In this post, we will explain how accounts receivable (A/R) are one of the most important deal terms affecting valuation and risk. You will see why working with an experienced dental practice acquisition attorney can be key to structuring financial terms and ensuring optimal cash flow throughout the transaction, benefiting both parties.

Real Example: Nevada Dental Practice Transaction and A/R Negotiation

Recently, we helped a dentist in Nevada purchase his first dental practice. As you may expect, one of the first issues we discussed during the early phase of the dental practice M&A lawyer discussions was how to handle accounts receivable.

In this case, the seller preferred a discounted lump-sum purchase of A/R, while our client, the buyer, wanted to collect receivables post-closing and to share the proceeds over time.

As experienced dental practice acquisition attorneys, we advised the client, resulting in an early agreement that avoided unnecessary delays and preserved momentum.

The deal was structured around two key terms, satisfying both parties:

• Discounted purchase of A/R at closing
• Post-closing collection period with shared revenue

Both arrangements are commonly used in dental practice sales, but it is always good to consult a legal expert to ensure you fully understand all the terms.

Common Legal Structures for Accounts Receivable

A dentist contract lawyer will typically advise to structure A/R in two main ways, depending on risk factors and the negotiation leverage:

• Buyer purchases A/R at a discounted value, as the price needs to reflect the collection uncertainty
• Buyer collects A/R for a defined period post-sale, and shares a percentage with the seller

Now, it's usually either/or, and the choice is rarely between both options. Which option will work better depends not only on the practice's financial condition but also on the negotiation context, leverage, and dynamics.

Of course, all deals need to meet the usual federal tax compliance and business registration requirements, as with the Nevada Secretary of State Business Services.

But all of that will vary from case to case, as each state has its own rules, which is why it is important to work with an experienced dental practice transition lawyer.

Finding an Ideal Legal Solution For Accounts Receivable In Dental Business Sales

Accounts receivable is a critical component of dental practice transactions as it affects the deal structure and financial outcomes. Addressing it with appropriate clauses will address concerns for both parties, mitigating risk for the buyer and increasing the deal for the buyer.

Whether you are acquiring your first practice or preparing for a sale, getting early legal guidance will reduce the risk and ensure the deal goes through without headaches.

Contact Finn Legal now to schedule your consultation and protect your dental practice transaction from unnecessary administrative burden and financial risks.

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Learn how a dental practice acquisition attorney handles accounts receivable in dental practice transactions, including negotiation structures, real examples, and compliance considerations for buyers and sellers.

Due to a highly competitive dental hygienist hiring market, dental practices are trying to stay relevant by offering higher wages and benefits to highly sought-after candidates. While there are different types of employment arrangements, a well-structured dental hygienist employment agreement is often the best option, as it mitigates risks around compensation, performance, and employee retention.

In this article, we will explain why a strong dental hygienist contract not only helps define the working relationship from the get-go, but also protects the dental practice from financial exposure. As you will see in our real-life example, a properly drafted employment agreement can save money, even if the hygienist decides to leave, thereby minimizing the financial damage the business must incur.

How Employment Agreements Protect Sign-On Bonuses

It's no longer sufficient to offer competitive salaries - to attract skilled professionals, dental practices often need to offer lucrative sign-on bonuses. While highly effective for recruitment, the sign-on bonus agreement can place a significant burden on the employer if the employee leaves shortly after joining.

But a well-drafted dental hygienist employment contract will help reduce this risk by outlining repayment obligations.

The "clawback provisions" are integral to defending the employer's position. These provisions are intended to reduce the risk that follows a significant financial investment the business makes in recruiting, onboarding, and granting the sign-on bonus.

With clawback provisions, employers can recover bonus payments if an employee leaves before the prescribed period expires. These employee payment clauses are usually tied to performance or tenure and are intended to protect dental practices from abrupt departures.

But not all clawback provisions are legal and enforceable. That's why it's important to work with a qualified dentist contract lawyer who will draft the provisions and safeguards into all agreements, ensuring full legal compliance and mitigating risks.

Our Missouri Dental Practice Example

Recently, a client of ours operating in Missouri faced a challenge when hiring a new hygienist. To secure the highly sought-after candidate, the dental practice offered attractive incentives, including a sign-on bonus, as outlined in the written employment agreement.

Despite the initial investment and onboarding, the hygienist was terminated after a few months. Still, because we drafted an agreement with clear repayment terms, the employer was able to recover most of their investment.

Without a properly structured dental hygiene agreement, the practice would have suffered the full financial loss. For that reason, it is very important to clearly document the incentive structure in all agreements before employment begins.

