Are you ready to Sell?
Any prospective buyer will want information regarding the financial performance of your practice, existing contracts and patient records. It is therefore important that before you begin the sales process, you ensure that you have organized all paperwork in respect of your practice. If you lease your premises, the lease may need to be assigned, or the buyer may want to enter into a new arrangement with the landlord. Your bank will need to be informed of the sale and will need to assist you with the release of any security over the assets of the practice.
If you are selling shares in a corporation, the corporations minute book must be up to date and properly reflect the current status of the corporation.
Before buying your practice the purchaser will investigate all aspects of your business. By ensuring your books and records are up to date an in order, will avoid unnecessary delays and help you maximize your sale price.
Prior to providing a potential buyer with any information about your practice, you want to make sure that they enter into a confidentiality agreement where they may not disclose any of the information they receive to any other party and if they do not go ahead with the purchase, they must return all documents to you without retaining a copy.
Sale of Shares or Sale of Assets?
You can either sell the assets of the practice or if you are incorporated, you can sell the shares of the corporation that carries on the practice. Tax advice from your lawyer and accountant will help you decide which route is best for you, by identifying the tax advantages of choosing one option over the other.
By selling shares, you may be able to take advantage of the lifetime capital gain exemption and avoid paying capital gains tax. If the purchaser purchases shares, they will inherit the corporation, including all existing liabilities.
By selling assets, you will not be able to take advantage of the lifetime capital gain exemption. This option may be more attractive to a buyer because they can pick and choose which assets they wish to purchase and, in most cases, the buyer does not assume the liabilities of the existing corporation. That being said, arrangements will still have to be made regarding the employees of the practice.
Payment of Purchase Price
Typically, you would like to be paid in full on closing but sometimes purchasers are not able to pay on full in closing or they would like to have a holdback to protect against any misrepresentations or issues that may come up. In the event that you are not paid in full on closing, the balance owed to you must be properly secured and protected to ensure that you are able to collect it. This can be done by way of securing the amount under a share pledge agreement, taking security over the assets of the practice, or entering into an escrow agreement. We can assist you in determining the ideal option depending on your situation.
The College of Veterinarians of Ontario
Anytime there is a change in ownership of your practice, you must inform the CVO and submit the necessary paper work.