Do’s and Don’ts Guidelines to a Dental Practice Transition
By: D. Keith B. Dunnagan,
Esq. June 27, 2023
The sale of a dental practice is a complicated matter. From considering what will be included in the sale, what happens to employees, the desirability of the business, and tax liabilities, there is a lot that could easily go wrong without the right plan in place. Due to the complexity of dental practice sales, we have put together a guideline of do’s and don’ts to help navigate the sale.
DON’T: Attempt to sell/buy the practice alone
It is possible to sell or buy a practice alone and not have any problems, however, this is a rare situation and not worth the risk and liability. This office often sees transactions go awry because assets were left out of the sale or major tax consequences were incurred because the proper allocation for good will versus non-compete clauses, if considered at all, were not made. Attempting the transaction alone may be appealing due to the initial low cost, but mistakes can lead to the transaction costing much more than it would have if professionals were hired at the beginning of the transaction.
DO: Hire a team of professionals
There is a lot more to consider to the purchase or sale of a dental practice than the name alone implies, and usually requires more than one professional to accomplish the task. A successful transaction which considers all factors, risks, and liabilities will almost always include a knowledgeable broker, attorney, and CPA. Creating this team will allow the transaction to go smoothly and protect the interests of the party.
DON’T: Enter into the transaction without a plan
The purchase or sale of a dental practice includes more than just the transfer of practice. Some dentists do not put together a plan before embarking on this endeavour, and this ultimately leads to unanticipated, strenuous negotiations over what is included in the sale. Dental practice transactions typically take some time in the best of circumstances and require a solid plan to be made before considering the transaction.
DO: Go over your plan with your professional team and revise
There is a lot to consider in the plan: What will be included in the sale? Will certain personal items be taken out or is everything included in the sale? How will accounts receivable be handled? Will there be a non-compete clause? How will retreatment and transitional services work, if any? Will financing be through seller-carry financing, a 1031-exchange, or some other method? What is the allocation of the goodwill, non-compete, and assets?
These questions need thoughtful and thorough consideration while creating the plan and this is usually only accomplished with the team of professionals. A good team will be able to make tweaks to the plan and tailor the transaction to best meet the interests and needs of the parties. Planning is essential to do before entering into the transaction and should be revisited as the transaction develops.
DON’T: Assume you can sell without checking your lease
Make sure, prior to the beginning of the transaction, that the lease held for the practice is transferable. Some leases will have non-assignment clauses or a provision stating the landlord must approve the assignment/sale of the lease. This is an important preliminary step that can save a lot of headaches if the lease is reviewed prior to beginning the transaction.
DO: Consider re-negotiating the lease
Leases may make the practice more marketable, especially if there is ample time left before the lease expires. However, even if there is a lot of time left on the lease, consider re-negotiating to get a better deal. The landlord may be willing to negotiate new and more favorable terms, which means that the dental practice will be even more marketable to buyers.
These are just some of the common Do’s and Don’ts to consider while entering into a transaction to purchase or sell a dental practice. For a more structured and tailored fit for the purchase or sale of a dental practice, the first step should be to contact an experienced attorney.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
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By: D. Keith B. Dunnagan,
Esq. June 27, 2023
The sale of a dental practice is a complicated matter. From considering what will be included in the sale, what happens to employees, the desirability of the business, and tax liabilities, there is a lot that could easily go wrong without the right plan in place. Due to the complexity of dental practice sales, we have put together a guideline of do’s and don’ts to help navigate the sale.
DON’T: Attempt to sell/buy the practice alone
It is possible to sell or buy a practice alone and not have any problems, however, this is a rare situation and not worth the risk and liability. This office often sees transactions go awry because assets were left out of the sale or major tax consequences were incurred because the proper allocation for good will versus non-compete clauses, if considered at all, were not made. Attempting the transaction alone may be appealing due to the initial low cost, but mistakes can lead to the transaction costing much more than it would have if professionals were hired at the beginning of the transaction.
DO: Hire a team of professionals
There is a lot more to consider to the purchase or sale of a dental practice than the name alone implies, and usually requires more than one professional to accomplish the task. A successful transaction which considers all factors, risks, and liabilities will almost always include a knowledgeable broker, attorney, and CPA. Creating this team will allow the transaction to go smoothly and protect the interests of the party.
DON’T: Enter into the transaction without a plan
The purchase or sale of a dental practice includes more than just the transfer of practice. Some dentists do not put together a plan before embarking on this endeavour, and this ultimately leads to unanticipated, strenuous negotiations over what is included in the sale. Dental practice transactions typically take some time in the best of circumstances and require a solid plan to be made before considering the transaction.
DO: Go over your plan with your professional team and revise
There is a lot to consider in the plan: What will be included in the sale? Will certain personal items be taken out or is everything included in the sale? How will accounts receivable be handled? Will there be a non-compete clause? How will retreatment and transitional services work, if any? Will financing be through seller-carry financing, a 1031-exchange, or some other method? What is the allocation of the goodwill, non-compete, and assets?
These questions need thoughtful and thorough consideration while creating the plan and this is usually only accomplished with the team of professionals. A good team will be able to make tweaks to the plan and tailor the transaction to best meet the interests and needs of the parties. Planning is essential to do before entering into the transaction and should be revisited as the transaction develops.
DON’T: Assume you can sell without checking your lease
Make sure, prior to the beginning of the transaction, that the lease held for the practice is transferable. Some leases will have non-assignment clauses or a provision stating the landlord must approve the assignment/sale of the lease. This is an important preliminary step that can save a lot of headaches if the lease is reviewed prior to beginning the transaction.
DO: Consider re-negotiating the lease
Leases may make the practice more marketable, especially if there is ample time left before the lease expires. However, even if there is a lot of time left on the lease, consider re-negotiating to get a better deal. The landlord may be willing to negotiate new and more favorable terms, which means that the dental practice will be even more marketable to buyers.
These are just some of the common Do’s and Don’ts to consider while entering into a transaction to purchase or sell a dental practice. For a more structured and tailored fit for the purchase or sale of a dental practice, the first step should be to contact an experienced attorney.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
Recent and Popular Articles From Our Blog:
2020 Blogs:
· April 28 – A New Reality – Temporary or Permanent – Virtual Showings and Disclosures
· May 22 – Servant Leadership
· June 8 – Paycheck Protection Program Flexibility Act is Enacted
· June 10 – Impact to Credit Score After Filing Chapter 7 Bankruptcy
· June 26 – SBA Rolls Out Updated PPP Loan Forgiveness Application
· July 2 – Understanding the Home Equity Sales Contract Act 2020
· July 14 – Governor Rolls Back Re-Opening
· August 4 – August 2020 COVID-19 Update
· August 18 – Status Of Selected California State Operations re: COVID-19
· September 1 – COVID Update on Foreclosures and Evictions
· September 3 – State Passes AB 3088
· September 15 – Update on PPP Forgiveness and Impacts
· November 10 – Changes to the Fair Housing and Discrimination Advisory CAR Form
· November 24 – In a Season of Difficulty – We Choose Gratitude
· December 15 – Cal/OSHA Issues New COVID Prevention Rule
2021 Blogs
· January 5 – Introduction to New Laws 2021
· January 26- Rain and the Prevalence of Failure to Disclose Claims
· February 2 – California Enacts COVID Tenant Relief Act (SB 91)
· March 9 – Understanding the Trust Exception to Real Estate Disclosures
· April 20 – Cash for Keys and SB 91
· May 4 – Help! Tenant Won’t Cooperate with Sale of Home
· May 11 – California Passes AB 80
· June 15 – Pinhole Leaks in Copper Pipes in Folsom