While in our case the hygienist was terminated, these types of clauses have a preventive purpose too - employees will be reluctant to leave early if they know they will owe the employer the sign-on bonus, or any other amount that was stipulated in the contract (usually license and training fees, if the employer is covering the costs).

Bottom Line: Why Dental Practices Need a Dental Hygienist Employment Agreement

A well-structured dental hygienist employment agreement can protect your practice and reduce hiring risk in a volatile job market. Clearly outlining compensation, bonuses, and clawback clauses will reduce turnover risk and safeguard the financial incentives you offer to attract top talent.

For those reasons, legal protection should never be an afterthought - taking proactive steps to mitigate potential financial losses will also prevent costly disputes and avoid unnecessary turmoil.

Contact Finn Legal today, and we will review or draft your agreement to ensure your hiring practices are fully secure and enforceable.

Payoff letters are essential in a dental practice sale. Learn what they are, why they matter, and how to avoid closing delays when buying or selling a dental practice.

Each week, I share a quick insight from my dental law practice. This week’s topic: payoff letters and why they’re so important at closing.

Scenario: We had a client that just closed on a dental practice in the Midwest. She had been an associate at the practice for several years before buying it from her employer. All things considered, the practice transition was going smoothly up until about two weeks before closing. The holdup: payoff letters. This is one of the most easily overlooked, yet critical pieces of the process of buying or selling a dental practice. These simple documents can make or break a smooth closing.

Answer: First, let’s discuss what a payoff letter is. A payoff letter (or payoff statement) is a written statement from a lender showing exactly how much is owed to pay off a loan in full as of a certain date. In a dental practice sale, payoff letters are often needed for practice loans or equipment financing. A payoff letter typically includes:

• The total amount due, including principal, interest, and any fees
• The per diem interest (the amount of interest added each day)
• Payment and wiring instructions
• The date through which the payoff is valid (usually around 10 days)

Before a dental practice changes hands and the lender wires the money to the seller, any existing liens or loans tied to the seller and the assets of the practice must be paid off. Most dental acquisitions are in the form of an asset purchase, meaning the buyer only purchases the assets of the business and assumes none of the liabilities. So, in order for the buyer to take ownership of the assets free and clear of any encumbrances, all the liens must be paid off.

Lenders don’t always move quickly when it comes to payoff letters. It can take several days or even a week to issue a payoff letter, and sometimes lenders won’t release it until just before closing. If the buyer’s attorney (if the buyer is not using any financing to fund the purchase) or the buyer’s lender (if the buyer is financing the purchase) does not have the payoff letter(s) in hand before closing, the deal will not proceed.

Some best practices for dealing with payoff letters are the following:

1. The buyer’s attorney should perform a UCC search early in the process (right as the purchase documents are starting to be drafted and reviewed) to determine if there are any liens against the practice or assets. The buyer’s lender will also perform this search to verify and confirm what the buyer’s attorney found.
2. The seller should start requesting payoff letters as soon as the closing date is decided.
3. Like we discussed earlier, the payoff letters might only be good for the next 10 to 30 days. If the anticipated closing is longer than the good-through date, the seller should make a note to follow up with the lender again when the time is right closer to closing.

Payoff letters are one of those small details that can make a big difference in your closing timeline. By planning ahead, you can prevent unnecessary delays and ensure a smooth, successful dental practice sale. If you’re preparing to buy or sell a dental practice, contact Finn Legal to make sure every step, including the handling of any payoff letters, is handled correctly from start to finish.

Learn which contracts a dentist typically assumes when buying a dental practice. Finn Legal helps dentists navigate asset purchase agreements with confidence.

Each week, I share a quick insight from my dental law practice. This week’s topic: what contracts are typically assumed in a dental practice asset purchase agreement.

Scenario: We have a client buying a dental practice on the West Coast. It is an asset purchase deal, as is the case in most scenarios when the buying dentist is purchasing essentially the whole practice of the selling dentist’s business. In a dental asset purchase deal, the buyer will purchase substantially all the seller’s assets, but will not assume many, if any, of the liabilities of the practice. Our client wanted to know what are typical liabilities that are assumed in a dental asset purchase deal.

