If you own a dental, veterinary, medical or optometry practice, the practice is probably the largest asset you have, and nearly every important decision about it is simultaneously a business question, a real estate question, a tax question and an estate planning question. Ament Law Group works with practice owners across Western Pennsylvania on all four at once: reviewing offers from consolidators, structuring sales and partner buy-ins, handling the building the practice sits in, and making sure the plan for your practice and the plan for your estate say the same thing.
Three Transactions, and the One That Matters Most
Over the life of a practice there are usually three moments that involve a lawyer: buying in or starting up, taking on or buying out a partner, and getting out. The first two are the ones owners prepare for. The third is worth more than the other two combined, and it is the one most owners walk into unrepresented, often because it begins with a phone call they were not expecting.
That is the ordering we work from. If you are at the beginning, we will help you start correctly. If you are being approached about selling, that is the conversation to have first, and to have before you sign anything.
If You Have Received an Offer
Private equity backed groups have been acquiring dental, veterinary and optometry practices in Western Pennsylvania steadily, and the approach is usually direct: a call or a letter, a request for three years of financials, and then a letter of intent with a headline number on it.
Two things about that letter are worth knowing before you respond.
The first is that the price in it is an opening position derived from a formula, and the formula has more give in it than the letter suggests. The headline is a multiple of adjusted earnings, and the adjustment schedule is negotiable in ways the multiple often is not.
The second is that the letter is described as non-binding, and the price genuinely is. The exclusivity and no-shop provisions usually are not. Signing can commit you to dealing with that buyer alone for sixty to ninety days, which removes the only real leverage you have, which is the possibility of another bidder. This is the most common and most expensive mistake we see, and it happens before anyone has read the purchase agreement.
We have a separate page on how these transactions are actually structured, what portion of the price tends to be cash, and what the management services agreement does: selling a practice to a consolidator or DSO.
What Your Practice Is Worth, and Who Decides
Practices sell on a multiple of adjusted earnings, not on revenue, not on collections, and not on what a colleague told you their practice sold for.
The adjustment is the part worth understanding. A buyer takes your earnings and normalizes them, which in practice means subtracting a market-rate salary for the clinical work you personally do, because once you are gone they must pay someone to do it. It also means adding back expenses the practice carries that a new owner would not: a vehicle, family members on payroll, personal travel, above-market rent if you own the building and have been paying yourself generously.
Both directions matter, and the add-back schedule frequently moves the price more than the multiple does. An owner who negotiates the multiple from 5.5 to 6 while accepting an aggressive compensation normalization has usually traded a dollar for a dime. This is also why an independent valuation before you go to market is worth its cost: it tells you what the add-back schedule should look like before a buyer tells you what it is.
Who Is Allowed to Own It
Pennsylvania treats dentistry, medicine, optometry and veterinary medicine as restricted professional services, which is why practices in these fields are organized as professional corporations or restricted professional companies under Title 15 rather than as ordinary companies. Ownership of the entity that actually delivers clinical care is separately limited to licensed practitioners. Which provision does that work varies by profession, the entity rules reaching some and a profession's own practice act reaching others, but the effect is consistent: a general business corporation cannot own your practice.
This constraint shapes more than the formation paperwork. It is the reason a corporate buyer cannot simply buy your practice outright, and it drives the two-entity structure used in nearly every consolidator transaction. It also matters at death: an interest in a professional entity cannot pass to a family member who is not licensed, which is a hard limit that a will cannot override and that surprises families who assumed the practice was simply inheritable property.
If you practice with others, it is worth confirming that your entity documents still match the arrangement you actually have. Practices commonly add an associate, change the economics by handshake, and never amend the operating agreement or shareholder agreement, which means the governing document describes an arrangement nobody is following.
The Building
Many practice owners own their real estate, usually in a separate LLC that leases to the practice. In a sale, that arrangement produces a decision that deserves more attention than it typically gets.
- Keep it and lease to the buyer. A consolidator wants a long lease on a location it just paid for, which means you hold an income-producing asset with a motivated tenant. The lease terms are a real negotiation: length, renewal options, rent escalations, who bears taxes, insurance and maintenance, and whether the tenant's obligations are guaranteed by the parent rather than by a thinly capitalized local entity.
