Selling a dental practice in Canada

A dental practice is built on patients who come back, a hygiene schedule that stays full, and a team that patients know. Buyers will want to see that collections are real, that associates and hygienists will stay, and that billing, records and corporate permits can move to a new owner without a gap. Here is what to expect and how to prepare.

What buyers look at first

Most buyers of a dental practice ask the same questions early. Have clear answers ready before you list:

• Production and collections. Two or three years by month. Buyers care most about what was actually collected, not only what was billed.
• Hygiene and recall. How full the hygiene schedule is, how many days of hygiene run each week, and how many patients are due or overdue for recall.
• Active patients. How many patients have been seen recently, how you define active, and how many new patients arrive each month.
• Who pays. The share of collections from private insurance, the Canadian Dental Care Plan and other programs, and patients paying directly.
• Dentists and team. What the owner, each associate and each hygienist produces, how they are paid, and who plans to stay.
• Space and equipment. The number of operatories, the lease, and the age of chairs, X-ray units, scanners and sterilization equipment.
• History. Any insurer audits, College complaints or open treatment plans.

Buyers will check these during due diligence, so it helps to gather them now. Our list of documents needed to sell a business is a good start.

Proving collections

Your practice management software holds the history, and buyers will want reports from it that match your bank deposits, your insurer remittances and your tax returns. Keep collections by provider and by type of work, such as hygiene, restorative and specialty procedures, because a practice that depends on one dentist or one kind of case carries more risk for a buyer.

If you treat patients yourself, show a fair wage for your own chair time and any personal costs run through the business as add backs with proof, and be honest about what it would cost to replace your days. Many buyers ask the selling dentist to stay for a period after closing to introduce patients, so think about what you are willing to offer. See the handover after selling.

Keeping associates and hygienists

Patients often stay because of the people they see. Gather each associate agreement and each employment agreement, check notice periods and any non solicitation or non competition terms, and think about when to tell your team. A buyer may ask key associates to sign new agreements before closing, or tie part of the price to them staying through an earn out or a holdback.

In British Columbia, section 97 of the Employment Standards Act says that when a business is sold, the employment of an employee is deemed continuous with the new owner. That matters for hygienists, assistants and front desk staff with long service. Talk to your lawyer about how employees and associates move over, and read what to tell employees when selling before you share the news.

Patient records

Charts are sensitive and hold much of the practice's value. The Dental Recordkeeping Guidelines from the British Columbia College of Oral Health Professionals say that under common law, and unless there is an agreement saying otherwise, the owner of a dental practice owns all patient charts. A dentist leaving or selling a practice should ideally give patients advance written notice of the change. If the outgoing dentist cannot, it becomes the incoming dentist's responsibility to tell patients that they hold their records.

The same guidelines say records with a most recent entry on or after June 1, 2013 must be kept for 16 years from the date of last entry, and records for minors for 16 years after the day the minor turns 19. Records last updated before June 1, 2013 follow transition rules. Appointment records, lab prescriptions, invoices and study models are part of what must be kept, and patients have a right to copies of their records. The purchase agreement should say who keeps the charts, for how long, and how patients and the College can reach them.

In British Columbia, section 20 of the Personal Information Protection Act allows personal information to move to a buyer as part of a sale without consent, but only what is needed, only under an agreement that limits how it is used, and after closing the people whose information was passed on must be told that the sale happened. During due diligence, share counts and summaries rather than patient names. See telling customers and suppliers.

Dental corporations in British Columbia

Dentists in BC are regulated by the British Columbia College of Oral Health Professionals, and a dentist needs a permit from the College before practising dentistry through a corporation. Under section 59 of the Health Professions and Occupations Act, all voting shares of a health profession corporation must be legally and beneficially owned by eligible licensees, or by companies whose voting shares are owned by eligible licensees and whose other shares are owned by eligible licensees or their family members. The College's bylaws list dentists, dental hygienists and denturists as eligible licensees.

