Recent Case Serves as Reminder to Take Care in Structuring Sales of Physician Practices

By: Ralph Levy, Jr.

Physicians Should Carefully Review Documents to Verify Information Accurately Reflects the Desired Structure of the Sale.

Over the past few years, hospitals, health systems, and practice management companies have increased their efforts to acquire physician practices. Moreover, physician groups are increasingly interested in selling their practices to these interested purchasers. The primary reasons for this trend are varied but in general are prompted by an increased focus the delivery medicine a seamless integrated system by health providers.  

For physicians or other health care providers that are considering practice sales, care should be taken in structuring the sale to minimize the federal taxes payable as a result of the sale.  In general, there are two choices to structure the practice sale:

1)  Stock sale: Under this sale structure, which works only if the practice is incorporated, the physicians sell stock in their professional corporation or professional association to the interested purchaser.

2)  Asset sale: Under this sale method, the practice itself sells its tangible and intangible assets to the purchaser. In addition to these two choices, the sale can be structured as a hybrid using a combination of these sales methods. A final and much less common option would be for a portion of the sale consideration to be paid by the purchaser to one or more selling physicians and characterized as a sale of personal goodwill.

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Ralph Levy, Jr. is Of Counsel in the Nashville TN office. He may be reached at 615-620-1733.