How is co-ownership of a dental practice structured?

Co-ownership typically refers to several dentists practising together under the same brand, sometimes described as a partnership. To comply with the Health Professions and Occupations Act (the Act) and the BCCOHP Bylaws, dentists usually incorporate a dental corporation that carries on the practice under that brand. The dentists are then shareholders of that corporation. While the dentists may own shares individually, holding shares through a family trust or their own corporation offers much more flexibility in tax and estate planning, and can offer creditor-proofing tools.

Dentists who are owners of a dental corporation should have a written agreement, which is typically referred to as a shareholder agreement. A proper agreement may provide a roadmap for resolving future conflicts that may arise from the parties not getting along, or due to the death or divorce of one of the dentists.

What do shareholder agreements address?

A shareholder agreement defines the rights and obligations of the company and shareholders. It usually does so by covering governance structures and by providing a roadmap in case of a conflict.

Governance structures

While the Act restricts control of a dental corporation to dentists, a shareholder agreement can further restrict how the dentists may exercise such control amongst themselves.

For example, by default, a board makes decisions by majority vote. Dentists working together often require certain key decisions to be made by a unanimous or supermajority (e.g. two-thirds) vote. Examples of key decisions may include matters dealing with management staff, buying or selling assets that exceed a certain value, and practice management policies (e.g. record keeping, use of AI).

Financial arrangements

Dentists can set out their financial arrangements in a shareholder agreement. For example, dentists may arrange to share certain common costs while every dentist remains responsible for other costs specific to their own practice.

The shareholder agreement may also set out how each dentist may withdraw funds from the practice, and how profits and losses are shared. Often shareholder agreements also set out how liability is apportioned among dentists. Although no such agreement limits a dentist’s liability for professional negligence, it can allocate responsibility among the dentists for commercial liabilities, such as those owed to landlords, lessors and workers.

For example, creditors and lessors will usually require the dentists of a practice to be jointly and severally liable for its debts, often through personal guarantees, which means that the creditor can recover 100% of the debt from any one dentist. A proper shareholder agreement may allow that dentist to then recover the other dentists’ shares of the payment from them.

Death or divorce

Death or divorce of a dentist may result in ownership interest in the dental corporation transferring to members of the dentist’s family who do not qualify to be owners or with whom the other dentists did not intend to do business. Proper planning can be built into shareholder agreements to deal with it.

Transfer restrictions

Typically, a shareholder agreement restricts transfers of shares in the dental corporation, except for usual tax-planning and estate-planning purposes, such as a dentist moving their shares from personal ownership to a family trust.

Exit arrangements

Shareholder agreements typically cover several options for dentists to exit from the practice. Making certain arrangements in advance may provide a roadmap for resolving conflict and therefore save on legal costs in the future. Examples of such arrangements include a shotgun clause, a piggyback (tag-along) clause, and a drag-along clause.

• A shotgun clause allows one dentist to offer to buy the other dentists’ shares at a stated price, and requires the others either to accept that offer or to buy that dentist’s shares at the same price.

• A piggyback clause allows the other dentists to require that a purchaser of one dentist’s shares also buy their shares on the same terms.

• A drag-along clause allows dentists holding a specified majority of the shares, when selling, to require the other dentists to sell their shares to the same purchaser on the same terms.

Deciding whether they are suitable and then designing the details of each of the above mechanisms involves careful analysis of the dentists’ objectives and circumstances.

Loss planning

Losses within a corporation remain that corporation’s to use. Unlike partners in a partnership, its shareholders cannot use those losses to offset their own income. A shareholder agreement can provide options for loss planning in the future so that a dentist’s profits elsewhere may be offset by the losses in the practice in limited circumstances.

What are the risks of an improper structure?

Dentists who join forces outside the umbrella of a principal dental corporation carry compliance and liability risks.

For example, a group of dentists who operate under the same brand without incorporating together may fall within the definition of a partnership under the Partnership Act, which requires only a relationship between persons “carrying on business in common with a view of profit”[1]. Falling within that definition may expose each dentist to the liabilities of the other dentists in the group[2].

In addition, since the Bylaws[3] require a dentist to disclose if they are providing services through a corporation, without one principal company carrying on the practice, each dentist will have separate disclosure obligations. A mix of dentists practising through corporations and individually can further complicate compliance.

Notes

1. Section 2 of Partnership Act, [RSBC 1996] c. 348.

2. Hughes v. Baldwin, 2003 BCSC 1891.

3. Section 9.11 of Bylaws of the British Columbia College of Oral Health Professionals, dated April 1, 2026.