When you’re thinking about selling or buying a professional practice – meaning a business requiring a license to practice, such as a medical, law, dental, chiropractic or optometry practice – the first thing you need to do is determine whether you are selling or buying an entity that owns the practice or simply the assets of the practice. If you are selling or buying an entity, such as a professional corporation, you will enter into a stock purchase agreement with the other party. Alternatively, if you are simply purchasing the business assets, you will enter into a purchase and sale agreement or an asset transfer agreement. In either case, you will want to compile or request a list of all the assets of the business that are being transferred, so that there is no confusion as to what may or may not be included in the sale.
Another key concern in the sale or acquisition of a professional practice is the lease for the office space (if the seller owns the building in which the professional office sits, that opens up different considerations, such as purchasing real estate in conjunction with the practice, leasing the space from the seller or moving the practice elsewhere). Often, the office space is itself of value, as retention of the patients or clients of the practice may be contingent upon maintaining the continuity of location. If the buyer plans to continue the practice at the existing location, approaching the landlord is as essential to the transaction as the sale itself. If the seller is still within the lease term, the landlord will have to agree to assign the lease to the buyer; the landlord may instead prefer to terminate the existing lease and enter into a new lease (at market value) with the buyer. In any event, obtaining the landlord’s approval for the sale, and either adding or substituting the buyer on the lease for the office space will be paramount – the sale may not be finalized otherwise.
Once you have compiled or obtained an asset list for the business – which may include equipment, supplies, client lists, employment commitments and intellectual property (such as trade names, logos and websites) among other items – you should negotiate the remaining terms of the sale with the other party. Chief among the remaining transaction terms will be purchase price. This amount may be paid out in a lump sum when the agreement(s) documenting the sale are executed (known as the “closing”) or in payments over time. If the purchase price is being paid over time, the seller may want to protect against a default in making a payment by the buyer. This payment over time will be structured as a loan, with an interest rate, and may be secured by the practice itself, which will serve as collateral for the loan. That way, if the buyer defaults on payment, the seller can simply take the practice back.