, rather than production targets, revenue goals, or other financial considerations. Establish Appropriate Limits on DSO Authority One of the main value-adds of selling to a DSO is that they typically assume responsibility for administrative services, including billing, scheduling, human resources, procurement, marketing, information technology, and facilities management. While many of these functions are easily distinguishable from clinical ones, there are areas where operational decisions could indirectly affect clinical care, such as scheduling policies, staffing levels, supply purchasing, laboratory arrangements, appointment lengths, and production incentives, all of which can have clinical implications. As such, the agreements should establish a clearly defined, workable boundary: the DSO manages the business, while the dentist retains authority over professional judgment. Compensation and Incentive Structures Can Pit Clinical Judgment and Business Objectives Against Each Other Compensation is another area that can create tension between a DSO’s business objectives and a dentist’s clinical judgment. Counsel should review an employment or services agreement to determine whether compensation formulas, production requirements, bonuses, quotas, or other incentives could pressure the dentist to recommend or perform treatment that the dentist would not otherwise recommend. That does not mean every production-based compensation arrangement is inappropriate. Rather, dentists should understand exactly how the formula works and consider contractual language confirming that compensation will not be contingent on making a particular clinical recommendation or on performing treatment the dentist does not believe is appropriate. One-Size-Fits-All Clinical Policies v. Individual Clinical Decisions Many DSOs have standardized policies that affect clinical practice which should be reviewed and addressed before closing. During due diligence and contract negotiations, practice owners and their counsel should understand the DSO's policies involving treatment protocols, referrals, supplies, laboratories, prescribing, infection control, scheduling, patient communications, and quality assurance. Such policies should allow appropriate clinical judgment where patient circumstances warrant an individualized approach, and the parties should establish how legitimate clinical exceptions will be handled. Clinical Autonomy Is Not a Set-It-and-Forget-It Issue The signing of documents at the consummation of a sale to a DSO may be the end of one process, but it is also marks the start of the actual, functioning relationship between the DSO and now-former practice owner. And that relationship can evolve over time in ways that can impact clinical autonomy. Another company may acquire the DSO; the practice could be transferred to another affiliated entity; and other management changes can alter or threaten the carefully negotiated dynamic reflected in the underlying agreements. Those agreements should address whether clinical-independence provisions survive such events and, where appropriate, whether they bind successors and affiliated entities. Selling a dental practice does not necessarily mean surrendering professional judgment. But clinical autonomy should not be left to assumptions, informal assurances, or legislators or regulators. It should be addressed explicitly in the transaction documents by sellers and their counsel. By doing so, dentists can reap the benefits of a DSO sale while retaining control over the one thing that no corporation or entity can or should: the practice of dentistry. If you are considering selling your dental practice to a DSO, please call Grogan Hesse & Uditsky at (630) 833-5533 or contact us online to arrange for your free initial consultation. We Focus on You So You Can Focus on Your Patients At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.

With Recently Introduced Bill, Congress Enters the Corporate Practice of Medicine/Dentistry Fray. How Would It Impact Dental Practices and DSOs?

By Jordan Uditsky • October 14, 2026
With Recently Introduced Bill, Congress Enters the Corporate Practice of Medicine/Dentistry Fray. How Would It Impact Dental Practices and DSOs?
Show More

Getting in Sync: The Practical Challenges of Integrating Your Practice With a DSO

