How DSOs Legally Own Dental Practices: The MSO Structure Explained

An owner asked me this over lunch last year, and he was almost annoyed when he asked it.

He had been told his whole career that only a dentist can own a dental practice. He believed it.

He had built his own two offices inside that rule and never once thought to test it.

Then a group backed by an investment firm offered to buy him, and the arithmetic in his head stopped working.

If a non-dentist cannot own a practice, whose money is this?

How do DSOs legally own dental practices? Strictly speaking, they do not own the clinical side.

A licensed dentist owns the professional entity that treats patients. A separate management company owns the equipment, the lease, the staff contracts and the systems, and is paid a fee under a long-term management services agreement.

Key takeaways

• Nothing is being evaded. The corporate practice of dentistry doctrine restricts who may own or control the clinical entity, and the two-entity structure is the lawful, standard, decades-old answer to that restriction.
• There are two boxes, not one. A dentist-owned professional corporation or PLLC holds the license, the clinical judgment and the patient relationship. A management company holds the equipment, the lease, the non-clinical staff and the systems.
• The management services agreement is the deal. It defines what the management company does, what it is paid, and how long the arrangement runs. It is frequently longer and more consequential than the purchase agreement.
• The management fee sits above the earnings line. That matters directly if any part of your price is measured on post-closing performance.
• The doctrine varies enormously by state, and 2026 has been the most active regulatory year this structure has seen. Where your practice sits changes the answer.

Why can a company not simply own a dental practice?

Start with the rule itself, because most owners have absorbed it as folklore rather than law.

Many states prohibit a person or entity that is not a licensed dentist from owning, operating or controlling a dental practice.

That prohibition is the corporate practice of dentistry doctrine: state laws restricting who may own or control a dental practice, and the reason the whole structure exists.

Its logic is narrow and, honestly, hard to argue with. Clinical judgment should belong to the person holding the license and the liability, not to someone whose interest in the case is financial.

Florida writes it about as plainly as any state does.

Its dental practice act makes it grounds for discipline for a dentist to be employed by any entity other than another dentist or a professional entity composed of dentists.

A separate clause bars anyone other than a dentist or such an entity from directing, controlling or interfering with a dentist’s clinical judgment.

Read those two clauses together and you have the doctrine in miniature. Ownership on one side, control on the other, and both reserved to licensees.

Now the part everyone skips. The doctrine is not one rule, it is fifty.

Congress’s own House Oversight Committee compiled a state-by-state survey of the laws governing the corporate practice of dentistry precisely because the variation defeats generalization. Some states prohibit non-dentist ownership outright.

Some regulate it lightly. Some barely address it.

Several states layer a second restriction on top, on fee splitting. New York’s Education Law makes it professional misconduct to divide or share a professional fee with an unlicensed party, while carving out sharing among partners and professional entities.

That second rule is quieter than the first and it shapes far more of the structure than owners realize. Hold onto it.

It comes back when we get to the management fee.

What follows is general information about how these arrangements are commonly built. It is not legal advice, the doctrine differs substantially from state to state, and any actual transaction should be reviewed by an attorney who does dental deals in your state.

The two entities, and what each one actually owns

Here is the structure, and once you can see it, most of what looks strange about a DSO offer stops looking strange.

A DSO is a dental support organization: the management company that owns the non-clinical side of a practice and handles everything outside the operatory, while a licensed dentist keeps ownership of the clinical entity.

The vehicle it uses is an MSO, a management services organization, which is simply the entity that holds and supplies all the non-clinical assets and services.

Your practice, which today is one thing, becomes two.

Cranfill Sumner describes the management services agreement as the vehicle through which the organization supplies administrative functions such as human resources, billing and information technology, while the selling dentist typically continues to practice under new employment terms.

That is the honest version. Not a loophole.

A division of labor with a legal boundary drawn through the middle of it.

	The clinical entity (PC or PLLC)	The management company (MSO or DSO)
Who owns it	A licensed dentist	The investors and their sponsor
What it holds	Dental license, permits, patient records, clinical staff	Lease, equipment, technology, non-clinical staff, capital
Who decides treatment	The treating dentist, always	Nobody in this column
Where the money arrives	Patient and payer collections	A fee paid by the clinical entity
What you typically sell here	Little to nothing, or a nominal amount	Almost the entire purchase price
What governs it	State dental practice act and board rules	Contract law, and the management services agreement
How long it is bound	Ongoing, through the same agreement	Typically a long, fixed initial term

Look at the fifth row for a moment, because it is the one that reorganizes how a seller thinks about the deal.

