Dental practices can go through various ownership and management transitions throughout their lives. A practice may become part of a purchase and sale agreement, see changes in the composition of its ownership, transfer from a retiring owner to an associate, or combine with another practice. Each type of transition involves unique legal considerations.
For this reason, when you become involved in a dental practice transition, you need experienced legal advice to help you understand the specifics of the process and walk you through the issues that arise. Contact Mahan Law – Dental Attorney for an evaluation with a dental law firm to discuss the specific kind of transition you face and to learn more about what to expect.
Selling a Dental Practice
A dentist may go through a practice transition when they sell their dental practice to another practice owner or a younger dentist looking to become the owner of an established practice. Some of the common reasons why dentists sell their practices include:
- Moving to another metro area or state
- Retirement
- Semi-retirement (leaving ownership or management role but continuing part–time clinical work)
- Leaving the practice of dentistry as part of a career change
- Disability or other personal health challenges
- Family considerations (e.g., needing to provide long-term care to a family member)
The sale of a dental practice will raise important legal considerations for sellers, such as:
- Practice valuation
- Transaction structure
- Transition process
- Restrictive covenants
At Mahan Law, our legal team helps dentists avoid mistakes or problems when selling their practices, including errors that unnecessarily reduce the business’s value, overlooking critical terms in purchase documents, or failing to address existing liabilities.
Buying a Dental Practice
Dentists may experience a professional transition when they take over an existing practice from a dentist who wishes to sell their business. Deciding to purchase a mature dental practice has certain advantages over starting a new business, including an established patient base, existing infrastructure, and revenue on day one of ownership.
The legal team at Mahan Law advises dentists on the major aspects of the purchase process. We provide comprehensive support in due diligence, including reviewing financial records, lease agreements, insurance contracts, regulatory issues, and potential liabilities. We also offer experienced guidance for legal issues, including structuring the transaction terms, securing financing for the purchase price, and negotiating transition agreements with sellers.
Partnership Transitions
A dental practice may also undergo changes in its partnership composition when dentists leave or new partners join. Practices may bring in new dentists to facilitate business growth or open new office locations to expand their geographic footprint. Partners may leave a practice due to retirement, disability, or death. Common issues that arise when admitting a new partner include:
- Calculating buy-ins
- Realigning ownership percentages
- Adjusting compensation structures
- Allocating decision-making authority
A departing partner can also raise issues for a practice, such as:
- Ensuring liquidity to cash out the partner’s interest
- Determining rights to the partner’s patient list and goodwill
- Compensating for the loss of the departing partner’s revenue
Mahan Law advises dental partnerships through the challenges that can occur when a partner leaves, retires, or passes away, or when the practice admits a new partner.
Associate-to-Owner Transitions
A dental practice transition may involve an owner passing the business to a younger associate. Associate-to-owner transitions represent a common career path for many dentists, who start out practicing in an established business. Over time, they can develop clinical and business experience that readies them to own and manage a practice. A retiring practice owner may choose to sell to a senior associate. The transition process can occur through a gradual equity transfer, in which the associate gradually increases their ownership stake as the owner reduces theirs. Alternatively, a transition may involve a gradual increase in the associate’s management responsibilities to give them experience running the practice, culminating in the associate buying out the existing owner.
The lawyers at Mahan Law can help practice owners develop tailored associate-to-owner transitions, including negotiating associate agreements, drafting equity purchase documents, and revising operating or shareholders’ agreements to reflect the details of the transition process.
Practice Mergers
Transitions in dental practice ownership and management can occur through mergers. Two or more practices may merge for various reasons, such as:
- Improving efficiency through shared overhead or increased buying power with suppliers
- Combining specialties (e.g., general dentistry, dental surgery, orthodontics, cosmetic dentistry, etc.) into a full-service practice
- Facilitating expansion by creating a multi-location practice
However, combining dental practices can pose significant challenges during the transition, including regulatory issues related to patient databases, merging workplace cultures, integrating different operational practices, and restructuring ownership shares and management authority. The lawyers at Mahan Law not only advise practice owners on the practical issues of mergers, such as negotiating merger agreements and conducting due diligence, but also on the often-overlooked complexities of combining two or more separate businesses into a smoothly functioning single entity.
Transitioning to Dental Service Organizations
Dentists who own practices may wish to pass operational and management responsibilities to another party while retaining clinical decision-making authority. Sometimes, dentists may choose to transition management duties to a dental service organization (DSO). The transition involves affiliating the practice with a corporate DSO. In some cases, the practice may take on the DSO’s branding. The DSO will also handle the operational aspects of a dental practice, such as marketing, patient scheduling, billing, and HR, while the practice owner(s) remain responsible for the clinical side of the practice.
At Mahan Law, we advise practice owners on the various issues involved with transitioning to a DSO, such as:
- Navigating corporate ownership rules under state laws or regulations
- Negotiating terms of management service agreements
- Protecting dentists’ continued clinical control
Contact Our Dental Attorneys Today
Do you plan to transition into an ownership or management role with a dental practice, or will your practice undergo changes in ownership or management? If so, you need seasoned legal counsel to help you avoid the pitfalls of a transition that could have catastrophic consequences for your business or career. Contact Mahan Law today for an initial consultation with a dental lawyer to discuss how our law firm can guide you through the transition process that you or your practice faces.
