For many veterinary practice owners, the decision to sell their practice represents one of the most significant milestones in their professional journey. Whether a sale is imminent or still several years away, early planning and proper legal preparation are key to ensuring a smooth transaction and maximizing the value of the business. This article outlines the essential legal, financial, and operational steps practice owners should take when preparing for a potential sale.
Planning Ahead: Operate as if You’re Always for Sale
While industry standards suggest that veterinary practice owners begin preparing for a sale at least five years in advance, a broader principle often cited in business is to operate your practice as though it is always ready for sale. This mindset encourages consistent attention to operational efficiency, financial transparency, and legal compliance—factors that not only facilitate an eventual sale but also enhance the practice’s overall performance and long-term value.
Tidy Up Your Entity Documents
First, confirm your practice’s legal entity is in good standing with the state. Make sure your annual filings are up to date and that your records are complete. If you’re a corporation, you should have your articles of incorporation, bylaws, stock certificates, and stock ledger on hand. For LLCs, be sure your certificate of formation and operating agreement are accessible.
Have a “doing business as” (DBA) name? Make sure it’s properly registered and documented. If it’s been decades since your practice was formed, these records may be buried—so start digging now.
For multi-owner practices, review any buy-sell or partnership agreements. These documents typically outline what must happen when someone wants to sell—think valuations, approvals, and restrictions. If you don’t have one in place, now’s the time to consider a contribution agreement, which outlines how liabilities and post-closing issues will be shared. Many corporate buyers expect one.
Real Estate: Personal or Entity-Owned?
If your practice owns the building, consider placing it in an LLC (if it’s not already) to protect your personal liability. After the sale, you’ll likely lease the space to the buyer. Having an LLC as the landlord simplifies the landlord-tenant relationship. Check that your real estate entity is also in good standing.
Clean Up Your Financials
A buyer wants reliable financial data. Work with your accountant to:
- Ensure all taxes are filed and paid
- Reconcile and clean up accounts receivable
- Remove uncollectible balances and clarify old client credits
Old credits may be reimbursed by you at closing, so you want to be sure they’re accurate.
You’ll also want to prepare an “addback” schedule—expenses that are not necessary for the practice’s operation. These include personal vehicles, family members on payroll, or one-time facility renovations. By identifying these, you help show the buyer the true profitability of your practice.
Equipment & Maintenance
Take inventory of all leased or loaned equipment—oxygen tanks, printers, security systems, in-house lab analyzers, and more. Make sure maintenance agreements and warranties are up to date and available. Remove assets that are no longer in use from your books.
Vehicles
If your practice owns vehicles (especially for ambulatory or farm visits), ensure titles are in the business’s name and that they’re properly insured under the business. If your personal car is registered under the practice, consider transferring it back to your name or flag it as an excluded asset in the sale.
Insurance & Risk Management
Ensure your business has active and appropriate coverage: general liability, property, workers’ comp, professional liability, and more. All veterinarians—employees and contractors—should be covered.
Ask your broker if your policies are claims-made or occurrence-based. If they’re claims-made, you may need to purchase tail insurance to cover claims filed after the sale but related to events prior to closing.
Licenses and Permits
Buyers will ask for proof that your practice is licensed and compliant. This includes:
- Radiation permits (for X-ray/dental)
- Medical waste registration
- Fire inspection approvals
- Certificate of occupancy
If you don’t have these on hand, request copies now from your town or vendor.
Employees & HR
Create a current employee census with roles, compensation, and benefits. Buyers often evaluate how competitive your compensation is and whether raises or adjustments are expected.
If you don’t already have one, consider drafting or updating your employee handbook. Buyers may request this to ensure your HR practices comply with current laws.
Review contracts for your associate DVMs. Signed agreements—especially those with assignable non-compete clauses—can increase buyer confidence that key team members will stay post-sale.
Vendor Contracts
Be cautious about signing new vendor agreements if a sale is on the horizon. Buyers don’t have to assume your contracts, and many vendors impose steep penalties for early termination—especially in lab or equipment contracts. Before signing anything new, make sure it’s cancelable without penalty or assignable to a buyer.
Now is also a good time to gather all current vendor contracts. You’ll need to provide copies during due diligence. Typical contracts include:
- Lab services
- Credit card processing
- Medical waste and recycling
- Security and alarm systems
- Website maintenance and hosting
- HVAC and pest control services
Also, check for prepaid services or warranties that extend beyond closing. If you’ve paid upfront for something that benefits the buyer post-sale, you may be entitled to reimbursement. Likewise, if you’ve earned rebates that arrive after the sale, ensure those payments go to the seller.
Selling a veterinary practice requires thoughtful planning and thorough preparation across all aspects of the business. From entity compliance and financial accuracy to human resources and contractual obligations, every detail matters. A well-prepared practice not only enhances its appeal to potential buyers but also mitigates legal and operational risks that can derail a transaction.
Our National Veterinary Law Group regularly assists clients with the legal aspects of veterinary practice sales, including due diligence, deal structure, associate contracts, and regulatory compliance. If you are contemplating a sale or want to ensure your practice is positioned for future opportunities, we encourage you to contact our team to schedule a confidential consultation.