Buying a Dental Practice in Ontario: Legal Checklist for Dentists

Purchasing a dental practice is one of the most significant investments a dentist will make in their career. While the opportunity to own and grow a clinic can be exciting, buying a dental practice also involves complex legal, financial, and regulatory considerations.

Before signing a purchase agreement, dentists should ensure they understand the legal structure of the transaction, review key agreements, and conduct proper due diligence. Failing to do so can expose a buyer to significant financial risk or operational problems after closing.

Dentists considering the purchase of a dental clinic should review the structure of the transaction, understand the practice’s existing contractual obligations, and conduct proper legal due diligence.

1. Asset Purchase vs Share Purchase

One of the first legal questions in any dental practice acquisition is whether the transaction will be structured as an asset purchase or a share purchase.

Asset Purchase

In an asset purchase, the buyer purchases the clinic’s assets rather than the corporation itself.

Assets may include:

• dental equipment

• patient records

• goodwill

• office furniture

• leasehold improvements

The buyer typically forms a new corporation and acquires these assets from the seller.

Many buyers prefer asset purchases because they may reduce exposure to historical liabilities associated with the seller’s corporation.

Share Purchase

In a share purchase, the buyer acquires the shares of the corporation that owns the dental practice.

This means the buyer takes ownership of the existing corporation and all of its assets and liabilities.

Share purchases are sometimes preferred for tax reasons, but they also require more extensive due diligence because the buyer may inherit:

• existing debts

• contractual obligations

• potential legal claims

A lawyer can help determine which structure is appropriate for the transaction.

2. Conducting Legal Due Diligence

Before purchasing a dental practice, buyers should conduct thorough due diligence.

Due diligence helps ensure that the buyer fully understands the business they are acquiring and identifies any potential risks before completing the purchase.

Important areas of review include:

Corporate Records

The buyer should review the corporation’s legal structure, including:

• corporate minute books

• shareholder agreements

• historical corporate filings

Financial Obligations

Buyers should examine:

• existing loans or security agreements

• supplier contracts

• service agreements

Understanding these obligations helps ensure the buyer does not assume unexpected liabilities.

Employment and Associate Agreements

Many dental clinics employ staff or engage associates.

These agreements should be reviewed carefully to understand:

• compensation structures

• termination rights

• restrictive covenants

Poorly drafted agreements can create operational problems after the purchase.

Patient Records and Privacy Compliance

Dental practices must comply with privacy obligations when transferring patient records.

Buyers should ensure the transaction complies with applicable health information and privacy laws and that proper procedures are in place for handling patient information.

3. Reviewing the Dental Practice Lease

For many dental practices, the clinic lease is one of the most important agreements in the transaction.

Dentists purchasing a clinic should review the lease carefully to confirm:

• the remaining lease term

• renewal rights

• rent escalation clauses

• assignment provisions

Some leases require landlord consent before the practice can be transferred to a new owner.

If the lease cannot be assigned, the buyer may face significant challenges operating the clinic in the existing location.

4. Purchase Agreement Terms

The purchase agreement governs the entire transaction and should clearly address the rights and obligations of both parties.

Important provisions include:

Purchase Price and Payment Terms

The agreement should specify:

• total purchase price

• payment structure

• holdbacks or adjustments

Representations and Warranties

The seller typically provides representations and warranties confirming key information about the practice.

These may include statements regarding:

• financial records

• equipment ownership

• legal compliance

If these statements are inaccurate, the buyer may have legal remedies.

Transition and Support

Many purchase agreements include transition provisions requiring the seller to assist the buyer after closing.

This may include:

• introducing patients

• assisting with staff transitions

• helping with operational handover

These provisions can help ensure continuity of the practice.

5. Non-Competition and Non-Solicitation Clauses

Dental practice transactions often include restrictive covenants preventing the seller from competing with the clinic after the sale.

These provisions may restrict the seller from:

• opening another practice nearby

• soliciting patients

• recruiting employees

The scope of these restrictions must be reasonable in terms of geography and duration.

6. Regulatory and Professional Considerations

Dentists operating in Ontario must also consider professional regulatory requirements when acquiring a practice.

This may include ensuring:

• the buyer meets licensing requirements

• corporate structures comply with regulatory rules

• professional obligations to patients are maintained during the transition

Proper legal guidance helps ensure the transaction complies with applicable professional standards.

7. Why Legal Advice Matters in Dental Practice Transactions

Buying a dental practice involves more than simply signing a purchase agreement. The transaction can affect the buyer’s finances, professional obligations, and long-term business success.

Working with a lawyer can help dentists:

• identify risks before completing the purchase

• negotiate key agreement terms

• structure the transaction appropriately

• protect their interests during the acquisition

Legal advice early in the process can prevent costly disputes or unexpected liabilities later.

Speak With a Lawyer Before Buying a Dental Practice

Purchasing a dental practice involves significant financial and legal considerations. Before signing a purchase agreement, dentists should ensure that the terms of the transaction are properly reviewed and that potential risks are identified.

A lawyer can assist with:

• reviewing dental practice purchase agreements

• conducting legal due diligence

• negotiating key contract terms

• reviewing lease and associate agreements

• helping structure the transaction appropriately

Obtaining legal advice early in the process can help prevent costly disputes and protect your long-term investment.

Businesses across Ontario seeking guidance on commercial agreements may wish to consult a licensed lawyer such as those at Delta Law, a fully virtual law firm providing services throughout Canada.

Book a Consultation

Dentists considering the purchase of a dental practice should obtain legal advice before signing any purchase agreement. If you would like assistance reviewing the transaction or conducting legal due diligence, you can Book a Consultation to discuss your situation and next steps.