Home  Library  Purchase Agreements: More Than Meets the Eye - Protecting Yourself and Your Practice, Part 2

Purchase Agreements: More Than Meets the Eye - Protecting Yourself and Your Practice, Part 2

By: Ali Oromchian

In order to best protect yourself and your new dental practice, you must make certain that your purchase agreement is absolutely thorough in all aspects. Some important pieces of the agreement include clauses regarding the correction of defective dentistry, warranties and representations, incorporation of your business, a discussion of lease of space, and information relating to your employee manual. With these aspects of your purchase agreement prepared in the most efficient ways, your new transaction will move forward with ease.

Correcting Defective Dentistry- After the closing of sale of a dental practice, the buyer should be prepared to re-do any defective dentistry that is thusly presented. Your purchase agreement should contain who will correct the defective dentistry at no charge to the patient. More specifically, your purchase agreement should determine where the corrective procedure will be done, whose cost it will be at, and whether or not the buyer of the practice will do the work for the seller for a fee. The purchase agreement should also clarify the exact length of time that the seller may be bound to execute any re-dos.

Warranties and Representations- Warranties and representations are those things upon which a buyer relies on when determining whether or not he is purchasing a reputable dental practice. As such, it is important to have this information executed in writing. Examples of warranties that a seller might make are whether or not he has ever had any issues with his license, whether there are any liens against the practice or property, whether the income of the practice and expenses are true and correct, and whether there have ever been any violations regarding third-party billing or insurance. Because warranties and representations can influence how much a buyer would pay, it is prudent to include all such related concerns within the purchase agreement.

Incorporating- There are several other issues that should be considered when developing a purchase agreement. For instance, you should decide whether or not you would like to incorporate your business. Incorporating protects you, as a dental practice owner, from personal liability in your business, except for the commission of malpractice. In addition to this, an incorporated practice allows for the collection of disability and health insurance before taxes, as well as for peace of mind regarding the frequency of IRS audits.

Lease of Space - Aside from incorporating, you should consider any risks you may be open to regarding the office space you may lease. In purchasing a dental practice, you might assume the lease of the seller to assist with a smooth transition. However, you should have legal counsel review the lease that you will be assuming, in case the seller did not scrutinize his own contract carefully. For instance, if you go forth and assume the lease as is, it is possible that the landlord might have included unfair language regarding acts of God, seizure of the property, or a right to relocate a tenant.

Employee Manual - To further reduce any risk of liability, you should consider drafting your own employee manual. As there are many specific policies that must conform with local, state, and/or federal law, it would provide peace of mind for you to draft a manual which you are certain contains all legal requirements. For instance, you will need to include harassment and equal opportunity clauses, along with information regarding pay, vacation time, holidays, and more. Additionally, the presentation of a new employee manual may help diffuse any issues regarding any retained or new employees as they will have a new set of standards with which to familiarize themselves. We recommend HR for Health to ensure you are 100% compliant with all the complex HR laws that apply to your dental practice.

When considering the sale or purchase of a dental practice, the asset purchase agreement is the key to protecting yourself and/or your potential new assets. By preparing carefully in advance, as well as consulting with your CPA and legal counsel, you can rest assured that you have made the best decisions possible relating to your new

About the Author

Mr. Ali Oromchian is one of the nation?s leading legal authorities on topics relevant to dentists. Since its creation, the Dental and Medical Counsel PC law firm has been regarded as one of the preeminent health care law firms devoted exclusively to healthcare professionals. His clients seek his advice on practice acquisitions and sales, creation of corporations and partnerships, associate contracts, estate planning, employment law matters, office leasing and state board defense. Additionally, he is a frequent speaker on topics such as employment law, negotiations strategies, contract and estate planning throughout North America. He is frequently quoted and has written articles for the California Dental Association, Progressive Dentist, Progressive Orthodontists, and The New Dentist magazines. His website: www.dentalcounsel.com

View all articles by Ali Oromchian


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ADA® is a registered trademark of the American Dental Association. ADA Member Advantage is a service mark of the American Dental Association. ADA Member Advantage is a program brought to you by ADA Business Enterprises, Inc., a wholly owned subsidiary of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

All financing is subject to credit approval.

Wells Fargo Practice Finance is the only practice and commercial real estate lender recommended for members of the American Dental Association.

ADA® is a registered trademark of the American Dental Association. ADA Member Advantage is a service mark of the American Dental Association. ADA Member Advantage is a program brought to you by ADA Business Enterprises, Inc., a wholly owned subsidiary of the American Dental Association.

All financing is subject to credit approval.

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