Selling a practice is emotional, complex, and often time-consuming. Below is a basic overview of the transition process.
Valuation of the practice
A practice should be sold at fair market value (FMV). Many times, a practice is placed on the market for sale, and the owner is not absolutely certain as to its value.
The Purchase Agreement (and LOI)
The Purchase Agreement (and LOI) should include:
- the amount of the purchase price
- the allocation of the purchase price between tangible and intangible assets (Goodwill, etc.)
- the exclusion of prepaid expenses and assets
- the amount of any deposit(s) account receivables
- any adjustments to the purchase price
Generally in the purchase of a practice, the accounts receivable are not an acquired asset and therefore are not sold at the time of the closing.
Also, practice assets generally do not include:
- Real property
- Cash and bank accounts
- Pension funds
- Insurance proceeds/cash value of an insurance policy
- Artwork, personal effects, diplomas, and certifications of the selling physician
The liabilities of the practice should be identified and listed in the agreement (and LOI), including:
- Lease agreements, including equipment leases
- Service agreements for equipment, billing, and staffing
- Government audits and investigations
The structure of the sale is critical, will it be an asset or stock sale?
Key documents for selling a practice should include:
- Non-disclosure and non-compete agreements
- Letter of Intent
- Purchase Agreement
- Agreement
- Post-Sale Employment/Independent Contractor Agreements
- Patient notification letter
- Staff termination and transition letter
Author(s)
Stuart J. Oberman, Esq.
Stuart J. Oberman is the founder and President of Oberman Law Firm. Mr. Oberman graduated from Urbana University and received his law degree from John Marshall Law School. Mr. Oberman has been practicing law for over 30 years, and before going into private practice, Mr. Oberman was in-house counsel for a Fortune 500 Company.
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