Attorneys in Los Angeles for Practice Purchase Agreements

The purchase of a dental practice is one of the biggest moves a professional makes when it comes to advancing their career and making a name for themselves. Dental professionals who are interested in making this life-changing move should consult with an attorney as soon as possible to ensure they are in the best position possible to move forward with a purchase.

A dental practice purchase agreement is a document that spells out the terms and conditions agreed upon between the seller and the buyer of a dental practice. These agreements are information-packed and indicate what parties assume responsibility of problems, when a move can occur, and various other things. When it comes to creating a practice purchase agreement, it is crucial that you work with an attorney who can draft the agreement. Working with a skilled legal team can help to ensure all legal concerns are addressed.

The attorneys at Leiva Law Firm have decades of experience helping buyers and sellers throughout the process of purchasing and selling a dental practice. Our team can help you by drafting an adequate practice purchase agreement and helping you understand the contents of such agreement as you move forward. We strive to ensure our clients are fully aware of their rights and responsibilities as they move forward with the purchase or sale of a dental practice. Contact our law firm today to see how our team can help you.

The Stages of Practice Transitions

If you have found a practice that you want to purchase, it is crucial that you complete the five states of practice transition to ensure the practice you find is the best one for you. These stages include:

Search: As the buyer of a practice, you will need to search within a specified location, a clinical mix, and the practice size or philosophy that best fits your needs. Following specific criteria will help to ensure you find the best practice that will allow for an adequate work-life balance.

Letter of Intent: Once you find a practice, it is crucial that you draft a letter of intent. This non-binding agreement between the buyer and the seller will specify certain terms. If the buyer agrees to the terms you set forth, they will take the practice off the market and move forward with the transition process.

Due Diligence: This period is provided to give the buyer and their adviser time to review various aspects of the practice to make sure it is the best choice moving forward. Quite often, buyers will review the operational, legal, and financial standings of a practice.

Financial and Business Planning: Buyers will need to make a financial commitment and establish a business plan moving forward to ensure they are able to operate the practice successfully.

Legal Documents and Closing: The closing of the sales deal comes in several parts. Working with a reputable legal team will ensure your best interests are protected as you finalize the purchase.

What to Look for During the Purchase Process

When it comes to purchasing a practice, it is imperative that you are well-versed in understanding what your purchase agreement states. There are specific things you should look for when making the purchase of a practice. Some of the most vital clauses incorporated in these agreements include:

Contingencies: You will want to review the specific details surrounding contingencies in your purchase agreement. These listed contingencies often specify events that must occur in order for the purchase agreement to move forward. If the contingencies are not met, you can walk away freely without assuming any liability. Contingencies often include:

The approval of existing records maintained by the accountant for the buyer
Being approved for loans at specific terms
Buyer’s accepting the entry or exiting a new lease at the specified terms
Buyers obtaining the approval of an attorney for the purchase

Non-Compete Covenant: This clause prevents a seller from practicing dentistry within a specific geographic radius for a predetermined amount of time. The purchase agreement will state the distance and the duration that the dentist is unable to practice. It is crucial that this covenant has specific details relative to the activities that are allowed and prohibited. If the seller stays on with the practice for any amount of time, the agreement should specify that the non-compete covenant does not start until their last day of employment at the current practice.

Defective Dentistry: If there are small things that go wrong during the purchase process, it is assumed that the buyer will fix it. However, when substantial failures occur, it is crucial to specify that the costs of repairs are split between the buyer and the seller. In many cases, clauses are included to specify that sellers can choose to return the practice to repair the work or pay the buyer 50% to 75% of the buyer’s customary fees to perform the work. These clauses should specify the time period for which the clause is effective and the method in which the buyer will exercise to notify the seller of the issues.

Warranties and Representations: These seller statements are used as a basis on which the buyer’s purchasing decisions are made. Verbal representations should be written into the agreement for purchase. Many common warranties include broad statements about the practice’s worthiness, whether there are any outstanding liens or any encumbrances on the assets. It should also specify whether the seller’s dentistry license has been revoked.

Accounts Receivable: It is crucial that buyers are aware of how much money is owed to the practice. There should be a clause regarding the accounts receivable. Buyers will have the option to choose to purchase all, some, or none of the accounts receivable. This and other specified elections should be clearly written in the practice purchase agreement.

Although purchase agreements are the key documents in dental sales practice purchase, they are not entirely sufficient on their own. It is imperative that other paperwork is included and carefully drafted. These include intent to purchase letters, deposit receipts, non-disclosure agreements, and office leases where applicable.

Working with a skilled and knowledgeable legal team can ensure your best interests and legal rights are protected as you move forward with the purchase of a practice in the Los Angeles area.

More About Restrictive Covenants when Purchasing a Practice

Non-competes, more formally referred to as restrictive covenants, are extremely critical when it comes to protecting your practice. These agreements are applicable under two circumstances:

During the purchase of an existing dental practice
When hiring an associate dentist to work at your dental practice

During each of these situations, dentists other than you know your employees, patients, and your practice. These dentists know your practice as good as you or possibly better. As a result, you should incorporate a restrictive covenant to ensure you are able to practice without any major obstacles. Some of the types of restrictive covenants you should have to protect your practice include:

Non-competes that preclude sellers or former employees from practicing within a specified geographical area
Patient non-solicitation covenants that restrict sellers or former employees from soliciting patients of the new owner’s practice
Non-solicitation covenants for employees that restrict sellers or former employees from hiring past employees at their new practice
Confidentiality provisions that prohibit the disclosure of confidential patient information and records

In order to enforce a restrictive covenant, they must be reasonable and designed to protect the practice. The aspects that must be considered when evaluating the validity of a restrictive covenant include:

Scope: The clause must be clearly written. The restrictive covenant must only restrict actions that are necessary to protect the practice under the new owner.
Time: The time in which the restrictive covenant is applicable must be specified in the clause. Typically, these restrictions last between one year and three years. Employees are typically restricted while working for the practice as well as for a specified period after employment ends.
Geography: The specific area that is restricted must be specified and it must be reasonable.

Those bound by restrictive covenant clauses must receive consideration in exchange for their agreement to abide by the restrictions set forth in the agreement. Working with a knowledgeable legal team will help to ensure your restrictive covenant is accurately structured to protect your best interest.

Leiva Law Firm is Here For Your Litigation Needs

Attorney Marlene Leiva at Leiva Law Firm has over two and a half decades of experience helping businesses throughout the Los Angeles area protect their legal rights while handling some of the most complex cases surrounding practice purchase agreements. Our team has extensive experience helping professionals protect their businesses and their reputations. Our practice purchase agreement attorneys work to ensure our clients are in the best position possible to move forward with their practice purchase agreements and starting their practices with confidence. Contact our team at Leiva Law Firm today by calling (818) 703-1777. Schedule a consultation with our attorneys so we can discuss legal options available to help you.