- Sell it alongside the practice. Cleaner, produces cash, and ends your role as a landlord. If you have held the building a long time, the gain can be substantial, and a 1031 exchange into a property you would rather own is worth evaluating before closing rather than after.
- Watch the rent you have been charging yourself. If you own both sides, the rent between them is one you set. Above-market rent inflates the building's value and depresses the practice's earnings, which is the number the practice sells on. Below-market rent does the reverse. A buyer will normalize it. Knowing which direction yours runs before you are quoted a price is useful.
Transfers of Pennsylvania real estate carry realty transfer tax, and whether it applies to a transaction involving an entity that holds real estate is a question worth resolving early. See commercial real estate.
Partners, and Agreements That Address the Right Risk
Most practice buy-sell agreements we are asked to review share two defects.
The first is that they handle death thoroughly and treat disability as a footnote. For a clinician this is backwards. A dentist with a hand injury, a surgeon with a tremor or an optometrist losing their own vision is a far more likely scenario than a sudden death, and it is harder to resolve, because the disabled owner is still alive, still an owner, still entitled to be bought out, and no longer producing the revenue that would fund the buyout. A workable agreement defines disability, says who decides whether it has occurred, states how long the practice carries the owner before the buyout triggers, and is funded by something other than optimism.
The second is a value set years ago and never revisited. A fixed dollar figure or a stale formula in a document signed in 2014 will govern a transaction in 2026, and it will be wrong in whichever direction hurts someone. Either a current valuation mechanism or a scheduled review solves this.
Beyond those, a practice agreement should address what happens on divorce, so an interest does not end up partly owned by a former spouse; on loss of license, which is specific to professional practices and usually missing; and on a partner who simply wants out, which is the most common exit and the one least often documented. Our business succession planning page covers the mechanics in more depth.
Your Practice in Your Estate Plan
A practice is the asset most likely to lose value fastest after an owner dies or is suddenly unable to work, and the reason is simple: its value is patients, staff and continuity, all of which are mobile and none of which wait.
What a practice owner's plan needs beyond the usual documents:
- A financial power of attorney broad enough to run a business. Signing checks, meeting payroll, paying the lab and the landlord, dealing with insurers. A standard power of attorney often does not clearly authorize operating a company, and the moment it is needed is not the moment to find out.
- A named transition plan. Who covers patients, who is authorized to negotiate a sale, and on what authority. Where it is possible, a standing arrangement with another local practitioner is worth more than any document, because it can take effect in days rather than months.
- Obligations that survive you. Pennsylvania's licensing boards impose requirements concerning patient records and patient notification when a practice closes, and those land on your estate. An executor who locks the doors has created a problem rather than solved one.
- Coordination with the buy-sell agreement. If the agreement says your interest is purchased at a formula price and your will leaves the practice to your spouse, those documents contradict each other, and the agreement will usually win. This is a common result of a business attorney and an estate attorney working years apart without speaking.
- Liquidity for Pennsylvania inheritance tax. The tax is due nine months after death and calculated on the practice's value, and a practice is not cash. See business succession planning for how families actually fund it, and the family-owned business exemption, which can apply to a practice that meets its conditions and which a sale during your lifetime forecloses.
Buying In, or Starting Up
The other end of the arc. For a practitioner buying a first practice, buying into a partnership, or opening a new location, the work is more defined but the terms set precedents that last for decades:
- Entity formation in the correct form for a licensed practice, with an operating agreement or bylaws written for a professional practice rather than a generic template
- Purchase agreement review and negotiation, including price allocation, treatment of accounts receivable, equipment condition, assumed liabilities, and what you are actually buying when you buy goodwill
- Asset or equity structure, which drives both tax treatment and what liabilities follow the practice to you. See asset versus stock purchase.
- The lease, negotiated or assigned, with attention to term, renewal options, personal guaranty and what happens if you later sell. A short remaining lease term will reduce what your own practice is worth when you eventually exit.
- Restrictive covenants, both the seller's covenant not to compete with you and any covenant you are asked to sign, with attention to geographic radius and duration
- Lender documents, reviewed alongside your bank or SBA lender, including what you are personally guaranteeing
- A partner agreement from the start, if you are joining others, rather than the version written later when something has already gone wrong
Planning the future of a law practice? See our attorney succession and practice sale services.
