Most practice owners assume that selling is the straightforward part. After all, the hard work of building the practice is already done. In reality, the legal side of a sale catches many experienced professionals off guard. These five mistakes are more common than most sellers expect. Knowing what to watch for can help you avoid unnecessary delays.
Skipping a proper business valuation
An accurate valuation is an important part of your sale. Without one, you may risk leaving money on the table. While Tennessee law does not require an independent valuation, it prohibits misleading and deceptive practices in business transactions. A professional valuation can help keep the price fair, transparent and well-documented from the start.
Underestimating licensing and regulatory requirements
Selling a licensed practice in Tennessee involves more than signing a purchase agreement. Most professional licensing boards set specific rules for ownership transfers. Before finalizing any agreement, verify the licensing requirements that apply to your profession and ensure that all necessary documentation is completed. Failing to meet these requirements can delay or even invalidate your sale.
Failing to review restrictive covenants
Before listing your practice for sale, carefully examine any non-compete agreements or restrictive covenants in place. Tennessee law enforces reasonable non-compete clauses. This means existing agreements could limit where the buyer can practice.
Similarly, your own employment contracts may restrict your post-sale activities. These overlooked details often surface during negotiations, potentially killing deals at the last minute.
Mishandling patient or client records
Records transfer is one of the most sensitive steps in selling a medical or dental practice. Tennessee law requires patients to be properly notified when their records are transferred to a new provider. Skipping or mishandling this step can potentially lead to legal problems and harm the reputation you built over the years.
Ignoring the tax structure of your sale
The structure of your sale directly impacts your tax burden. Many sellers focus solely on the purchase price. However, federal capital gains taxes can significantly reduce your actual proceeds. Reviewing the tax implications of the transaction early can help you avoid unexpected costs. This can maximize what you take home.
Protecting your sale with proper planning
These mistakes have disrupted many practice sales, costing sellers money and peace of mind. Knowing these common pitfalls can help you avoid them. Addressing these issues early can help keep the sale on track.