This shapes how the deal is built. In a share sale, the bylaws say that before any transfer of a voting share in the corporation, or in a company that owns its voting shares, the corporation must apply to vary its permit. The College also says that if dental corporations are amalgamated, the new corporation needs a new permit, and that permit applications can take several weeks. In an asset sale, the buyer's own company needs its own permit before it starts practising. If your buyer is a group or company, ask your lawyer early how they plan to meet these rules. See asset sale vs share sale.

Other provinces have their own dental regulators and their own rules on corporations and records, so if your practice is outside BC, check with your provincial regulator and your lawyer.

Insurance billing, CDAnet and the Canadian Dental Care Plan

Most practices send claims electronically through CDAnet. The Canadian Dental Association says that when ownership changes, the new owner's role can be updated on the existing CDAnet office through its Practice Support Services website, and each dentist must subscribe to the services for each office they practise in. Insurers receive these changes in an update file the Association sends every two weeks, so start before closing. Claims must always go under the treating dentist's own number, never another dentist's.

The Government of Canada says participation in the Canadian Dental Care Plan is voluntary, and each oral health provider either signs up formally through Sun Life or submits claims to Sun Life one claim at a time. It is not something the buyer takes over with the practice. A buyer who wants to keep seeing plan patients should confirm their own participation and make sure Sun Life has the right payment details. Make a list of every payer and program you bill, and swap card terminals and bank details on the closing date. See transferring contracts and licences.

Equipment, leases and X-ray units

List every major item with its age and service history. Chairs, imaging units, intraoral scanners and other equipment are often leased or financed, so decide whether each will be paid out on closing or taken over by the buyer with the lender's consent. Software licences and lab accounts may also need new agreements.

The College says WorkSafeBC is the regulatory authority for radiation protection in British Columbia, and it expects compliance with Health Canada's Safety Code 30. WorkSafeBC's guideline says radiation surveys would not normally be more than three years apart, or five years for a typical bite wing unit operating at or below 70 kVp, and a survey is also needed if equipment is damaged or modified. Safety Code 30 places radiation safety with the owner, including registering equipment where the regulator requires it. Have recent survey reports ready, and ask WorkSafeBC or your provincial regulator what the new owner must do.

The lease and the space

Dental space is costly to build, with plumbing, compressed air and suction lines in each operatory, so the lease matters a great deal. Check how many years are left, any renewal options, whether the landlord must consent to an assignment, whether the use clause allows a dental practice, and any restoration terms at the end. See the commercial lease when selling.

GST/HST and PST

Under section 5 of Part II of Schedule V to the Excise Tax Act, a health care service rendered by a medical practitioner to an individual is exempt, and a medical practitioner includes a person entitled under provincial law to practise dentistry. Section 8 exempts dental hygienist services. The Act carves out supplies made for cosmetic purposes and not for medical or reconstructive purposes, so ask your accountant how this applies to services such as cosmetic whitening. Products you sell may be taxable for GST/HST and BC PST.

When the practice itself is sold in an asset sale, the section 167 election on Form GST44 can often remove GST/HST when the buyer acquires all or substantially all of what is needed to run the business, but it has conditions about registration, and many dental practices are not registrants because their services are exempt. Ask your accountant. In British Columbia, PST generally applies to taxable equipment, but not to goodwill. See taxes when selling a business.

A worked example

Questions to take to your lawyer and accountant

• Should this be an asset sale or a share sale, given the corporation permit rules?
• Can my buyer own the voting shares, and when do we file the permit variation?
• How do my associates, hygienists and staff move to the buyer, and what do their agreements allow?
• Who keeps the patient charts, for how long, and how are patients told?
• What happens to CDAnet, insurer payments and Canadian Dental Care Plan claims on the closing date?
• Which equipment is leased or financed, and should it be paid out on closing?
• Am I treating cosmetic services and products correctly for GST/HST and PST, and can we use the section 167 election?

Rules and fees change, so confirm current requirements with the British Columbia College of Oral Health Professionals, WorkSafeBC, the Canadian Dental Association and Sun Life before you set dates. For more, read what your lawyer and accountant do. Running a related practice? See selling a physiotherapy clinic or selling a pharmacy. Running an animal clinic? See selling a veterinary clinic. This guide is general information, not legal or tax advice for your situation. Questions about listing with us go to hello@sellmybusinessdirect.com.