Buying a dental practice is a significant investment—one that blends business acquisition strategy with complex legal and financial considerations. Whether you’re acquiring an existing practice in Los Angeles or expanding your dental footprint, thorough due diligence is essential to avoid hidden risks and set yourself up for long-term success.
At Polished Legal, we assist dentists in navigating the legal and transactional steps involved in purchasing dental practices. Below is a comprehensive due diligence checklist to guide you through the acquisition process.
Financial & Business Review
Before finalizing any deal, ensure the dental practice is financially sound.
- Review practice financial statements for at least the past three years to assess profitability and cash flow.
- Evaluate patient base stability, including active patient count, new patient growth, and retention trends.
- Examine insurance contracts, reimbursement rates, and any capitation agreements that may affect revenue.
- Identify outstanding liabilities, including declining growth, inappropriate billing, and waiving of patient co-pays.
A strong financial foundation helps ensure the practice purchase aligns with your growth trajectory.
Legal & Compliance Checks
Los Angeles has unique regulations and a complex regulatory framework. Confirm the practice is legally compliant and transferable:
- Employment Agreements: Does the staff have written employment agreements? Verify if there are any long-term agreements or potential staff liabilities.
- Litigation History: Does the seller have any outstanding lawsuits or disputes with patients or vendors?
- Existing Lease Agreements: If the practice leases its space, review terms, landlord consent requirements, and rent escalations.
These legal checks help prevent costly compliance surprises after closing.
Property Condition & Inspections
A detailed property inspection can reveal hidden structural or mechanical issues.
- Inspect HVAC, plumbing, electrical, and roofing systems, which can be expensive to repair.
- Review the seller’s rent statements to determine the amount the Seller may be paying in CAM charges each month.
- Check the availability of parking during peak business hours.
Identifying potential repairs early allows for better negotiation or budgeting.
Valuation & Appraisal
Dental practice acquisitions often involve two separate valuations—one for the real estate and one for the business.
- Practice Goodwill: Assessed based on patient base, brand reputation, and revenue trends.
- Equipment & Fixtures: Valued separately for tax and financing purposes.
- Real Estate Appraisal: Independent property appraisal to confirm the purchase price reflects market value if you are purchasing the real estate with the dental practice.
A clear valuation picture informs financing, negotiations, and long-term tax planning.
Professional Advisors
Surround yourself with experienced professionals who understand dental transactions, such as:
- Attorney: Drafts and reviews purchase agreements and structures ownership entities.
- Accountant: Advises on tax strategies, financing, and depreciation.
- Practice Consultant: Evaluates operational transition and growth opportunities.
- Lender: Ensures the deal aligns with loan requirements and manages cash flow.
At Polished Legal, we frequently collaborate with these advisors to streamline the due diligence process.
Financing & Deal Structure
Dental practice purchases are often structured through separate legal entities to optimize liability protection and tax benefits.
- Set up a California dental corporation or the right general partnership to purchase and own the dental practice.
- Review loan terms, interest rates, and amortization schedules carefully.
These decisions can have significant implications for your financial future.
Partner With Polished Legal for Your Dental Practice Purchase
Buying a dental practice is a major strategic step in your career. At Polished Legal, we help dentists across Los Angeles structure and execute practice acquisitions with precision, protecting your investment and positioning your practice for growth.
Our team handles legal reviews, regulatory checks, contract negotiations, and coordination with your financial advisors, enabling you to move forward with confidence.
Contact Polished Legal today to schedule a consultation about your dental practice purchase.