By Jordan Uditsky • October 21, 2026
Getting in Sync: The Practical Challenges of Integrating Your Practice With a DSO  Almost all mergers, whether they involve two giant corporations or two new spouses, present a multitude of challenges. Each party has their own way of doing things, each may possess capabilities or infrastructure that are duplicative of the other, and each will need to get used to a new dynamic that may, at first, cause some friction and pushback. Such is the case when an independent dental practice must integrate its operations, policies, and affairs with those of a far larger dental service organization (DSO) after the latter acquires the former. While the management services agreement (MSA) and other documentation behind a DSO acquisition may address a broad spectrum of issues, including those affecting integration, the practical, on-the-ground realities of combining two businesses can make the transition difficult for the practice and the DSO alike. An MSA that may look straightforward on paper can become much more complicated once the practice is operating within the DSO's platform. The most successful integrations recognize such issues early and establish clear lines of responsibility between the clinical practice and the DSO. Are you interested in speaking with one of our attorneys? Click here to contact us now. Aligning the MSA With Day-to-Day Operations The MSA should clearly identify the services the DSO will provide, such as billing, human resources, accounting, procurement, information technology, marketing, and facilities management. But the parties should also understand how those services will actually be delivered, including such granular but critical matters as: Who must approve expenditures Who hires and terminates nonclinical employees Who controls the practice's bank accounts Who manages payer enrollment and credentialing Who owns the patient records and other data Who is responsible for regulatory compliance Ambiguity can lead to disputes, particularly when the parties have different expectations about the DSO's role. A well-drafted MSA should be supported by practical integration procedures that translate contractual provisions into everyday operations. Employee and Staffing Integration The practice owner and the DSO may be the only parties with their signatures on an MSA, but the document also plays a big role in the fate and future of the practice’s employees. Compensation structures, benefits, payroll systems, timekeeping, job responsibilities, and reporting relationships may all change. Before integration, the parties should determine whether employees will remain employed by the professional practice, become employees of another affiliated entity, or transition under another arrangement permitted by applicable law. Counsel should also carefully review existing employment agreements and restrictive covenants to ensure that those documents are not in conflict with any relevant provisions of the MSA. Another common issue is the integration of compensation systems. A DSO may use standardized compensation models, bonus structures, or productivity metrics that differ from those historically used by the practice. Those changes should be reviewed not only for employment-law considerations but also for potential implications under healthcare fraud-and-abuse laws and applicable fee-splitting restrictions. Technology, Data, and Patient Records The technological infrastructure of a dental practice is complex enough on its own, but integrating its practice-management software, electronic records platform, accounting system, or communication tools to systems used throughout the DSO takes that complexity — and related risks — to another level. Patient records must remain accurate and accessible, and the parties must address applicable HIPAA privacy and security obligations when patient information is transferred, accessed, or stored by DSO personnel and vendors. The integration plan should address data ownership, access rights, cybersecurity responsibilities, backup procedures, retention requirements, and procedures for responding to security incidents. A rushed technology conversion can disrupt patient care and lead to costly but avoidable compliance problems. Branding and Patient Relationships DSOs frequently seek to standardize branding, marketing, websites, telephone systems, and patient communications. While consistency can be valuable, practices should consider how these changes affect existing patient relationships. Patients may be confused if a familiar practice suddenly adopts a new name, website, phone number, or communication style. The integration plan should provide a thoughtful transition that explains changes without undermining patient confidence. Counsel should also review marketing materials for compliance with applicable advertising rules. Dental practices remain subject to professional obligations even when a centralized DSO team manages marketing and communications. Financial Integration and Revenue Cycle Management Another major integration issue is the transition to the DSO's accounting and revenue-cycle systems. Differences in billing procedures, collection policies, payer relationships, and financial reporting can produce surprises after closing. The parties should establish clear procedures for accounts receivable, refunds, patient balances, insurance claims, write-offs, and reconciliation. They should also determine how financial information will be reported to the practice and its owners. These issues are especially important where the selling dentist continues to own the professional entity or retains an economic interest in its operations. Consider and Address Practical Integration Issues Before Closing It’s one thing for a newly cohabitating couple to combine their kitchenware, furniture, and checking accounts; it’s quite another to merge two operationally complex, heavily regulated, and technologically dependent businesses with each other. Perhaps the most important lesson is that dental practice/DSO integration should not be treated simply as a matter of documentation or an administrative project that begins after the transaction closes. It should be part of the transaction planning process. Before closing, the parties should identify critical systems, personnel, vendors, contracts, licenses, payer relationships, technology platforms, and regulatory requirements. They should establish an integration timeline and assign responsibility for each major task. The parties must ensure that the legal structure, MSA, operational procedures, technology, employment arrangements, and clinical responsibilities work together. For dentists selling to or partnering with a DSO, experienced legal counsel can help identify integration risks before they become post-closing problems. If you are considering selling your dental practice to a DSO, please call Grogan Hesse & Uditsky at (630) 833-5533 or contact us online to arrange for your free initial consultation. We Focus on You So You Can Focus on Your Patients At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.

Respect My Authority: How Dental Practice Owners Can Preserve Clinical Autonomy After a Sale to a DSO

