Buying a dental practice in Washington or selling a dental practice in Washington is a significant decision that requires careful planning and a strong understanding of the legal landscape.  

From legal requirements for dental practices to contract negotiations, ensuring that every aspect is legally sound can make the transition smoother and protect all parties involved.  

Understanding State Licensing and Compliance 

Washington state has strict licensing requirements for dental practitioners. Before purchasing a practice, buyers must hold an active license from the Washington State Department of Health. If a seller is retiring or relocating, they should maintain their license until the transition is fully completed to avoid any legal complications. Additionally, Washington dental practices must comply with: 

• Washington State Dental Quality Assurance Commission (DQAC) regulations 

• Health Insurance Portability and Accountability Act (HIPAA) compliance 

• OSHA workplace safety standards 

• Washington State Department of Revenue tax obligations 

Structuring the Sale: Asset Purchase vs. Stock Purchase 

The sale of a dental practice can be structured as either an asset purchase or a stock purchase. 

• Asset Purchase Agreement: This is the most common method and involves selling specific assets of the practice, such as equipment, patient records, and goodwill, while excluding liabilities. 

• Stock Purchase Agreement: This is less common but may be beneficial in certain circumstances. In this case, the buyer acquires the entire business entity, including its assets and liabilities. 

Most buyers prefer asset purchases because they allow for a fresh start without taking on the seller’s liabilities. However, sellers sometimes prefer stock purchases due to potential dental practice tax implications. 

Letter of Intent (LOI) and Due Diligence 

Before finalizing a sale, both parties should sign a Letter of Intent (LOI) outlining the key terms of the transaction, including the purchase price, payment structure, and transition period. While not legally binding, an LOI serves as a roadmap for the final agreement. 

During due diligence, buyers must thoroughly examine the dental practice’s financials, legal standing, and compliance records. A failure to conduct proper due diligence can lead to costly surprises post-sale. 

Key areas to review include: 

• Patient records and retention rates 

• Accounts receivable and profitability trends 

• Existing employment agreements and staff contracts 

• Real estate leases or property ownership terms 

• Pending litigation or regulatory issues 

Employment Agreements and Non-Compete Clauses 

Sellers who plan to continue working after the sale, either in the same practice or elsewhere, must be aware of non-compete clauses and employment agreements.  

These clauses typically prevent a seller from opening or working at a competing dental practice within a certain radius for a specified period. 

As of 2024, the state of Washington enforces non-compete agreements if they are: 

• Reasonable in duration (maximum 18 months) and geographic scope 

• Clearly stated in the contract 

• Necessary to protect the buyer’s legitimate business interests 

• Workers earn more than $120,559.99 for employees and $301,399.98 for independent contractors 

Overly restrictive non-compete clauses may be challenged in court, so working with an attorney to draft enforceable terms is essential. 

Real Estate Considerations: Lease Transfers vs. Property Sales 

If the dental practice operates in a leased space, the lease terms must be reviewed carefully. Most commercial leases require landlord approval for a transfer, and some may include restrictive clauses that can impact the sale. Buyers should ensure that lease terms align with their long-term plans and negotiate necessary modifications before finalizing the purchase. 

For dental practices that own their buildings, sellers must decide whether to include the real estate in the sale or lease it to the new owner. Each option has dental practice tax implications and financial effects that should be assessed with the help of a financial advisor. 

Patient Record Transfers and HIPAA Compliance 

Patient records are one of the most valuable assets in a buying a dental practice in Washington or selling a dental practice, but their transfer must be handled in compliance with HIPAA regulations and Washington state laws.  

Sellers cannot simply hand over patient files without obtaining proper consent and ensuring continued confidentiality.  

The transition should include: 

• Patient notification about the ownership change 

• Secure transfer of electronic health records (EHR) 

• Clear policies on record retention and access rights 

Tax Implications for Buyers and Sellers 

Both buyers and sellers should work with tax professionals to optimize the transaction’s tax treatment.  