Courts have upheld this arrangement where it is genuinely built. Holland & Knight reported on a New Jersey appellate decision that went the DSOs’ way on exactly this ground, which is worth knowing if you have absorbed the idea that the model is legally shaky.

It is not shaky. It is scrutinized, which is a different thing, and the scrutiny is about whether a given structure does what it says on paper.

The management services agreement is the actual deal

Owners spend their attention on the purchase agreement. I understand why.

It has the number in it.

The management services agreement usually has more of their future in it.

It sets what the management company will do and what it will not. It sets the term, which is typically long and does not end when your employment does.

It sets the fee. It sets who supplies what, from the software you will chart in to the supplier you will order composite from.

Nixon Peabody’s rundown of the issues dentists and DSOs should settle before signing runs across the transaction documents together rather than the purchase agreement alone, and that is the right instinct. The papers are a set, and the set only makes sense read together.

Three documents, three subjects. The purchase agreement settles price.

The employment agreement settles your working life. The management services agreement settles how the practice is run for the next decade or more.

Most owners read the first one closely, skim the second, and never open the third.

Who is the dentist who owns the PC?

This is the question that separates people who understand the structure from people who have only heard about it.

Somebody licensed has to own the clinical entity. In many transactions that is you, at first, holding the professional entity while the management company holds everything else.

In others the entity is owned by a different dentist affiliated with the organization, sometimes called a nominee or a friendly professional corporation arrangement.

Both are ordinary. Neither is a trick.

The mechanics sit in a stock transfer restriction or succession agreement between the management company and whoever holds the shares.

It typically fixes what happens when that dentist retires, dies, loses a license or simply leaves, so the clinical entity never ends up ownerless or in the hands of someone the organization has no relationship with.

Which is a reasonable thing to want, when you think about what would otherwise happen.

But the arrangement has attracted regulator attention in 2026, and the direction of that attention is worth understanding before you sign into it.

California’s settlement with a large organization in May 2026 included, among its injunctive terms, a requirement that an actual practicing dentist hold the professional entity rather than a nominal one.

The same terms provide that the initial owner not be a non-practicing person, nor the spouse of an executive of the management company.

Hinshaw & Culbertson’s analysis reads those terms as the most detailed compliance framework the state has produced on this question.

Read that as a signal about where the standard is heading rather than as a comment on any one organization. The point for a seller is narrower and more useful.

If you are the dentist who will own the professional entity after closing, you should know exactly what you are holding, what obligations come attached to it, and how you get out of it.

Ask for the succession document by name. Ask what happens to your ownership of that entity when your employment term ends, because those two dates are frequently not the same date, and owners assume they are.

The management fee, and why it lands on your side of the table

Now the number that quietly does the most work in the whole structure.

The clinical entity collects from patients and payers. It pays its clinical staff.

Then it pays the management company a fee for everything the management company supplies.

That fee is an expense of the clinical entity. Which means it sits above the earnings line, not below it.

How it is calculated varies, and the variation is not cosmetic. Fees are commonly built as a fixed amount, as cost plus a margin, as a percentage of collections, or as some blend of those.

Here is where the fee-splitting rule from earlier resurfaces.

A fee that looks like a share of professional revenue draws more scrutiny in states with strict fee-splitting prohibitions than a fixed or cost-based fee does, which is why so much drafting effort goes into a structure that most owners never examine.

The tension is live rather than settled. Hinshaw notes that the California settlement’s injunctive terms push toward fixed or cost-plus structures, while the state’s own Business and Professions Code has long permitted certain percentage arrangements.

Reasonable lawyers are still working out where that leaves things.

For a seller, none of that legal texture is the point. This is the point.

If any part of your price depends on how the practice performs after closing, the management fee is now a cost sitting inside that measurement.

A practice doing identical dentistry, with an identical team, reports different earnings depending on whether that fee sits above or below the line the earnout is measured on.

I am not going to rebuild that arithmetic here, because we have already done it properly.

