Ten Reasons to Choose a Lawyer Familiar with Dentistry to Draft Your Buy-Sell Agreement

by Olivia Wann

Thirty-four percent of dentist owners plan to retire within six years according to Dental Post’s 2025 Dental Salary Survey Report. If you are interested in selling a practice or buying a practice, there are important legal considerations. Selecting a lawyer who understands the many facets of dentistry to prepare or review a buy-sell agreement is to the dentist’s advantage.  Here’s my top ten reasons why:

1. Dental practices are governed by HIPAA which is a federal law that establishes standards to protect individual’s health information.  From the initial valuation to patient notification of the practice sale, the entire process must adhere to the Privacy Rule’s protections.  This entails that the valuation expert enters into a Business Associate Agreement with the covered entity prior to the valuation process that may entail disclosure of patient information. 

Additionally, the Seller and Buyer must comply with their State’s Dental Practice Act. For example, in Tennessee, patients must be notified who were treated 36 months prior to the sale of the practice. 

Patients are informed that the buyer will retain custody of their records and at their written request, copies of their records may be sent to another dentist of their choice if they choose not to return.  On returning to the practice, a new patient registration form is completed providing the buyer dentist consent for treatment.

2. Goodwill represents the intangible assets that contribute to the practice’s overall value.   It is generally better for the buyer dentist to have higher goodwill as it relates to the practice valuation.  This is due to the fact that goodwill is generally amortized over 15 years which helps reduce taxable income.  On the other hand,  for the seller, the sale of the goodwill is typically taxed at the lower capital gains rate. 

3. Clearly identify which assets are included in the sale.  The asset purchase agreement should set forth these assets such as dental equipment, office equipment, inventory of supplies, patient records, practice name, website, social media platforms, and telephone numbers.

4. Proper handling of patient records is critical during the transfer.  Old patient paper records, if any, cannot be simply placed in a storage building.  Record retention and proper disposal rules must be followed that are published in the State’s Dental Practice Act.

5. The buy-sale agreement should detail how accounts receivables are going to be addressed.  Options include the seller retaining pre-closing AR, buyer purchasing AR at different tiered levels depending on the age of the AR, and specify how the incoming payments are tracked.

6. Buy-sell agreements and associate employment agreements often include non-compete clauses. A properly drafted non-compete provision is critical in restrict a dentist from practicing or establishing a competing dental practice in a designated geographic region for a certain time frame, such as 10 miles for a period of 2 – 5  years.  This is a contractual, enforceable arrangement to safeguard the interests of the current practice, namely the patient base.

7. PPO participation of the selling practice may require assignment of the PPO contracts and present credentialling issues for the buyer.  Some experts recommend that the credentialling process should commence as soon as the letter of intent is received to allow a head start. 

8. The sale of the practice may include the sale of the building or a lease assumption. Relevant to a lease, the landlord’s approval must be sought in order to transfer the lease.  There may be changes to the lease’s terms.  If the real estate is being purchased,  the buyer dentist may want to consider whether the property is held in a separate entity such as a holding LLC apart from the dental practice ownership.  A title search should be conducted to check if there outstanding liens against the property. 

If the equipment is being purchased, it is advisable to check the Secretary of State’s website for equipment liens.  It is critical that any liens are paid by the seller at closing to assure transfer of title.

9. The buy-sale agreement should address employment such as whether the existing staff will be offered employment and specifying that withheld taxes prior to the transition date are the responsibility of the seller.  Address how the team will be informed of the transition and how accrued benefits will be handled, such as vacation time and paid time off.

10. Assurances from the seller should be addressed such as representations and warranties.  For example, if there is a cyber attack and corresponding HIPAA breach that actually occurred prior to the transition date, is the seller dentist responsible or the buyer?  Has the seller attested to the accuracy of the financial statements that the buyer is relying on?  Are there any pending lawsuits or investigations currently taking place?  Be sure the agreements specify how to handle a dispute, whether it will be handled through mediation, arbitration or litigation.

Working with a lawyer familiar with the dental industry is an invaluable asset to navigating the complexity of a business transaction.  Choose a trusted partner who can make this process less stressful who uses timely communication.