Answer: Here are some contracts that might be assumed by a buyer in a dental asset purchase:

1. The Office Lease – The buyer will either assume the seller’s existing lease through the landlord’s consent and an assignment or negotiate a new lease with the landlord. Since the location of the practice is essential to the goodwill that the buyer is purchasing, the lease is one of the most important assumed contracts.
2. Equipment Leases – Many practices lease equipment or have maintenance contracts for chairs, autoclaves, IT systems, or digital X-ray machines. These contracts can be assigned to the buyer; however, each vendor typically must consent in writing.
3. Practice Management Software - Most practices run on systems like Dentrix, Eaglesoft, or Open Dental. These agreements are often assumed to maintain operational continuity, but software licenses can be tricky. Some vendors allow transfers; others require a new subscription.
4. Employment Agreements – If the buyer plans to retain the seller’s staff, those employees are typically terminated on the day of closing and immediately rehired by the buyer after closing. However, certain contracts like an associate’s employment agreement may be assigned to the buyer.
5. Vendor and Supply Contracts – Relationships with dental suppliers like Henry Schein, Patterson, or Benco can often be continued. Buyers may assume these contracts if they include favorable pricing or credit terms.
6.  Service Contracts – A dental office relies on multiple recurring services. Some examples of this include janitorial, biohazard waste disposal, IT maintenance, laundry, and equipment calibration. These contracts are usually assumed so the buyer can walk into a fully operational office on day one.
7. Patient Financing Agreements – If the seller offers third-party financing through CareCredit or similar companies, those agreements can be assumed. It’s an easy way to maintain the same payment options for patients and preserve goodwill.
8. Equipment Warranties – If the equipment being purchased is still under warranty, those warranties are usually assigned to the buyer so they can take advantage of any remaining coverage.
9. Marketing, Phone and Domain Agreements – For continuity in communication, a lot of the time buyers will assume contracts related to the practice’s phone numbers, answering services, and website domain and hosting.
10. PPO and Insurance Contracts – It should be noted that these types of agreements cannot be assigned because they are unique to each dentist and their tax ID. The buyer will need to re-credential with the carriers under their new legal entity.

When purchasing a dental practice, not every contract is worth assuming. However, he right ones are essential to keeping the business running smoothly. Each agreement should be reviewed carefully to confirm whether it can be assigned, whether the terms are favorable, and whether third-party consent is required.

At Finn Legal, we help dentists navigate every step of the practice transition process. If you’re considering buying or selling a dental practice, contact Finn Legal today to schedule a consultation and ensure your transaction is structured for long-term success.

Learn why the “No Adverse Events” clause is a key closing condition in dental asset purchase agreements. Protect your investment and avoid post-closing surprises.

Each week, I share a quick insight from my dental law practice. This week’s topic: the “No Adverse Events” clause and why it matters when you’re buying a dental practice.

Scenario: We had a client that had been negotiating and working towards buying an oral surgery practice in the Northeast. Due to some difficulties in coming to an agreement on the valuation of the real estate that was to be purchased as part of the deal, the parties signed the asset purchase agreement in January but were not anticipating closing on the deal until June of the same year. As we got closer to the closing date in June, the lender, as is lending protocol, requested year-to-date profit and loss statements and year-to-date production/collection reports. It was discovered in these reports, a week before we were set to close, that the seller had let collections drop by a staggering 40%. The seller thought the deal was done and dropped his clinical hours significantly during the six months between signing the purchase agreements and closing. Once this was discovered, our client wanted to know what his legal options were.

Answer: In a scenario like this, there are typically two ways to proceed for the buyer. The first is to re-negotiate the purchase price. Practically and legally, this is very straightforward. The buyer and seller decide on a new purchase price to account for the drop in the collections and then an amendment to the purchase agreements is drafted to reflect the new purchase price agreed by the parties. 

The second way for a buyer to proceed, which our client ended up doing, is to rely on the “No Adverse Events” clause in the asset purchase agreement. When buying a dental practice, one of the key conditions that must be satisfied before closing is the “No Adverse Events” clause. This clause is designed to protect the buyer from unexpected negative changes in the practice between signing the asset purchase agreement and the closing date.

A typical provision might read something like:

“There has not been any event or condition of any character on or before the Closing Date that has materially and adversely affected the financial condition, business, Purchased Assets or the Practice.”

In plain terms, this means that the seller must maintain the practice in substantially the same condition as it was when the buyer agreed to purchase it. The practice should not experience any material decline in staff, production, collections, patient base, or other key business elements before closing.

This clause is important for three reasons:

1. Protects the buyer’s investment. If the practice loses staff, patients, or experiences a sharp drop in production after the agreement is signed, the buyer could end up purchasing a business worth far less than expected.
2. Maintains business continuity. This provision encourages the seller to operate “business as usual” until closing, ensuring the buyer acquires a stable and fully functioning practice.
3. Gives the buyer leverage. If a significant adverse event occurs the buyer may have the right to delay or even terminate the closing.

Buying a dental practice involves a lot of moving parts, and this is one clause you definitely don’t want to overlook. A well-drafted “No Adverse Events” condition can save you from big headaches down the road.

If you’re in the process of buying or selling a dental practice, reach out to Finn Legal. We help dentists navigate every step of the deal with confidence.