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What Ontario Dentists need to know about Associate Agreements (Part 1)

By December 10, 2013January 19th, 2022Corporate, Employment Law

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 tradename that is registered with the Ontario Government and approved of by the Royal College of Dental Surgeons. As sole proprietors, they may also hire others to 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 that 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 come 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.

DMC