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Question:

Can shares of a professional corporation (dental practice) be owned by the principal’s revocable trust (dentist is the trustee and beneficiary of the trust). When the owner/dentist dies, can a marital trust for the benefit of the spouse (also a practicing dentist in another entity) own the shares of the PC?

Response:

Yes. There are some restrictions on non-dentists owning dental practices which may differ from state to state, but where the surviving spouse is also a licensed dentist this will not present an issue. Generally, dental practices that are not entirely owned by a dentist or several dentists must designate a dentist to act as the dental director of the practice.

This is in contrast to the rules for lawyers. In all states, with the exception of Arizona, non-lawyers may not have any ownership interest in law firms. Utah is also experimenting with certain forms on non-lawyer ownership. Whether these restrictions are intended to protect the monopoly of lawyers or, as the bar claims, to protect their independent judgment is debatable. (Of course, it could be for both reasons.)

ABA Model Rule of Professional Responsibility 5.4 does permit the payment of a lawyer’s estate or a designated person for the deceased lawyer’s practice. This is an exception to the general rule that lawyers may not share legal fees with non-lawyers.

Some lawyers are exploring the possibility of separating out the practice of law from the business of law. The concept is to create separate entities that own the law office, employee the non-attorney staff, and take care of functions such as marketing, bookkeeping and sending out bills. The lawyer would then just practice law with the non-lawyers taking care of everything else. The same concept could work for dental practices.

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