Many of the considerations in buying a practice, such as allocation of purchase price, accounts receivable and restrictive covenants, also apply in selling a practice. However, there are some additional issues a seller should keep in mind when selling the practice.
What Do I Do With My Patient Records?
In most cases, the purchaser will want your patient records as part of the sale. However, you must keep in mind that, unless the purchase and sale agreement provides that the purchaser will assume responsibility of the patient records, you may still legally be the custodian of those records, and you may be responsible if any of the protected health information in those records is disclosed. You should make sure that the purchase and sale agreement clearly establishes that the buyer will be the custodian of your patients' records and will maintain them in accordance with the appropriate dental board requirements.
How Do I Make Sure I Am Not Personally Liable For The Practice's Debts After The Sale?
As the owner of the practice, you may have to enter into personal guaranties for practice loans, office leases and equipment leases and financing. If you transfer these assets without removing yourself as the guarantor, you will still be personally liable in the event the purchaser defaults on any of the payments. If possible, you should remove yourself from as many of these obligations as possible through assignment agreements with the landlord/vendor and the buyer and include indemnification language in the purchase and sale agreement requiring that the buyer personally agree to cover any future obligations of the practice.
How Can I Maximize The Purchase Price?
If a potential buyer is having trouble financing the purchase price, one option that may be beneficial to both the buyer and seller is for the seller to finance the purchase price through a carryback loan. This may allow the seller to receive a higher overall purchase price for the buyer, and also allow the seller certain tax advantages. This can be dangerous, though, since you are assuming the risk of the buyer defaulting on the practice and your loan to the buyer will have a lower priority than the primary lender's will.
How Do I Tell My Staff?
When you are selling a practice, questions usually arises about what to tell the staff and when. Staff are often understandably anxious about the transition to a new owner, and many may fear that they will be terminated when the new owner comes in. After all, the new owner has no loyalty to these staff and may see their new boss as a threat to their job security. Although every situation is different, you almost certainly will not want to tell the staff about the change in ownership until the deal is final in order to avoid disrupting the office, and you will likely want to work with the new dentist to understand his or her intentions with the staff.
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While we are making an effort to share general knowledge with the dental community and answer dentists’ questions, this not a substitute for individualized advice from an experienced healthcare lawyer. If you would like to speak with our attorneys and have them take an in-depth look at your particular situation, please feel free to contact us directly.