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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
