If you are selling a medical practice, here are seven questions you need to work through with your business lawyer.
Transferring ownership of a car or a house in Manhattan can be a hassle. There are many details, and sellers often become a little frustrated with all of the hoops through which they need to jump. Selling a business is even more complicated, particularly when it is a medical practice.
The importance of hiring an attorney
Whether you are retiring, transferring your practice to a successor or selling your business outright, the assistance of an experienced business lawyer can be invaluable as mistakes during the process can be quite costly. A forgotten state filing, an omitted step in the notification process or a poorly drafted contract provision could throw your carefully laid plans out the window.
Questions to review with your lawyer
Choose a lawyer who routinely handles business law matters in the state where your practice is located. Think about your desired end result before your initial consultation, and ask the following questions:
- How and to whom should I give notice? Some medical journals recommend giving your staff members 90-days notice. However, there is the risk that they may take new jobs while you still need them. Severance packages or incentives can help, but you may also want to retain temporary staffers. Notifying your patients is more complicated. You will need to include details about continued access to their medical records as well as transitioning their care to your successor or other medical professionals.
- Is it better to sell stock or assets? There are advantages and disadvantages to both, depending on your circumstances. A stock sale allows the buyer to purchase the entire professional entity, including the assets, liabilities and outstanding contracts. An asset sale does not automatically transfer the liabilities to the buyer.
- What are my tax considerations? Tax consequences will vary depending on your corporate form and your transfer type. If selling stock, you will pay taxes only on the appreciation of your shares. If the buyer purchases your assets, the buyer gets a stepped-up basis in those assets.
- Will my liability continue after the transition? Since allegations of medical malpractice may not arise until far in the future, a tail insurance policy may be necessary to cover the intervening years until the applicable statutes of limitations expire.
- How much is my business worth? Your relationship with your patients is probably worth far more than the physical assets of your practice. While there are a number of ways to establish the value, your after-tax consequences may determine what your true selling price will be.
- What should I know about licensing and fee splitting arrangements? State laws vary. New York laws prohibit fee splitting arrangements between licensees, and only licensed professionals can provide professional medical services. If you are staying on to help your successor, your agreement needs to be drafted carefully in order to comply with state laws.
- Which documents will I need? Your lawyer will help you determine which contracts and agreements will best protect you during and after your transition. The provisions of each will depend on your unique situation.
These are only a few of the issues you may face during your transition. In addition, your questions will be quite different if two or more businesses are merging or if you are retiring without a successor.
An experienced business law attorney at Cox Padmore Skolnik & Shakarchy LLP will help you understand your options and guide you through the entire process. The firm provides services to clients in New York, New Jersey and Colorado.