Step 2: Find your friendly dentist

In Bluebird’s selected dentist-owned-PC model, the friendly dentist is the licensed dentist who will own the professional entity and exercise the governance and professional authority state law assigns to that role. Ownership percentage, officer and director eligibility, and the selected entity form still come from the launch state’s law.

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What Bluebird did

Dr. Maya Okafor is not a hired figurehead. She is Bluebird’s clinical leader: she practices at the location four days a week, will supervise the hygienists and the associates as they’re hired, owns the patient records, and makes every clinical decision. She owns 100% of Maya Okafor, D.D.S., P.C. She signed a stock transfer restriction agreement and an employment agreement, and she has her own attorney. This is the strongest version of the arrangement: the friendly owner is a real participant in the business.

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What the friendly owner actually does

Not ceremonial. For Bluebird, verify the dentist-owner’s actual authority across these domains:

• Owns the equity of the professional entity, with the economic rights that implies (constrained by the transfer restriction agreement).
• Serves as an officer and director, and in many states must be, because those roles are limited to licensees.
• Holds ultimate authority over clinical matters: diagnosis, treatment planning, clinical protocols, materials and lab selection, clinical staffing, peer review, and quality.
• Exercises record ownership, custody, access, and clinical authority as the state’s rules require.
• Signs payer and provider agreements when authorized by the entity documents and accepted by the counterparty.
• Controls or employs clinical roles where the state’s ownership, employment, and supervision rules require it; hygienist and staff allocation is not uniform.
• Bears fiduciary duties to the PC and its patients.

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Why genuine authority matters

The losing fact pattern in dental enforcement has been the same for decades: a dentist left with nothing but the handpiece. In In re OCA, Inc., the Fifth Circuit voided the management agreements of a national orthodontic company because the manager held the space, the staff, and the bank account, and the dentists “were essentially only left with control over diagnosing and treating their patients”; only chairside decisions was not enough.¹ Aspen Dental is a modern enforcement through-line. The 2015 New York Attorney General resolution and May 2026 California settlement imposed party- and state-specific restrictions involving percentage fees, clinical staffing or incentives, accounts, owner replacement, and monitoring.²³ In the unpublished, nonprecedential Galkin v. SmileDirectClub opinion, a New Jersey panel separately affirmed summary judgment on a record that included licensee-only successor eligibility, a clinical carve-out, and insufficient proof of the asserted sham-control theory.⁴ The lesson for this step: recruit an owner who will actually exercise the authority the paper gives them.

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Where to find one

Three sourcing paths, in descending order of durability:

1. Your own clinical co-founder or lead dentist. Best case by a wide margin. Their incentives are already aligned, they’re present in the practice, and the structure describes something real.
2. A practicing dentist you recruit into the leadership role. Common and defensible: they practice part-time, serve as clinical director, and own the PC. Compensation covers both roles.
3. A professional “nominee” or dentist-owner network. Vendors exist that supply licensed owners for PCs, particularly for multi-state and teledentistry expansion. They are widely used and not per se improper, but they are the version regulators scrutinize hardest, and they are the version where succession planning does all the work. If you go this route, know that a nominee who owns twelve unrelated PCs has twelve conflicts and no operational knowledge of yours.

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What to verify before you sign anything

Do this diligence before the person owns your professional entity. Undoing it later means a share transfer, board consents, payer re-credentialing, and possibly a new EIN. Analyze LEIE exclusion, SAM.gov status, and state exclusion lists separately. Screen owners, clinicians, employees, contractors, and vendors in the scope and at the cadence required by applicable program, payer, contract, and state rules. OIG recommends routine LEIE checks and notes that monthly screening best minimizes exposure because it updates the LEIE monthly; that is a risk-control recommendation, not a universal SAM.gov cadence.⁶

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How they’re paid

Two distinct income streams, and keeping them distinct matters:

1. Clinical compensation, for practicing dentistry. Employment agreement, market-rate, structured like any associate’s (base, per-diem, or a percentage of their own production or collections; the standard dental shapes).
2. Clinical director / ownership compensation, for the governance and oversight duties of owning the PC. Typically a flat stipend or an hourly rate for documented time.

