A Planning Guide for the Successful Retirement of Dentists
When the DSO or Corporate Entity
Comes Knocking at Your Door
Like most dentists you may have received letters or
calls from DSOs interested in buying your practice.
The decision to sell to them or not is for individual
reasons. The initial thought may be to get as much
equity out of the office as possible while maintaining
clinical income. However, there are many terms that
could influence the net result of your financial and
emotional outcome. The best advice is to hire a
consultant who has successful experience negotiating
terms that are fair to the seller.
Selling Your Practice to
A Family Member
Passing your practice on to a child who followed in
your footsteps may feel like the natural and logical
progression for your legacy, but there are several factors
that must be discussed first. Having your consultant
address and educate all parties on topics below can
help to avoid any adversarial feelings and
misunderstandings. This is a delicate situation and it
needs to be handled with care and understanding.
Here are some of the considerations:
• If the seller needs the proceeds from the sale for
retirement, the consultant can clarify and explain
why the practice cannot just be “turned over” from
an objective vantage point
• Being fair and equitable to all children, not just the
one who chose the same profession as their parent
• Communicate expectations and avoid assumptions
of what will be done with the practice
• Have an informed and unrelated third
party arrive at a fair market value
• There are different tax considerations
when selling to a family member
• Proceed with a method that avoids uncomfortable
“negotiations” among family members
When Multiple Partners Intend
to Retire at the Same Time
Without proper early planning that provides for and
spells out the terms and conditions for your practice’s
long-term exit strategies, it may be a problem for two
or more partners to retire simultaneously. Begin by
examining your original Operating Agreement to
determine if a simultaneous transition is even
discussed or permitted.
Among the considerations in a multiple
partner transition:
1 The transition could require a lengthier
time frame to accommodate a more complicated
search process that may involve partners
“competing” for their successor.
2 Two or more successors may require a much larger
debt service, making bank loans more difficult to
obtain.
3 It will be critical to ensure that key staff members
be retained by the new owner(s).
4 Specialty practices in this scenario will have these
challenges to a greater
degree than a GP practice
Partnerships Where One Partner Is
Ready to Retire but The Other(s) Is Not
If one shareholder is ready to retire, but the other
still plans to practice for several more years, reference
the original Operating Agreement to determine
and identify any mutual obligations. If the departing
shareholder needs to leave prematurely and quickly,
they may need to take a reduced price for their interest
in the practice and cooperate in finding a successor.
Approach the separation in a logical,
businesslike manner and leave
emotions aside. Moving forward,
the remaining shareholder must
now ensure that adequate and
appropriate planning and contractual
considerations are in place for a
successor shareholder.
MAY/JUNE 2020 | PENNSYLVANIA DENTAL JOURNAL 25