Focus, Health Care, and Law

Buying/selling dental practice is complicated

There are at least seven issues to address before any transaction is completed.

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Each year, hundreds of thousands of businesses change ownership. No matter what type of business you’re looking to buy or sell, there is a great deal of planning and preparation that goes into it.

For someone buying or selling a dental practice, however, it can be a highly complicated process.

A dental practice is no ordinary business. Those involved in these transactions must take into account several factors before considering buying or selling a dental or related health practice, particularly in Michigan.

There are seven important issues to attend to when buying or selling a dental practice in Michigan: asset transactions, real estate, purchase price, allocation of the purchase price, employee benefits, post-closing employee agreements with the selling dentist, and post-closing.

Of these, calculating the cost of the dental practice for sale is often the most challenging. Although there are many variables involved, the general rule of thumb is that dental practices will sell for between 50 percent and 70 percent of annual gross revenues.

If the buyers are interested in purchasing the real estate as well as the practice, they also need to take into consideration whether the space was leased or purchased by the previous owner.

It is very common for the selling dentist to also own the real estate/dental office condo, either in his or her individual name or in a limited liability company. However, if the owner leased the space from a private landlord, the interested party will, of course, need to communicate with the landlord directly.

Another very important consideration in this kind of transaction is the proper transfer of patient records once the sale is completed. The Michigan Department of Community Health must be notified of the transfer of medical records.

Buying a dental practice goes far beyond just purchasing the real estate owned by the previous owner. Those looking into buying a dental practice must take into consideration what the practice may be leaving behind for the next owner, including past patients, employees, benefits for the employees and other assets.

Buyers should determine what types of benefits, if any, they intend to offer to the remaining employees. Because these employees play a key role in keeping the transition between owners smooth, the buyer may also want to keep the benefits consistent with those provided by the previous owner to assure the employees’ continuing loyalty.

Health care laws and real estate laws often differ dramatically state by state. Anyone considering the purchase or sale of a dental or related health care practice in Michigan would be advised to seek professional assistance to help guide the process and avoid unnecessary complications.

Dan McGlinn is an attorney specializing in health care with the local law firm Kreis Enderle Hudgins and Borsos PC.

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