The allocation of the purchase price across different asset categories can significantly impact dental practice tax implications. Common allocations include: 

• Equipment and furniture (subject to depreciation) 

• Goodwill (subject to capital gains tax) 

• Accounts receivable (taxable as income) 

Sellers should also consider capital gains tax implications and explore strategies to minimize their tax burden. Working with a financial advisor experienced in dental practice transitions will ensure you don’t make costly mistakes during the sale. 

Finalizing the Purchase Agreement and Closing 

Once all negotiations are complete, the final Purchase Agreement is drafted, covering every aspect of the transaction, including: 

• Purchase price and payment terms 

• Asset allocation and exclusions 

• Seller transition assistance 

• Indemnification clauses 

Both parties should review the contract with their attorneys before signing. After closing, the buyer must ensure a seamless transition, including notifying patients, updating business licenses, and integrating staff. 

Moving Forward in the Sale with Confidence 

Navigating the sale or purchase of a dental practice requires careful planning, thorough due diligence, and a strong understanding of the legal framework. From structuring agreements to ensuring compliance with regulations, each step plays a crucial role in protecting both parties’ interests.  

Engaging experienced legal and financial professionals can help avoid potential pitfalls and facilitate a smooth transition. With proper preparation, buyers and sellers can move forward with confidence, knowing their decisions are well-informed and strategically sound. 

If you’re considering buying or selling a dental practice, let the experts at Consani Associates guide you every step of the way. Contact us today to ensure a smooth and successful practice transition. 

Selling a dental practice is a major decision that requires careful planning. Whether you’re preparing for retirement, relocating, or moving into a new career, avoiding common mistakes can help ensure a smooth transition and a successful sale.

Here are some key pitfalls to watch out for and how to avoid them.

1. Waiting Too Long to Prepare

Many dentists wait until they are ready to retire before thinking about selling. The problem? A successful sale takes time—often a year or more. The earlier you start planning, the better your chances of securing the right buyer at the right price.

Ideally, you should begin preparing at least three to five years in advance. This allows you to strengthen financials, upgrade equipment, and maintain patient retention, making your practice more appealing.

2. Setting the Wrong Price

One of the most common dental practice sale mistakes is misjudging the value of the business. Pricing it too high can discourage buyers, while pricing it too low means losing out on potential earnings.

A professional valuation helps ensure that your dental practice is competitively priced based on revenue, patient base, and market trends.

3. Letting Patient Numbers Decline

A steady patient base is essential for a successful sale. Some sellers cut back their hours or slow down production before selling, but this can make the practice appear less profitable.

Maintaining consistent patient flow reassures buyers that the practice is stable and thriving.

4. Poor Financial Recordkeeping

Serious buyers—and their lenders—will scrutinize your financial records. If your books are disorganized, missing tax returns, or showing inconsistent revenue, it can delay or even derail the sale.

Work with an accountant or financial advisor who specializes in dental practice transitions to ensure that your financials are accurate, transparent, and up to date.

5. Not Considering Buyer Financing

Even if a buyer is interested, securing financing can be challenging. Lenders evaluate your practice’s financial health before approving loans. If your records are not in order, or your revenue is inconsistent, financing may fall through. Proper preparation increases the chances of a seamless transaction.

6. Trying to Sell Without a Broker

Some dentists attempt to handle the sale themselves to save on broker fees. However, working with a dental practice broker can result in a better outcome.

Brokers help connect you with qualified buyers, negotiate terms, and manage the paperwork, making the process smoother and less stressful.

7. Overlooking Staff and Transition Planning

Your team is one of the most important parts of your dental practice’s success. Buyers want to know that staff will stay on after the sale, as sudden departures can disrupt operations. Thoughtful dental practice transition planning includes keeping key staff informed at the right time and ensuring a smooth handover.

8. Getting Emotionally Attached

A dental practice is more than just a business—it’s the result of years of dedication. However, letting emotions drive the sale can lead to unrealistic expectations or reluctance to negotiate.

Keeping a business-focused mindset and working with experienced professionals can help ensure a fair and efficient sale.

Thinking About Selling? We Can Help

Selling a dental practice doesn’t have to be overwhelming. With careful planning and expert guidance, you can avoid these dental practice sale mistakes and secure the best outcome. If you’re considering selling, our team at Consani Associates Ltd. is here to help. Give us a call today for a confidential consultation.