If you are a doctor, dentist, or veterinarian, you’ve gone through the arduous process of obtaining an undergraduate degree and the ongoing to an additional four years to earn the title “Doctor.” Even upon completing academic requirements, you’ve likely been required to complete years of further training before you can go out on your own. Now that you’ve spent years training and preparing for a healthcare career and you’ve decided to open your practice, you’re hit with a question: Should I be purchasing or starting a practice? There are many things to consider when deciding whether to open a new practice or buy an existing one, and it may seem complex and stress-inducing. Once a decision is made, you have further considerations, including selecting the entity to purchase or the type of organizational structure you’d like to operate, real-estate agreements, and employment matters.
Additionally, healthcare practitioners are subject to strict rules and regulations when establishing a practice. These regulations govern many things, such as who can own practice, how the practice must be named, where the practice can be located and operated—the types of business arrangements the owners of a practice can have with others.
Whether you are purchasing or starting a practice, a business attorney with experience in medical, dental, and veterinarian businesses can offer advice based on your situation. In addition, the attorney can provide legal advice to help you understand the risks involved in operating these businesses and the federal and state laws that govern healthcare practices. The team at McClanahan Powers, PLLC is available to help doctors in Virginia and the Washington D.C. area who are considering starting their practice or buying an existing practice.
Buying an Existing Medical, Dental, or Veterinarian Practice
The process of purchasing a healthcare practice can be complicated, and trying to complete the process on your own may prove to be inefficient to your goals. There are multiple steps involved with purchasing an existing medical, dental, or veterinarian practice, including:
- The existing owner decides to sell their practice. The owner may choose to sell the practice to you whether you are an associate or a third party. When you find a practice that you are interested in, you should tour the facility, make several inquiries, and request to see financial documents. These financial documents will help you to decide if purchasing the practice is worth the price you will pay to do so. If you choose, you will inform the seller of your intent to buy the practice and likely begin looking at financing options.
- Once you have obtained a loan to purchase the practice, you and your attorney will draft a purchasing agreement. It would help if you considered the real-estate factors involved. If purchasing the practice requires you to purchase the real estate, your attorney will also have to draft a contract pertaining to such. Otherwise, if the owner is leasing the building to you, you and your attorney should review any lease agreements. Note that you will likely become an assignee of the lease. This means that all rights under the lease will be transferred to you, and you will become the new “tenant.” At this time, you should also begin securing commercial insurances you will be required to have and maintain to run your practice. Additionally, the seller may provide a list of conditions that must be met before closing. It would be best if you began to think about staffing and hiring decisions at this stage.
- The next step involves the execution of the purchasing contract. This means that any conditions on closing the seller imposed should be met. If there are any liens on the business, you should ensure that the creditors have been paid off and released by the seller or that arrangements for pay-off have been made. You and your attorney will finalize any terms of the lease and its transfer with the landlord if you are not purchasing the real estate. As to hiring decisions, you should at least know whether you intend on rehiring existing staff or if you are going to hire new staff.
- Lastly, you will close and take ownership of the practice. At this stage, your attorney will help you take care of escrowing and any last-minute issues. The seller will hand over the keys to the practice and any instructions and final documents. Final documents may include patient lists and lists that show what patients owe or the credits they hold.
Forming a New Medical, Dental, or Veterinarian Practice
When forming a new medical, dental, or veterinarian practice, the advice of an attorney is highly advisable as setting up your practice in specific ways can affect your future profits. Additionally, the advice of an attorney can help you understand what legal documents are required, such as the Articles of Incorporation or a partnership agreement, depending on the structure you choose.
When you decide to form a new healthcare practice, you will likely consider some factors involved in buying an existing practice. However, there may be slight differences in your considerations. For example, will you buy a property and build, buy an existing building, or lease commercial space? These all necessitate an attorney to draft any agreements as to the purchase or lease of the real estate.
A significant decision in forming a new practice includes picking your organizational structure or what type of business entity you’d like to open. The business structure will affect your taxes and your liabilities for debts.
Many professionals like doctors, dentists, and veterinarians form professional corporation. In an experienced corporation, the owners perform services as business employees. One important note regarding the corporation is that the business’s name must include the words “Professional Corporation” or “P.C.” Professionals may also choose to open a professional limited liability company which may protect the members from personal liability claims for financial debts. If you decide to open your practice under this structure, the name should include “Professional Liability Company” or PLLC.”
Call the Business Lawyers of McClanahan Powers PLLC
Whether you are deciding on purchasing or starting a practice, the business attorneys of McClanahan Powers, PLLC, are here to guide you through the process and answer your questions. Call 703-520-1326 or visit our website to consult with an attorney today.