Legal Guidance for Dental Practice Stock Purchases
Buying or selling a dental practice often involves deciding whether the transfer will be structured as an asset purchase or a stock purchase. While asset sales are common, stock purchases can offer unique advantages, along with specific risks. At Polished Legal, we help Los Angeles dentists and dental groups navigate the complexities of stock purchase agreements, ensuring the deal structure aligns with their goals and protects them from hidden liabilities.
What Is a Stock Purchase Agreement?
A stock purchase agreement (SPA) is a legal contract through which the buyer acquires ownership of the seller’s shares in a professional corporation. Unlike an asset purchase, where specific practice assets (such as equipment, patient files, or goodwill) are sold, a stock purchase involves buying the entire entity.
This means the buyer steps into the shoes of the seller, taking over all assets, contracts, employees, and liabilities associated with the corporation. For Los Angeles dentists, this distinction is critical because the structure of the purchase can significantly impact taxes, liability exposure, and long-term business strategy.
Stock Purchases vs. Asset Purchases
Understanding the difference between stock and asset transactions is essential when evaluating the right path for a dental practice acquisition:
- Asset Purchase: Buyer selects specific assets (such as dental chairs, lease rights, or patient records) and generally avoids assuming unwanted liabilities.
- Stock Purchase: Buyer acquires the entire corporate entity, inheriting existing contracts, staff, debt obligations, and potential liabilities.
While stock purchases often provide a smoother transition for employees and patients, they require extensive due diligence to avoid inheriting costly surprises.
Key Considerations in Stock Purchase Agreements
At Polished Legal, we guide clients through the most important legal and financial issues in SPAs, including:
- Liability Exposure: Evaluating potential risks such as pending litigation, tax obligations, employment disputes, and compliance issues.
- Due Diligence: Reviewing corporate records, patient data management systems, insurance contracts, and regulatory filings.
- Representations and Warranties: Ensuring the seller discloses all material facts about the practice’s financial and legal standing.
- Indemnification Clauses: Protecting the buyer from undisclosed debts, lawsuits, or regulatory violations.
- Tax Implications: Considering how California and federal tax laws affect both buyer and seller in stock transactions.
Due Diligence in Dental Practice Stock Purchases
When acquiring stock in a dental practice, due diligence must go beyond financial records. We help Los Angeles dentists review:
- Patient contracts and retention rates to assess ongoing goodwill.
- Employment agreements and benefit plans to understand inherited obligations.
- Lease agreements tied to the corporation to confirm transferability and landlord consent.
- Licensing and regulatory compliance under the California Dental Practice Act.
- Outstanding debts or liens that could impact the practice’s financial stability.
A thorough due diligence process minimizes risk and ensures a smoother transition after the stock transfer.
Why Work With Polished Legal
Stock purchase agreements are complex, especially in the dental field, where licensing rules, patient privacy laws, and healthcare compliance add additional layers of responsibility. At Polished Legal, we combine transactional law experience with in-depth dental industry knowledge to structure deals that safeguard your investment and position your practice for long-term success.
Speak With Polished Legal About Stock Purchase Agreements
If you are considering buying or selling stock in a dental practice in Los Angeles, the right legal guidance can make the difference between a successful transaction and a costly mistake. At Polished Legal, we draft, review, and negotiate stock purchase agreements that protect your interests, reduce liability, and set the stage for growth.
Contact Polished Legal or schedule a call today, to schedule your consultation and let us help you navigate your stock purchase with clarity and confidence.