How to Transfer Ownership of Your Practice to a Junior Dentist
If you are thinking about retiring or taking on a reduced role in your dental practice, you may have already considered passing it on to a junior dentist in your practice who wants to have a clinic to call their own. In order to ensure the continuity of the practice and get your successor off on the right foot, there are a few steps to follow. Below, our dental practice sales attorney explains what these are.
Confirm that the Associate is a Suitable Choice
When considering whether to transfer ownership to a junior dentist, the first step is to evaluate their professional and financial readiness to take control of the business. When considering their financial preparedness, focus on whether they have the financial resources to take on the responsibility and risks of owning the company. For example, do they have the necessary credit to obtain operational loans or capital?
To determine if the associate is professionally prepared to take on the business, you can start delegating management responsibilities to them. This will allow you to determine if they can manage daily operations and important events as they arise while staying available to provide critical advice and make final decisions when necessary.
Develop the Transition Structure
There are several transition plans you may want to consider when passing on your practice to a junior dentist. These include:
- A gradual buy-in, where you hand over operational managements duties and clinical oversight slowly, allowing the associate to increase their share of ownership gradually over time
- An immediate sale, possibly with seller financing
- Phased ownership, with specific milestones based on performance
Regardless of the transition structure you choose, it is important that disruptions to patients and staff members are minimized.
Determine the Value of the Practice
You must also accurately value the practice, even if you are transferring control internally rather than shopping it around to multiple buyers. It is critical to obtain a professional valuation so the IRS does not suspect that you sold the practice for below market value for tax purposes. When determining the purchase price, it is critical to include the real estate, all equipment, patient lists, and goodwill.
Organize Legal Paperwork
There are a number of legal documents you will need to complete the sale to an associate. These include, but are not limited to:
- A letter of intent establishing the terms of the deal after initial negotiations
- Equity or stock purchase agreements that outline the terms of the final deal
- Updated operating agreements, bylaws, stockholders’ agreements, and stock ledgers
- Independent contractor or employment agreements for the seller if they intend to continue in a practitioner role after the close of the sale
Contact Our Dental Practice Sales Attorney Today
If you own a dental practice and want to pass it on to a junior dentist or associate, our dental practice sales attorney at AGS Law can help make the transition as easy as possible. Call us today at 801-477-6144 or contact us online to schedule a consultation and to get the legal help you need.