Our piece on rollover equity and earnouts in a DSO deal walks one practice through 4 different earnout measurements and shows the full amount paid under two of them and nothing under another.

Same practice. Same year.

Two sentences in a document deciding the difference.

Again, and it bears repeating: this is general information about how these structures are typically built, not legal or tax advice. Management fee design in particular is state-sensitive, and it should be reviewed by counsel experienced in dental transactions where your practice sits.

What you are actually selling, in each box

So bring it back to your side of the table.

When a DSO buys your practice, the great majority of the value is transacted on the management company side.

The equipment, the leasehold interest, the systems, the non-clinical workforce, the goodwill attached to the operation, and the long-term right to service the clinical entity under the agreement.

The clinical entity usually transacts for little or nothing, because there is very little left in it once everything non-clinical has moved across.

This single fact explains a whole cluster of things owners find odd when they first read a letter of intent.

It explains why the purchase agreement can look like it is buying assets you would not have described as the heart of your practice. It explains why the transaction hinges on an agreement between two entities rather than a straightforward transfer of your shares.

It explains why your employment agreement is a separate negotiation with its own leverage.

And it explains why the price arrives split into parts. Cash, sometimes equity in the management company, sometimes an amount contingent on performance.

Equity in a DSO transaction is equity in the right-hand box, not in the practice you built.

That is not a warning. It is a description, and a fair one, and the parts of the deal built on it are covered in our walkthrough of what a DSO letter of intent is actually committing you to.

Some organizations invert the emphasis deliberately and build the model around the dentist keeping a meaningful ownership position rather than exiting it, which is a genuinely different proposition and worth understanding on its own terms.

We look at one version of that in our piece on the doctor-partnership model.

The structure is the same underneath. What changes is how much of you stays in it.

Where regulators are pushing back in 2026

This is the part that has moved, and it has moved more in the last eighteen months than in the previous fifteen years.

Start with California, because everything else is downstream of it.

SB 351 took effect on 1 January 2026. It codifies and sharpens the state’s corporate practice restrictions for medicine and dentistry, and it does so by enumerating what a private equity group or hedge fund may not control.

Benesch’s summary of the enacted law lists the prohibited controls. The list is specific rather than atmospheric.

Diagnostic decisions. Referrals.

Responsibility for a patient’s overall care. How many patients a dentist sees in a given period, and how many hours a dentist works.

Notice what that list is not. It is not a ban on the structure.

It is a definition of the boundary the structure has always been supposed to respect, written down so it can be enforced.

AB 1415 took effect on the same day, and does something different.

It extends California’s health care transaction review to management services organizations directly, pulling them into the definition of a noticing entity that must file with the Office of Health Care Affordability before certain transactions.

Goodwin’s alert on the signing sets out the practical effect. A category of transaction that previously happened privately now files notice, in advance, on a defined timeline.

Then enforcement. California’s Attorney General announced a settlement in May 2026 with a large dental management organization, resolving allegations relating to the state’s prohibition on the corporate practice of dentistry and to advertising.

Reported terms: $2 million in civil penalties, $300,000 in restitution, injunctive terms governing the arrangement with affiliated practices, and a 36-month independent monitor.

I state that as fact and go no further. Nixon Peabody and Dorsey both read it as a signal of increased enforcement attention rather than as an outlier, and Dorsey places it alongside a separate settlement and an appellate filing within the same three-month window.

Other states are moving, at different speeds and in different directions.

Goodwin has tracked at least 9 states introducing proposals to widen their transaction review regimes since late 2024, with private equity ownership a recurring focus, and counts at least 15 states now running health-care-specific transaction notification regimes.

Nixon Peabody’s January 2026 survey opened the year describing a flurry of state activity, and Holland & Knight’s quarterly recaps have been tracking the same pipeline.

Pennsylvania is one to watch. House Bill 2115, introduced in January 2026 and referred to committee that month, would require pre-closing notice to the Attorney General for transactions producing a material change, and expressly reaches private equity funds.

It is a proposal, not law, and it may not become law.

At the federal level the posture is analytical rather than prohibitive so far.

The Congressional Research Service has published a neutral survey of enforcement issues raised by private equity investment in health care, which is a useful and unusually even-handed read if you want the debate without the temperature.