How We Work These
We handle business law, commercial real estate and estate planning in the same firm, which matters here more than in most matters, because a practice transaction is all three and the pieces have to agree with each other. The purchase agreement, the lease, the management services agreement, the entity documents and your estate plan are a single structure, and when they are drafted by different people at different times they contradict each other in ways that only surface at the worst moment.
We also work alongside your CPA and financial advisor rather than around them. Purchase price allocation, the treatment of goodwill and the tax posture of the proceeds are joint decisions, and a structure that is sound legally can be costly if nobody runs the tax.
If you have a letter of intent in hand, bring it, along with the financials you have already sent the buyer. If you are planning further out, bring the entity documents, any partner agreement, the lease or deed for the building, and your current estate plan. The first meeting is free.
For Advisors and Referral Partners
If you are a financial advisor, CPA, practice broker or insurance professional with clients facing a practice transaction or a succession decision, we are glad to collaborate. We handle the legal documents while you manage the financial strategy, and we coordinate directly with your team. Learn about our referral process, or call (724) 733-3500.
Frequently Asked Questions
I received an unsolicited offer for my practice. What should I do first?
Do not sign the letter of intent yet. A letter of intent is usually described as non-binding, and the price really is non-binding, but the exclusivity, no-shop and confidentiality provisions in it typically are binding, and they can lock you out of talking to any other buyer for sixty to ninety days. That is the one part of the document that has teeth, and it is the part owners skim. Have the letter reviewed before you sign it, not after.
How is a professional practice valued when it sells?
Almost always as a multiple of adjusted earnings rather than of revenue or collections. The adjustment is where the money is. A buyer normalizes your earnings by subtracting what it would cost to pay a market-rate associate to do the clinical work you personally perform, because after you leave they have to hire that person. Owners focus on the multiple, which is the number in the headline, and the add-back schedule quietly decides the price. Both deserve the same scrutiny.
Can a non-dentist or a non-physician own my practice in Pennsylvania?
Not the clinical side of it. Pennsylvania treats dentistry, medicine, optometry and veterinary medicine as restricted professional services and limits ownership of the entity that actually delivers patient care to licensed practitioners. This is why consolidators use a management structure: a licensed practitioner continues to own the professional entity, and the buyer acquires the non-clinical assets and enters a long-term management services agreement with it. That management agreement, not the purchase agreement, is often where the real economics of the deal live.
Should I sell the building with the practice or keep it?
It depends on what you want your retirement income to look like, and it is a genuinely open question rather than a formality. Keeping it and leasing to the buyer turns the building into an income stream backed by a tenant with a strong incentive to stay, and a long lease at a fair rent is itself a valuable asset. Selling it produces cash and a clean exit, and may support a 1031 exchange into something you would rather manage. What you should not do is let the building be decided in the last week of the transaction, which is when it usually gets decided.
My partner and I have a buy-sell agreement. Is that enough?
Look at whether it addresses disability, and whether anyone has updated the value in the last five years. Most practice buy-sell agreements we review handle death carefully and treat disability as an afterthought, which is backwards for a clinician. A dentist or surgeon with a hand injury is far more likely than a dead one, the practice's revenue stops immediately either way, and a disabled owner is still alive and still needs to be bought out. A fixed price set years ago and never revisited is the second problem we see most.
What happens to my practice if I die or am suddenly unable to work?
Without planning, your executor inherits a business they are not licensed to operate, and the practical result is that the practice loses most of its value within weeks. Staff leave, patients transfer, and collections stop. There are also obligations that outlive you: Pennsylvania's licensing boards impose requirements around patient records and notifying patients when a practice closes, and those fall on your estate. A practice needs a named transition plan, a financial power of attorney broad enough to keep payroll running, and ideally a standing arrangement with another practitioner.
Do you work with my accountant and financial advisor?
Yes, and on a practice transaction we would rather work with them than around them. Purchase price allocation, the treatment of goodwill, and the tax posture of the proceeds are decisions made jointly, and a structure that is clean legally can be expensive tax-wise if nobody checks. We handle the legal documents and coordinate directly with your CPA and advisor.