The constraints on the second stream are real: the compensation must be fair market value for services actually rendered, must be commercially reasonable, and must not vary with the volume or value of referrals. Those are the shapes that keep the arrangement outside the Anti-Kickback Statute’s problem space; live for any group that touches Medicaid. And never bolt quotas or sales incentives onto either stream: production pressure on clinical staff is the recurring finding in dental enforcement, from the Aspen settlements to the Medicaid fraud cases.² See Structure friendly-owner compensation and Stark, AKS, and why comp design is constrained. Do not assume the practice must run near break-even or that the owner may never receive distributions. Model owner compensation, practice distributions, and management fees separately under the entity, tax, fiduciary, fee-splitting, referral, and solvency rules. See Where the profit lives.

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Red flags, in both directions

Red flags in a candidate owner:

• Wants to be paid purely as a percentage of the whole practice’s revenue
• Won’t get their own lawyer, or wants you to pay for and direct theirs
• Owns many other PCs and can’t articulate what any of them do
• Any history of exclusion, board discipline, or insurance fraud allegations
• Uninterested in the clinical governance duties
• Unwilling to sign a transfer restriction agreement

Red flags you might be presenting, from the dentist’s side. If you are the dentist reading this, be wary of a DSO that:

• Asks you to sign a share transfer at a nominal price with no explanation of the triggers
• Wants to control hiring and firing of clinical staff, patient volume targets, or CDT coding decisions
• Won’t let you retain your own counsel
• Structures your pay so that treatment-plan acceptance and production targets drive your income in ways you can’t control
• Cannot tell you what happens to your personal liability if the structure is challenged

The dentist-owner’s professional license, fiduciary duties, contractual exposure, and reputation can be affected by an arrangement they do not actually govern. In re OCA addressed contract enforceability and bankruptcy claims rather than dental-board discipline, while other authorities involve different remedies. That risk allocation is why the dentist needs independent counsel and why the operator should document real governance rather than rely on a nominal-owner label.

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Succession: solve it now

The dentist can die, become disabled, lose their license, be excluded, or simply quit. If any of those happens and you have no mechanism, your professional entity is owned by an estate, an ex-employee, or nobody, and the entity that holds all your payer contracts is frozen. Dental practice acts make this concrete: some states give a deceased dentist’s estate or personal representative a statutory transition window, while others use a different rule or provide no express dental window.⁵ Look up your state’s text in the death and transition table and draft against it. A stock transfer restriction or succession agreement can define eligibility, triggers, valuation, approvals, and transfer mechanics, but those terms must be tested under the state’s professional-entity, fiduciary, creditor, tax, and dental-control rules. Maintain a qualified successor bench without giving the support company an at-will replacement right. The California Aspen settlement restricted specified owner-replacement and forfeiture controls; the unpublished Galkin opinion is a New Jersey-specific example in which licensee-only succession terms survived the challenge on the record before that panel, not a national safe harbor.³ See Draft the stock transfer restriction agreement and Plan for friendly-owner succession.

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Your artifact from this step

• A named dentist who has agreed in principle, in writing
• Completed verification: license, board history, LEIE, SAM.gov, Medicaid standing, malpractice
• Agreement on both compensation streams, in ranges
• Their own counsel engaged
• A named successor candidate

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Checklist

• Primary source dental license verification complete
• OIG LEIE and SAM.gov clear (documented, dated)
• Disciplinary and malpractice history reviewed
• Other PC ownerships disclosed in writing
• Compensation structure agreed and FMV-defensible, with no production quotas or sales incentives
• Dentist has independent counsel
• Successor dentist identified, and the state’s transition window looked up

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Next

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Sources

1. In re OCA, Inc., 552 F.3d 413 (5th Cir. 2008). Official opinion. Full case treatment: DSO & dental case law.
2. NY AG, settlement with Aspen Dental Management (June 18, 2015).
3. California AG, settlement with Aspen Dental over corporate practice (May 7, 2026); terms detail: DLA Piper, CPOM enforcement: new pressure points (July 2026).
4. Galkin v. SmileDirectClub, LLC, No. A-2867-19 (N.J. App. Div. June 11, 2021), official unpublished opinion.
5. E.g., O.C.G.A. § 43-11-47(a)(7)(B) (six months, LLC interests), text; W. Va. Code § 30-4-16(g) (24 months), text. Full table: DSO laws by state.
6. HHS OIG, Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs (May 8, 2013), pp. 15–16.