A Legal Guide to Purchasing a Dental Practice
Purchasing a dental practice is a complicated process that requires thorough due diligence, careful financial planning, and professional legal guidance every step of the way. A dental practice purchase attorney can guide you through the important steps involved when purchasing a practice so you can avoid costly mistakes and move forward with confidence. The most important steps are outlined below.
Identify Your Goals
Before you even start looking for a practice to purchase, you need to identify the type of acquisition you are interested in. The main types of acquisitions are as follows:
- 100% buyout: With this option, you purchase the practice outright and take full ownership from the first day.
- Buy-in: A buy-in allows you to take partial ownership, often with an option for full ownership in the future.
- Associate with option to buy: This option allows you to work in the practice so you can evaluate it before making a full commitment.
Each of the above structures have different legal implications. For example, any option other than a full buyout involves ongoing partnership dynamics, income distribution provisions, and governance rights that require a thorough written agreement.
Choose the Right Practice
Choosing the right practice may seem obvious, but there are many factors to consider. These include:
- Location: The location of your dental practice will determine its patient demographics, competitive environment, and potential for long-term growth. A dental practice purchase attorney familiar with Utah’s dental regulations, including the state’s Dentist and Dental Hygienist Practice Act, can help you determine if there are regulatory issues or disciplinary actions affecting the license history of the practice you are considering.
- Type of dentistry: The services a practice provides, whether general dentistry, orthodontic, or cosmetic, should align with your own interests and clinical training. Otherwise, you may face a high patient attrition rate after the purchase, which will directly impact the value of the practice.
- The financials: Before making an offer on any dental practice, you should review at least three years of collections data, production reports, and other financials. Buyers often find discrepancies between a broker’s evaluation of a practice and what the actual records reflect.
Conduct Due Diligence
Reviewing tax returns and other financial records is part of conducting your own due diligence, but there are other steps, as well. These are as follows:
- Active patient count: Active patients are typically those who have been with the dentist for the past 18 to 24 months. The purchase agreement should include the seller’s representations of these metrics as well as remedies in case the numbers are significantly different.
- Condition of equipment: Outdated equipment can significantly impact the profitability of your practice from day one. It is important to inspect all equipment to ensure these are all properly addressed in the purchase agreement. If there are leases on any existing equipment, those will likely need to be paid off before you close on the practice.
- Lease terms: Along with any leases for equipment, you should also allow an attorney to review the lease for the space you will be using. Unfavorable renewal options, significant annual increases, a short remaining lease term, extensive maintenance or repair requirements (such as being fully responsible for an HVAC replacement), or an uncooperative landlord can create serious financial risk and derail a transaction. A lawyer can review the terms of your lease, negotiate the terms, and advise on whether a purchase or lease makes sense for your long-term goals.
Our Dental Practice Purchase Attorney Can Guide You Through the Steps
At AGS Law, our dental practice purchase attorney can guide you through the above steps and provide the legal guidance you need every step of the way. Call us now at 801-477-6144 to get more information and to ensure your transition is as smooth as possible.
Source:
le.utah.gov/xcode/Title58/Chapter69/C58-69_1800010118000101.pdf