Before we answer the question of whether or not a DSO is needed, first let's answer these:

1. Do you want to bring on additional owners of your practice?
2. If yes, do you want to potentially bring on non-dentists as owners?
3. Do you currently or plan to own 3 or more practices?

If you want to bring on additional owners of your practice(s), forming a management entity/DSO is probably a good idea. If you don't want to bring on additional owners, but you want to create efficiencies in your non-clinical processes and streamline how you pay for services for your multiple locations, a management entity might be the right fit.

Before we get into using our terms interchangeably, let's define the differences. 

Dental Support Organization (DSO): a legal entity formed in support and service of its subsidiary dental practice(s) with the function of allowing non-clinical owners of the entity

Management Entity: a legal entity formed in support and service of its subsidiary dental practice(s)

Hopefully that leads us all to the same thought: a Management Entity and a DSO aren't very different in terms of purpose, but primarily differ in that a formal DSO allows non-dentists to own shares of the organization. That distinction gets us our simple answer to the question of "Do I need to form a DSO?" Only if you are bringing on non-dentist owners.

There are other considerations to make when forming a DSO, not the least of which is whether you will actually use it. We see doctors all the time forms these management entities that they call "DSOs" and when we look under the hood, they aren't even using the business properly. It ends up being an EIN number and 2 extra bank accounts just sitting there.  The purpose of a DSO, even aside from allowing non-dentist owners, is to separate running a dental practice from the actual dentistry. The curse of the private practice is that the doctor is both the main producer and CEO of that business. Wearing both of those hats makes it nearly impossible to excel in both roles, and most doctors choose to focus on the dentistry. So if you are going to form a DSO, do it for the purpose of supporting yourself in the non-clinical functions of your business.

Additional Benefits to Forming a DSO:

• A DSO can make it easier to own and operate practices across state lines
• By unifying non-clinical systems through a single organization, you can scale your enterprise far more efficiently
• Aggregating purchasing for multiple practices through a DSO can increase your purchasing power
• When implemented and used effectively, a DSO can increase the value of your practices and make you more attractive to investors

*Important Note: If you are the sole owner of your practices, no matter how many you have, forming a DSO/Management Entity is not going to save you any tax money.

Consult with your legal professional AND your accounting professional to make sure you correctly set up these companies.