Buying a Medical Practice in California? Know the Difference Between Purchasing the Business and Purchasing the Assets
The California Health Care Foundation reports that approximately 75,000 physicians are in active practice in our state. Are you a doctor who is considering buying a group medical practice? It is crucial that you ensure the transaction is structured properly. You could buy the entire business or, potentially, you could purchase its assets. Here, our California business law attorney explains the key points to understand about the differences between purchasing the company and purchasing the company’s assets.
What Does it Mean to Purchase a Business?
Purchasing a business means acquiring the entire company, including all its assets, liabilities, and operational responsibilities. As the buyer, you effectively step into the shoes of the previous owner. You get the medical practice and its existing contracts, but you also take on its debts, and legal obligations. Comprehensive due diligence is especially important when buying an entire medical practice.
What Does it Mean to Purchase the Assets of a Business?
Purchasing the assets of a business involves buying specific assets without acquiring the company itself. In an asset purchase, you select which assets to acquire—such as medical equipment, patient relationships, and intellectual property—while generally avoiding the company’s liabilities. However, you cannot assume the company’s contracts or the goodwill it has built.
Choosing the Best Option for Buying a Medical Practice in California
Pros of Buying a Business
- Seamless transition: Acquiring the entire business allows for uninterrupted operations, minimizing disruptions for patients and staff.
- Retention of contracts: Existing agreements—such as insurance provider contracts and leases—run with the business itself.
- Established reputation: Goodwill matters. You inherit the practice’s brand identity and patient goodwill.
Cons of Buying a Business
- Assumption of liabilities: You take on all the business’s debts and legal obligations, including any undisclosed or contingent liabilities.
- Complex due diligence: Thorough investigation is required to uncover financial, legal, and regulatory issues, which can be time-consuming and costly.
- Regulatory compliance challenges: Navigating California’s healthcare regulations for ownership transfer can be complex.
Pros of Buying the Assets of a Business
- Selective acquisition: You can choose specific assets to purchase, allowing you to exclude unwanted equipment or obligations.
- Reduce liability risk: As a rule, you can avoid assuming the seller’s liabilities, reducing your exposure to potential legal and financial risks.
Cons of Buying the Assets of a Business
- Operational disruption: Transferring assets may necessitate re-establishing contracts, obtaining new licenses, and renegotiating insurance provider agreements.
- Patient continuity concerns: You may face major challenges in retaining patients, as transferring medical records requires patient consent under privacy laws.
Speak to Our California Business Lawyer Today
Lynnette Ariathurai is a business attorney with extensive experience working with owners of medical practices. If you are considering buying a medical practice, we are here to help. Call us now or contact us online to arrange your confidential, no obligation consultation. From our Fremont office, our firm works with medical practices throughout the Bay Area.
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