By Jordan Uditsky • October 21, 2026
Respect My Authority: How Dental Practice Owners Can Preserve Clinical Autonomy After a Sale to a DSO Over the past several years, we have posted many articles on this blog discussing two particular topics: selling a dental practice to a dental service organization (DSO), and developments related to the corporate practice of dentistry by DSOs that stick their noses too much into a practice’s clinical operations and decision-making. At the center of the venn diagram linking these two issues is a concern that faces most dental practice owners when considering a sale to a DSO: how to maintain clinical autonomy and authority after a sale and prevent the DSO from interfering in this fundamental, non-administrative aspect of running a dental practice. While legislators and regulators debate about appropriate guardrails to put on DSOs to prevent their overreach into a dentist’s clinical responsibilities, it ultimately falls on the dental practice owner — and their counsel — to take the steps needed during negotiations to ensure that the documents governing the transaction include robust protections to preserve the dentist’s appropriate authority over clinical decisions. Are you interested in speaking with one of our attorneys? Click here to contact us now. Make Clinical Independence Explicit and Detailed in Writing One of the most important protections is an unequivocal contractual statement that clinical decisions remain under the licensed dentist's control. The purchase agreement, employment or professional services agreement, and other transaction documents should clearly distinguish between business decisions and clinical decisions. As with any contract, vagueness or lack of defined terms can plant the seeds of misunderstanding and conflict. Accordingly, a general promise that the dentist will maintain “clinical autonomy” without delineating what that actually means in practice is insufficient. The agreement should define what that autonomy means and identify decisions that cannot be dictated by non-clinical personnel, including, but not limited to: · Diagnosis · Treatment planning · Selection of appropriate treatment · Referrals · Patient communications concerning treatment · Prescribing · Use of clinical techniques and materials. Additionally, a dentist should consider provisions stating that treatment recommendations will be based on the patient's clinical needs and the dentist's independent professional judgment, rather than production targets, revenue goals, or other financial considerations. Establish Appropriate Limits on DSO Authority One of the main value-adds of selling to a DSO is that they typically assume responsibility for administrative services, including billing, scheduling, human resources, procurement, marketing, information technology, and facilities management. While many of these functions are easily distinguishable from clinical ones, there are areas where operational decisions could indirectly affect clinical care, such as scheduling policies, staffing levels, supply purchasing, laboratory arrangements, appointment lengths, and production incentives, all of which can have clinical implications. As such, the agreements should establish a clearly defined, workable boundary: the DSO manages the business, while the dentist retains authority over professional judgment. Compensation and Incentive Structures Can Pit Clinical Judgment and Business Objectives Against Each Other Compensation is another area that can create tension between a DSO’s business objectives and a dentist’s clinical judgment. Counsel should review an employment or services agreement to determine whether compensation formulas, production requirements, bonuses, quotas, or other incentives could pressure the dentist to recommend or perform treatment that the dentist would not otherwise recommend. That does not mean every production-based compensation arrangement is inappropriate. Rather, dentists should understand exactly how the formula works and consider contractual language confirming that compensation will not be contingent on making a particular clinical recommendation or on performing treatment the dentist does not believe is appropriate. One-Size-Fits-All Clinical Policies v. Individual Clinical Decisions Many DSOs have standardized policies that affect clinical practice which should be reviewed and addressed before closing. During due diligence and contract negotiations, practice owners and their counsel should understand the DSO's policies involving treatment protocols, referrals, supplies, laboratories, prescribing, infection control, scheduling, patient communications, and quality assurance. Such policies should allow appropriate clinical judgment where patient circumstances warrant an individualized approach, and the parties should establish how legitimate clinical exceptions will be handled. Clinical Autonomy Is Not a Set-It-and-Forget-It Issue The signing of documents at the consummation of a sale to a DSO may be the end of one process, but it is also marks the start of the actual, functioning relationship between the DSO and now-former practice owner. And that relationship can evolve over time in ways that can impact clinical autonomy. Another company may acquire the DSO; the practice could be transferred to another affiliated entity; and other management changes can alter or threaten the carefully negotiated dynamic reflected in the underlying agreements. Those agreements should address whether clinical-independence provisions survive such events and, where appropriate, whether they bind successors and affiliated entities. Selling a dental practice does not necessarily mean surrendering professional judgment. But clinical autonomy should not be left to assumptions, informal assurances, or legislators or regulators. It should be addressed explicitly in the transaction documents by sellers and their counsel. By doing so, dentists can reap the benefits of a DSO sale while retaining control over the one thing that no corporation or entity can or should: the practice of dentistry. If you are considering selling your dental practice to a DSO, please call Grogan Hesse & Uditsky at (630) 833-5533 or contact us online to arrange for your free initial consultation. We Focus on You So You Can Focus on Your Patients At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.

With Recently Introduced Bill, Congress Enters the Corporate Practice of Medicine/Dentistry Fray. How Would It Impact Dental Practices and DSOs?

By Jordan Uditsky • October 14, 2026
With Recently Introduced Bill, Congress Enters the Corporate Practice of Medicine/Dentistry Fray. How Would It Impact Dental Practices and DSOs?
Show More