Here is what I would take from all of it, as a seller rather than as an observer.

None of this makes the structure illegitimate, and none of it is likely to unwind deals already done.

What it does is raise the cost of a structure that was documented carelessly, and it makes the identity and independence of the dentist who owns the clinical entity a live compliance question rather than a formality.

Which is genuinely good news for a well-advised seller, and a reason to read the documents you were planning to skim.

What to ask about the structure before you sign

Take these to the meeting. Write down the answers rather than the impressions, because impressions are what you will be left with otherwise.

On the two entities. Which entity is buying which assets, and what happens to my existing professional entity? Am I selling my shares in it, keeping them, or transferring them to someone else?

On the clinical entity after closing. Who will own it, and for how long? If that is me, what obligations come with holding it, and what document governs what happens when I leave?

On the agreement. How long is the initial term of the management services agreement, does it renew automatically, and does it survive the end of my employment?

On the fee. How is the management fee calculated, is it fixed, cost-based or a percentage, and is it excluded or included when any post-closing measurement of performance is made?

On control. Which decisions are reserved to the clinical entity in writing? Scheduling, hiring of clinical staff, treatment planning, the supplier and materials formulary, and what is advertised in the practice name.

On my state. How does the corporate practice of dentistry doctrine apply where I practice, and does anything about this structure change if I have offices in more than one state?

On the paperwork nobody sent. Can I see the management services agreement and the succession or transfer document now, rather than after the letter of intent is signed?

That last one is the highest-yield question on the list, and the one owners most often ask too late. A deeper version of this conversation sits in our questions to ask before selling to a DSO.

Once more, plainly: none of the above is legal advice, and none of it substitutes for counsel.

The doctrine varies significantly by state, the 2026 rules are new, and a real transaction needs an attorney experienced in dental transactions in the relevant state to review the actual documents.

What to do next

Understanding the structure does not change what your practice is worth. It changes what you can see in an offer, which is a different and more useful advantage.

An owner who knows there are two entities asks which one the money is in. An owner who knows the management fee sits above the earnings line asks how the earnout is measured.

An owner who knows the clinical entity has to belong to somebody asks who, and for how long.

Those are three questions. They take four minutes.

They routinely change terms.

The other lever is competition, and it works on structure as much as on price. A single organization approaching you directly proposes the structure it prefers, which is exactly what any rational organization would do in that position.

Put 4 qualified bidders in the same window and the structure becomes a term rather than a given. That is what the Elite Selling System is built to create.

We vet and hand-pick every organization that gets to bid, the way a doorman works a rope with a short list that has been checked long before anyone reaches the door, then run a private competitive window inside that group.

The pool is deeper than most owners assume. The ADSO alone counts more than 80 member organizations, and roughly 30 to 35 acquire independent general practices at meaningful scale.

Meanwhile the direction of travel in ownership is not in dispute.

ADA Health Policy Institute data has practice ownership among US dentists falling from 84.7 percent in 2005 to 72.5 percent in 2023, and reports DSO affiliation rising to 16.1 percent of dentists by 2024, concentrated heavily among dentists earlier in their careers.

You are not being unusual by considering this. You would be unusual in signing it without reading the third document.

We will look at your situation free and in confidence, including telling you to wait and fix two things first when that is the honest answer. It starts with a free, confidential practice value estimate.

Our fee varies depending on the value of the practice and is entirely success-based. If we do not get you a result, we do not get paid.

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Frequently asked questions

How do DSOs legally own dental practices if only a dentist can own one?

They do not own the clinical side. A licensed dentist owns the professional entity that holds the license and treats patients, while a separate management company owns the non-clinical assets and is paid a fee under a management services agreement.

What is an MSO in dentistry?

A management services organization is the entity a DSO uses to own the non-clinical side of a practice, because most states bar non-dentists from owning the clinical practice. It holds the lease, equipment, technology and non-clinical staff, and supplies services to the clinical entity.

What is the corporate practice of dentistry doctrine?

It is the body of state law restricting who may own or control a dental practice, so that clinical judgment stays with the licensed dentist. It varies substantially from state to state, and it is the reason the two-entity structure exists at all.

Is the MSO structure a loophole or a way around the law?

