How to Sell a Dental Practice in California: Key Legal Steps

Selling a dental practice is one of the most significant transactions of a dentist's career. Whether you are retiring, relocating, or pursuing a new opportunity, the sale process involves far more than finding a buyer and agreeing on a price. California dental practice sales carry specific legal and regulatory considerations that can affect the value of your practice and the enforceability of your deal.

Working with experienced healthcare transaction counsel early — along with your CPA and practice broker — helps you avoid costly surprises and keeps the transaction on track.

Start With a Realistic Valuation

Before you talk to buyers, understand what your practice is worth. Most dental practices are valued using a combination of methods, including a multiple of collections or EBITDA, adjusted for equipment, accounts receivable, and goodwill. A formal valuation or appraisal from a qualified dental practice appraiser gives you a defensible asking price and strengthens your negotiating position.

Keep in mind that valuation is only the starting point. Deal structure — how much is paid in cash at closing versus seller financing or an earnout — can matter as much as the headline price.

Prepare for Due Diligence

Serious buyers will examine your practice closely. Expect requests for several years of tax returns and profit-and-loss statements, production reports, staff and associate agreements, equipment lists and leases, office lease documents, payer contracts, and compliance records.

Organizing these materials before you go to market speeds up the process and signals to buyers that the practice is well run. Gaps in documentation often become leverage for price reductions.

The Letter of Intent

Once you have an interested buyer, the parties typically sign a letter of intent (LOI). The LOI outlines the proposed purchase price, deal structure, timeline, and key contingencies such as financing and due diligence.

Most LOI provisions are non-binding, but certain terms — like confidentiality and exclusivity — usually are binding. Because the LOI sets the framework for the definitive agreement, it deserves careful legal review before you sign.

Negotiating the Asset Purchase Agreement

Most dental practice sales are structured as asset purchases rather than stock purchases. The asset purchase agreement (APA) is the core legal document of the transaction. Key provisions include:

• Purchase price and payment terms, including any seller note or earnout
• Allocation of the purchase price among assets, which has significant tax consequences for both parties
• Representations and warranties about the condition of the practice
• Covenants, including any non-compete or non-solicitation obligations
• Closing conditions, such as landlord consent to lease assignment and payer enrollment matters

Each of these terms is negotiable, and the details matter. An experienced attorney can help you understand the tradeoffs and protect your interests.

Regulatory Considerations in California

California imposes specific rules on dental practice ownership and transfers. Dental practices generally must be owned by licensed dentists, which limits the pool of eligible buyers and affects deal structure. The sale may also trigger requirements related to patient records, including proper notice to patients and compliant transfer or retention of records under HIPAA and California law.

If the transaction involves a management services organization or DSO-affiliated buyer, additional structuring considerations apply to keep the arrangement compliant with California's corporate practice of dentistry rules.

Employment and Staff Matters

Your team is part of what makes the practice valuable. Decide early how staff transitions will be handled — whether employees will be offered positions by the buyer, how accrued benefits and PTO will be treated, and what notices are required under California employment law.

If you have associate dentists with employment or independent contractor agreements, review those contracts for assignment provisions, non-competes, and compensation terms that could affect the sale.

Plan the Closing and Transition

A smooth closing requires coordination among the buyer, seller, lender, landlord, and advisors. Build in time for final walkthroughs, funds transfer, and the execution of closing documents. Many sellers also agree to a transition period — remaining available for a defined time after closing to introduce the buyer to patients and staff, which can support patient retention and, in some deals, earnout payments.

Selling your dental practice is a complex process, but with the right preparation and advisors, it can be a rewarding one. Mostofi Law Group represents dentists and dental practices in practice sales and acquisitions throughout California. To discuss your transaction, call us at 1-866-247-9420.

This post is for general information only and is not legal advice. Every transaction is different — consult a qualified attorney about your specific situation.