New Dentist Buying Into a Clinic in Ontario: Legal Issues To Review

You have been working as an associate for a while, and now the practice owner is talking about bringing you on as a partner or selling you shares in the clinic. It feels like the next step, and it might be the right move. But before you sign anything, there are a number of legal issues worth slowing down for.

Buying into an existing dental practice in Ontario is not the same as signing an associate agreement. You are taking on ownership, and ownership generally comes with more rights, but also more responsibility and more risk than an associate role usually carries. This article walks through some of the main legal issues a new dentist should review before buying in.

Understand What You Are Actually Buying

Buy-in deals are usually structured in one of two ways: a share purchase, where you buy shares in the practice's professional corporation, or an asset purchase, where you buy an interest in specific assets of the practice. Each structure can carry different tax, liability, and ownership consequences. In some cases, you may be buying into a holding company or a numbered company rather than the clinic directly. Understanding exactly what you are purchasing, and from whom, is generally the starting point before anything else makes sense.

Look Closely at the Valuation

How was the value of the practice determined? Buy-in prices are often based on a percentage of revenue, an earnings multiple, or a formal valuation. Depending on the facts, the figure presented to you may or may not reflect an independent or current assessment of the practice. You may want to ask whether an independent valuation was prepared, what method was used, and whether you have the right to obtain your own valuation before agreeing to a price.

Shareholder Rights and Decision-Making Power

Owning shares does not automatically mean having an equal say in how the practice is run. A shareholders' agreement, if one exists or is being drafted, typically sets out how decisions are made, including hiring, spending, scheduling, and major changes to the practice. You should review whether decisions require unanimous consent, a majority vote, or are left mostly to the founding dentist. Without clear terms, a minority shareholder may end up with limited influence over the clinic, even after investing significant money.

Existing Debt and Financial Obligations

Practices sometimes carry debt, whether from equipment loans, a line of credit, or an earlier buy-out. Depending on how the deal is structured, you may be taking on a share of that debt, or you may become responsible for obligations of the corporation going forward. It is worth asking for a clear financial picture of the practice, including outstanding loans, equipment leases, and any personal guarantees you may be expected to sign.

The Lease and the Premises

If the clinic operates out of leased space, the lease terms deserve a careful look. Consider how much time is left on the lease, whether the rent is reasonable, and what happens if the lease is not renewed. In some cases, new owners are asked to personally guarantee the lease, which can carry real risk if the practice later runs into financial difficulty.

Employment and Associate Agreements Already in Place

If the practice has other associates, hygienists, or staff, it helps to understand what agreements are already in place and whether buying in changes your obligations to them. You may also want to review your own associate agreement, if one currently governs your role, and how, or whether, it will be replaced once you become an owner.

Non-Compete and Non-Solicit Clauses

Buy-in agreements often include restrictions on competing with the practice or soliciting patients and staff if you eventually leave. These clauses can vary widely in scope, duration, and geographic area. Whether a particular non-compete or non-solicit clause would hold up can depend heavily on its specific wording and the surrounding circumstances, so it is worth having a lawyer review these provisions rather than assuming they are standard or fair.

Exit Rights: Planning for the Day You Leave

At some point, you may want to sell your shares, retire, or move on to something else. Well-drafted buy-in agreements address this in advance, including how shares are valued on exit, who has the right to buy them, and what timelines apply. Without this kind of planning built in early, leaving a practice later can become complicated and, in some cases, contentious.

What Happens If the Relationship Breaks Down

Not every partnership works out. Disagreements between dentist-owners can arise over money, patient care decisions, or the direction of the practice. It is worth checking whether the agreement includes a process for resolving disputes, and what happens to your shares and your role if the relationship cannot be repaired. Having this addressed before a conflict arises is generally easier than trying to negotiate it during one.

A Few Practical Reminders

• Ask for full financial disclosure of the practice before agreeing to a price.

• Request an independent valuation, or at least a clear explanation of how the figure was calculated.

• Read the shareholders' agreement and the lease closely, not just the headline buy-in price.

• Clarify decision-making power and voting rights before you commit, not after.

• Have a lawyer review the full agreement, including any non-compete or non-solicit clauses, before you sign.

Buying into a dental practice can be an exciting milestone, and for many dentists it is a meaningful step toward building something of their own. But it is also a significant legal and financial commitment. Taking the time to understand what you are agreeing to, and getting the right advice before you sign, can make a real difference to how things go later.

FREQUENTLY ASKED QUESTIONS

Q: What is the difference between buying shares in a dental practice and buying its assets?

A: Buying shares generally means you are purchasing an ownership interest in the corporation that owns the practice, including its existing contracts and history. Buying assets generally means you are purchasing specific things, such as equipment or goodwill, without necessarily taking on the corporation's past liabilities. Which structure applies to your deal, and what it means for you, depends on how the transaction is set up. You should speak with a lawyer to understand the difference in your specific situation.

Q: Do I need my own lawyer if the practice owner already has one?

A: In most cases, yes. The lawyer acting for the existing practice owner or the corporation is generally representing their interests, not yours. Having your own lawyer review the agreement, the valuation, and any shareholder or lease documents can help you understand what you are agreeing to and spot terms that may not be in your favour. This is one of the more important steps for a new dentist buying into a practice.

Q: What happens to my buy-in investment if the partnership does not work out?

A: This depends heavily on what the shareholders' agreement or partnership agreement says. Some agreements include a clear process for valuing and buying back shares if a dentist-owner wants or needs to leave. Others may be silent on this, which can make an exit more difficult and uncertain. Reviewing these provisions before you buy in, rather than after a dispute arises, is generally a good idea.

Q: Are non-compete clauses in dental buy-in agreements enforceable in Ontario?

A: It depends on the specific wording, scope, and circumstances of the clause. Some non-compete or non-solicit provisions may be enforceable, while others may not hold up if they are overly broad or unreasonable. This is a fact-specific question that is not something you should assess on your own. A lawyer can review the specific clause in your agreement and advise on how it may apply to your situation.

CONTACT

If you are thinking about buying into a dental practice in Ontario, DevLaws can help you review the agreements before you sign. Contact DevLaws today to schedule a consultation and get a clearer picture of what you are agreeing to.

contact@devlaws.com  |  +1 437 290 0424  |  devlaws.com

DISCLAIMER

This article is provided for general information purposes only and does not constitute legal advice. It is not intended to create a lawyer-client relationship. Laws and regulations can change, and the information here may not reflect the most current developments. Every situation is different, and the information in this article may not apply to your specific circumstances. If you are considering buying into a dental practice or have questions about a dental practice transaction in Ontario, you should consult a qualified lawyer for advice tailored to your situation. DevLaws does not guarantee any particular outcome or result.