Owning a practice right out of dental school can be a daunting endeavor. Although dental school may prepare you for clinical practice, often little or no attention is paid to the administrative responsibilities of running a practice. In fact, a 2013 survey conducted by the American Dental Education Association (ADEA) showed 95% or more of graduating dental students believed that their education adequately prepared or well-prepared them in the areas of patient evaluation and diagnosis; radiology; and operative and restorative dentistry, whereas less than half believed their education had prepared them for practice administration.
In our final post in this series, we look at ways to structure asset purchase agreements to resolve disputes that may arise after the asset purchase agreement has been executed. Although the goal of every agreement is to clearly define the rights and obligations of the buyer and seller, disputes can arise even with the most careful planning and best intentions. A well-crafted asset purchase agreement will have mechanisms for resolving potential disputes in a fair and cost-effective manner so that you can continue to build your medical or dental practice.
Our previous posts in this series looked at different ways you can structure the exchange of assets in a practice purchase agreement. This post will look at a different topic: how non-competes can be structured so that a buyer can preserve the value of his investment in the practice, while a seller can continue to pursue his career without overly burdensome restrictions.
In our previous post in this series, we looked at the allocation of the purchase price between equipment, goodwill and non-competes. In this post, we examine the treatment of accounts receivable in the sale of a practice.
The importance of accounts receivable to an asset purchase agreement often depends on the type of practice you have. If you have a fee-for-service practice where your patients pay upfront for all of the work you will do, accounts receivable may not be a significant part of the transaction. However, if you accept payment over time, or some or all of your practice is insurance-based, then you will often carry significant receivable balances that must be accounted for in the asset purchase agreement. Although there can be variations, there are two ways general ways in which receivables are treated in asset purchase agreements: