Buying into a veterinary practice gives you a long-term stake in the business you’ve helped build. But practice ownership comes with legal steps you can’t afford to ad lib. Here’s what you need to know about what to check, what to negotiate, and how to protect your investment before you sign anything.
Confirming Eligibility and Ownership Structure
Before you jump into the logistics, make sure the laws in your area actually allow you to own a share of the practice. Many states limit ownership to licensed veterinarians. If the business is set up as a professional corporation or PLLC, you may also face restrictions on how much you can own and whether non-vets can hold any interest. You’ll need to confirm the practice’s legal structure, check your state’s veterinary board rules, and review any existing ownership agreements before you move forward.
Valuing the Practice and the Ownership Interest
Your next step is determining how much the deal will cost. Practice value plays a big role in what you’ll pay and what you’ll own. A formal valuation should factor in revenue, operating costs, goodwill, real estate, and existing debt. Sometimes, practices use set valuation formulas, like a multiple of earnings. Other times, they hire outside firms to run the numbers. Make sure you know exactly what your share would include. You’ll want a clear overview before you make an offer or lock yourself into a deal.
Reviewing and Negotiating the Buy-In Agreement
A buy-in agreement spells out what you’re getting and what you’re giving. It should cover the price, payment terms, ownership percentage, profit distributions, and decision-making rights. If the practice already has a shareholder agreement or operating agreement in place, you’ll want to review that too. It might include rules about voting, future sales, or how disagreements get resolved. Don’t assume this is a take-it-or-leave-it deal. You can and should negotiate if necessary. A lawyer can help you review every detail before you sign.
Addressing Financing, Compensation, and Tax Treatment
Next, you’ll need to decide how you’ll pay for your share. Some associates use personal funds. Others finance buy-ins through loans or income offsets. You’ll also want to review how your salary, bonuses, and distributions might change after you become an owner. Ownership often comes with new risks, so make sure the compensation structure reflects that. The way the deal is structured will also affect your taxes. Seek dependable legal advice before you commit.
Updating Employment, Noncompete, and Management Roles
If you become an owner, your role will likely shift. Your old employment agreement might no longer fit. You’ll need new terms that reflect your authority, responsibilities, and pay. Look out for noncompete clauses, too, as many buy-in deals expand or extend them. Make sure they’re reasonable before you sign anything. You should also clarify what input you’ll have on hiring, scheduling, and financial decisions. Ownership doesn’t always mean control, so be sure to clarify what your role will look like on paper, especially if other owners will hold majority shares.
Planning for Future Transfers and Exit Options
Your buy-in deal should cover you today and tomorrow. What happens if you want to leave the practice? Will you be able to sell your share? Would the practice have to buy you out? What if you retire, become disabled, or die? A strong agreement should answer all of these questions. Look for buy-sell clauses, valuation terms, and rules for bringing in new partners. If these terms don’t exist yet, now is the time to have a lawyer help you draft them.
Work With a Law Firm That Understands Veterinary Ownership
Thinking about buying into a vet practice? Mahan Law can help. We work with veterinarians across the country on buy-ins, transitions, and ownership deals. Founding attorney Anthony Mahan knows the industry well and owns a veterinary practice himself, so he understands the legal and financial risks involved. Contact our firm today to arrange your free consultation and learn more about how Mr. Mahan and his team can guide you.