Associate Agreements: What Dentists Should Know
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Hamilton, Mississauga, Brampton, and other Ontario business lawyers registered on the website who can answer your questions or help you. I should know – I’m one of them and you can contact me directly (firstname.lastname@example.org).
Legally, dentists can practice in one of many ways. First, they can practice as sole proprietors. This means that they personally own and operate the business. They may practice under a trade name that is registered with the Ontario Government and approved of by the Royal College of Dental Surgeons. As a sole proprietor, they may also hire others to do work for them. These third parties may be “associates”, “dental hygienists”, “receptionists”, “bookkeepers”, “technicians”, etc.
A dentist may also join up with other dentists to carry on a dental practice as a partnership. Each dentist contributes capital (money, property) to the dental practice and, in return, gets an interest in the practice as a whole. The assets of the dental practice are partnership assets, and do not belong to any individual dentist (each has an interest in the assets). There are specific rules under the Partnerships Act about how partnerships are generally governed; but certain default rules can be overridden by a partnership agreement. There are also tax issues (a partnership does not pay tax, but is merely a flow-through structure for tax purposes) and liability issues (each partner can bind the partnership and the other partners and is liable for the debts and obligations of the partnership) that arise in the context of a partnership. The partnership itself can hire employees or independent contractors (other than the partner dentists) through an agreement.
Dentists can also carry on business as an employee, director, officer, independent contractor, etc. of a dentistry professional corporation. The latter is a separate legal entity which hires the dentist to work for it and receive payment. I’ve blogged extensively about how to set up a dentistry professional corporation and the tax advantages to doing so (e.g. small business tax rate on the first $500k, using the lifetime capital gains exemption to reduce taxes, etc.).
So, as you can see, typically there is AN AGREEMENT that needs to be entered into between someone or something (e.g. sole proprietorship, partnership, or corporation) and a dentist who is going to provide services in exchange for compensation. Now, you can simply make an oral agreement; but this is ill-advised. There are lots of questions that comes up which may not be adequately dealt with (or remembered) through an oral agreement – such as compensation, restrictive covenants (e.g. non-compete, non-solicitation, etc.), termination, proprietary rights (e.g. patient records), etc.
That’s why it’s best to have a written AGREEMENT in place. I’ll get into the nitty gritty of that agreement next…