A physician or dentist joining an established practice usually focuses on the clinical fit: the patient base, the location, the existing team. The legal structure underneath that arrangement, share purchase versus asset purchase, the professional corporation’s existing liabilities, what happens if either party wants out later, gets far less attention until it becomes a problem nobody planned for. By the time that happens, the purchase price has usually already changed hands.
Key Takeaways
- A practice purchase can be structured as a share purchase or an asset purchase, and the two carry very different liability and tax consequences.
- Professional corporation rules in Ontario add a layer of complexity that a standard business purchase doesn’t involve.
- A restrictive covenant limiting where a departing practitioner can practise afterward needs specific, reasonable boundaries to hold up if ever challenged.
- The practical next step: have a lawyer review the purchase structure and any existing corporate liabilities before signing a letter of intent, not after.
Why Does the Purchase Structure Actually Matter?
A share purchase means buying into the existing professional corporation itself, along with whatever history, contracts and liabilities already sit inside it. An asset purchase means buying specific assets, equipment, patient records, goodwill, without necessarily inheriting everything else the corporation has been party to. Each structure has different tax treatment and different exposure to whatever happened in the practice before the buyer arrived. Neither is automatically the right answer; it depends on what’s actually inside the existing corporation and what a buyer is comfortable inheriting along with it.
How Does a Healthcare Business Lawyer’s Work Differ Here?
A transaction involving healthcare business lawyer in Kitchener services, like the kind Kay Law provides, involves more than a standard business purchase agreement. Professional corporation rules specific to regulated health professions in Ontario govern who can hold shares, how the corporation can be structured, and what happens to registration and permits when ownership changes. A lawyer working through these transactions regularly is better positioned to flag the professional-corporation-specific issues that a general commercial purchase agreement wouldn’t necessarily catch, since the rules governing a dental or medical corporation differ meaningfully from those governing an ordinary business sale.
What Should Due Diligence Actually Cover?
Before any agreement is signed, a buyer’s lawyer typically reviews a specific set of documents and questions:
- The professional corporation’s existing contracts, leases and any outstanding liabilities.
- Whether the practice’s regulatory college registration and any facility permits will transfer or need to be reapplied for.
- The valuation methodology behind the purchase price, and what it’s actually based on.
- Any existing associate or employment agreements that would carry over.
- Whether there are any pending complaints, claims or disputes tied to the practice.
- How accounts receivable and any outstanding patient or client balances get handled at closing.
Skipping this step because a deal feels straightforward is usually where problems surface later, often well after the purchase price has already changed hands and the new owner has no leverage left to renegotiate.
What Happens If a Partner Wants Out Later?
A purchase agreement should address more than the initial transaction. What happens if a co-owner wants to sell their share in five years? What restricts a departing practitioner from opening a competing practice nearby, and for how long? A restrictive covenant needs specific, reasonable geographic and time limits to actually hold up if it’s ever challenged; an overly broad one risks being unenforceable when it matters most. These are the terms worth negotiating before the initial purchase closes, not after a disagreement has already started and both sides are working from different assumptions about what was agreed.
Getting the Structure Right From the Start
The clinical and financial fit of a practice purchase usually gets plenty of attention. The legal structure underneath it, and what happens if circumstances change later, often gets far less. Both matter equally once the transaction is actually signed and the new owner is living with whatever terms were negotiated.
Kay Law works with physicians and dentists across Waterloo Region on practice purchases and professional corporation structuring, reviewing the legal side of a transaction before it becomes the clinical team’s problem to untangle later.
