For dentists, selecting the right practice structure is one of the most important business decisions you can make. The choice affects tax efficiency, personal liability, business continuity, and future sale or growth opportunities.
In a recent Dentists Who Invest podcast, Ray Goodman, Consultant Partner at Acuity Law, discussed practical guidance for dentists navigating these decisions, explaining the pros, cons, and key legal considerations of limited companies, partnerships, expense-sharing arrangements, and NHS contract incorporation.
You can listen to the episode here:
Limited companies: protection, tax efficiency, and flexible ownership
A limited company is a separate legal entity, meaning the business owns its assets and liabilities rather than the individual dentist. This structure provides limited liability, protecting personal assets from business debts.
Ray explains that limited companies also offer tax advantages, since corporation tax rates are generally lower than personal income tax. Owners can take money from the company via salary or dividends, and the most effective approach often requires guidance from a specialist dental accountant, such as a NASDAL member.
One of the lesser-known benefits of limited companies is the ability for non-dentists to hold shares, provided at least 50% of directors are registered dental care professionals (DCPs). This allows family members, investors, or business partners to participate in ownership without regulatory issues.
Limited companies are particularly suited to larger practices or those seeking investment or eventual sale. However, they come with ongoing obligations, including annual accounts, company filings, and compliance requirements, which must be managed carefully.
Partnerships: shared responsibility with potential risks
Many smaller dental practices operate as partnerships, where two or more dentists share ownership and profits. Partnerships are straightforward to set up and provide opportunities for shared expertise and resources.
However, Ray warns that each partner is jointly and severally liable for partnership debts. This means that if one partner incurs liabilities, all partners can be held responsible. To mitigate this, it is essential to have a well-drafted partnership agreement covering:
- Profit distribution and drawings
- Decision-making and deadlocks
- Partner exits, retirement, or death
- Dispute resolution and governance
Ray adds that partnerships often work best when trust levels are high and partners share a long-term vision, such as in family-run practices or when an initial principal brings associates into the business. Without a clear agreement, conflicts can arise, creating financial and operational risks.
Expense-sharing arrangements: a hidden partnership risk
Expense-sharing arrangements are commonly used when multiple dentists share resources like rent, staff, or equipment while retaining separate incomes. While these arrangements may explicitly state they are not partnerships, Ray advises caution.
If money is pooled with a view to profit, the arrangement could be legally treated as a partnership, exposing participants to joint liability. Ray recommends that any expense-sharing agreement should clearly define:
- Shared costs and responsibilities
- How income and expenses are calculated
- Reporting and accounting procedures
- Contingency plans for partner default or disputes
- This ensures the structure works smoothly while protecting each dentist from unforeseen liabilities.
Incorporating NHS dental contracts
For dentists holding NHS contracts, incorporation adds another layer of complexity. NHS contract transfers require approval from local area teams (LATs) and completion of a novation agreement, which legally transfers the contract from the individual or partnership to the limited company.
Historically, personal guarantees were often required, leaving dentists liable even after selling the company. Ray notes that recent NHS guidance allows for more flexibility: guarantees can be time-limited or negotiable, reducing long-term risk.
Dentists should also consider the potential impact of UDA rate adjustments, as LATs may require rates to align with local averages. Acuity Law advises balancing the tax benefits of incorporation against any potential reduction in contract revenue.
Limited liability partnerships (LLPs)
LLPs combine elements of partnerships and limited companies, offering management flexibility with limited liability protection. Members are shielded from the LLP’s debts unless unlawful conduct occurs.
While LLPs are suitable for certain professional groups, Ray explains they are less common in dentistry. For most practices, limited companies remain the preferred structure, providing clearer governance, scalability, and sale readiness.
Why specialist advice matters
A recurring theme in the discussion is the value of sector-specific legal advice. Acuity Law emphasises that dental practices have unique requirements — including CQC compliance, NHS contract rules, and regulatory obligations — that general solicitors may not fully understand.
“Dentists should work with professionals who understand the dental sector,” says Ray. “It ensures that your structure is legally sound, tax-efficient, and protects your business now and in the future.”
Acuity Law’s dental team is the largest specialist group in the UK, advising on incorporations, partnerships, shareholder agreements, and practice acquisitions nationwide.
Next steps for dentists
If you are considering restructuring your dental practice, incorporating your NHS contract, or reviewing partnership agreements, Acuity Law’s specialist Corporate Healthcare lawyers can guide you through every step of the way.