No. It is a lawful, standard and long-established response to a real legal restriction, and courts have upheld properly built arrangements.

What regulators scrutinise is whether a particular structure genuinely does what its documents say.

Who owns the professional corporation after a DSO buys my practice?

Either you continue to hold it, or a different dentist affiliated with the organization does. A succession or transfer agreement usually governs what happens when that dentist retires, dies, loses a license or leaves.

Ask which arrangement applies before signing.

How is the DSO management fee calculated, and does it affect my earnout?

Fees are commonly fixed, cost-plus, a percentage of collections, or a blend. The fee is an expense of the clinical entity, so it can reduce reported earnings.

If your price includes a performance-based component, whether the fee is included in that measurement matters a great deal.

What changed in 2026 for DSOs and MSOs?

California’s SB 351 codified corporate practice restrictions and enumerated controls a private equity group may not exercise, and AB 1415 extended transaction notice requirements to MSOs. Both took effect 1 January 2026.

Several other states have proposed or expanded similar oversight.

Do I need a lawyer to review a DSO structure before I sell?

Yes. The doctrine varies significantly by state, the rules changed in 2026, and the management services agreement is frequently more consequential than the purchase agreement.

Use an attorney who does dental transactions in your state, not a general commercial lawyer.

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Sources

The corporate practice of dentistry doctrine and state law

1. US House Committee on Oversight. “Survey of State Laws Governing the Corporate Practice of Dentistry.” oversight.house.gov
2. The Florida Legislature. “Florida Statutes § 466.028 — Grounds for disciplinary action.” flsenate.gov
3. New York State Legislature. “Education Law § 6509-a — Additional definition of professional misconduct.” nysenate.gov
4. California Legislature. “Senate Bill 351 (2025-2026).” leginfo.legislature.ca.gov
5. California Legislature. “Assembly Bill 1415 (2025-2026).” leginfo.legislature.ca.gov

How the structure is built and documented

6. Cranfill Sumner LLP. “Selling Your Dental Practice to a DSO: What to Expect Before, During, and After the Deal.” cshlaw.com
7. Mandelbaum Barrett PC. “The Four-Phase DSO Transaction Process: What to Expect When Selling a Dental Practice.” mblawfirm.com
8. Nixon Peabody LLP. “Five Issues Dentists and DSOs Should Address Before Signing a Transaction,” 22 July 2026. nixonpeabody.com
9. Holland & Knight. “NJ Appellate Court Gives DSOs a Much-Needed ‘Win’.” hklaw.com

2026 legislation, enforcement and state oversight

10. Benesch, Friedlander, Coplan & Aronoff LLP. “California Enacts SB 351: New Restrictions on Private Equity and Hedge Fund Involvement in Physician and Dental Practices.” beneschlaw.com
11. Goodwin. “California Governor Signs AB 1415, Extending Healthcare Transaction Oversight to MSOs.” goodwinlaw.com
12. Hinshaw & Culbertson LLP. “A New Era of Compliance Standards for California DSOs and MSOs After the Aspen Dental Settlement.” hinshawlaw.com
13. Nixon Peabody LLP. “California Attorney General Signals Increased Corporate Practice Enforcement,” 15 May 2026. nixonpeabody.com
14. Dorsey & Whitney LLP. “California Attorney General Escalates Corporate Practice Enforcement in Medical and Dental Care.” dorseyhealthlaw.com
15. Goodwin. “States Continue to Pursue and Expand Healthcare Market Oversight at an Unprecedented Pace, With Significant Implications for Private Equity.” goodwinlaw.com
16. Nixon Peabody LLP. “2026 Starts With a Flurry of State Activity on Private Equity and Healthcare,” 29 January 2026. nixonpeabody.com
17. Holland & Knight. “Q1 Recap on Proposed Legislation Affecting Healthcare Consolidation.” hklaw.com
18. Congressional Research Service. “Private Equity Investments in Health Care: Selected Enforcement Issues,” LSB11215. congress.gov

Ownership trends and the buyer pool

19. ADA Health Policy Institute. “Practice Ownership Trends in Dentistry: A New Look at Old Data.” ada.org
20. ADA News. “More Dentists Affiliating With DSOs.” adanews.ada.org
21. Association of Dental Support Organizations. “About ADSO.” theadso.org