Buying an existing dental practice can be a faster path to ownership than starting from scratch, but it comes with financial complexity that goes well beyond reviewing patient charts and equipment lists. A CPA experienced in dental practice transitions can make the difference between a smart acquisition and a costly mistake that haunts you for years afterward.
Financial due diligence should begin long before you sign a letter of intent with the seller. Reviewing several years of profit and loss statements, tax returns, and accounts receivable aging reports helps verify that the practice’s reported revenue and collections match reality rather than relying solely on the seller’s own summary figures. It’s also essential to evaluate overhead ratios against industry benchmarks specific to dental practices — a practice with unusually high supply costs or staffing expenses relative to revenue may signal operational inefficiencies or, in some cases, projections that were inflated to make the practice appear more attractive to a buyer.
How the deal is structured matters just as much as the negotiated price itself. An asset purchase, where you buy specific assets like equipment, patient records, and goodwill rather than the legal entity itself, often carries different tax treatment and liability exposure than a stock purchase of the existing practice entity. Buyers frequently prefer asset purchases for the more favorable depreciation treatment on acquired assets and the reduced risk of inheriting the seller’s prior liabilities, malpractice history, or unresolved disputes tied to the old entity.
Financing terms, whether through an SBA loan designed specifically for practice acquisitions, conventional bank financing, or seller financing where the previous owner carries part of the note, also carry meaningful tax implications worth modeling in advance with a CPA’s help. And once the transition happens, proper allocation of the purchase price across tangible assets, goodwill, and any non-compete agreement with the seller significantly affects your future tax deductions and how quickly you can recover your investment through depreciation.
A successful practice acquisition depends on financial clarity from day one. Contact Ash CPA for guidance through every stage of buying a dental or medical practice.
