Joint Ventures vs. Asset Sales

At Mahan Law, we advise veterinary practices on joint ventures and assets sales as part of a comprehensive strategic plan. If you are considering a practice transition, a joint venture with another veterinary practice, clinic or management service organization may allow you to continue practicing veterinary medicine without selling out entirely. Because a joint venture is a complicated legal structure, it is crucial to have the informed representation we provide. 

Lead attorney Anthony Mahan regularly collaborates with a nationwide network of veterinary attorneys who guide our clients through practice transitions. When it comes to entering into a joint venture or selling your practice, we know the terrain and will work closely with you to make the best decisions for your future. Contact our office today to set up a consultation.

What Are Joint Ventures?

A joint venture is a formal agreement in which two or more veterinary practices collaborate on a project or undertaking in order to share in the profits and risks of the business activity. One of the key features of a joint venture is that it operates with a limited life. By contrast, an asset sale involves the acquisition of a veterinary practice by another organization.

In a joint venture, each partner is responsible for contributing a share of the assets and expertise in the venture, which exists as a separate legal entity. The partners continue to own their own veterinary practices. 

There are a number of challenges, however, not the least of which are potential problems with the partners agreeing on the right strategic plan for the venture. Ultimately, joint ventures are complex relationships that require careful planning, which makes working with our experienced veterinary attorneys the wise choice. 

The Pros and Cons of Joint Ventures for Veterinary Professionals 

There are both advantages and disadvantages of entering into a joint venture with another veterinary practice. The main benefits  include:

  • Sharing resources, costs and risks
  • Collaborating with partners on business decisions
  • Accessing additional financial resources 
  • Expanding your patient base
  • Planning for the sale/purchase of the practice

Although joint ventures are flexible structures, defining a strategy and goals is essential to success. Moreover, a joint venture typically results in one of the partners being bought out, which makes having an exit strategy crucial if your objective is to sell your veterinary practice in the future.

Despite the benefits of forming a joint venture, there are potential obstacles, such as: 

  • Sharing some of the profits and losing a degree of control
  • Assimilating each partners' different cultures and management styles
  • Managing communications among veterinarians, managers, and employees so that they understand the objectives of the joint venture
  • Misunderstanding the role of each partner, which can adversely impact the success of the venture

While the partners share in the costs and risks, there may be an imbalance of expertise, assets, and investment, and one of the partners may lack the commitment to make the project work. In short, the success of a joint venture hinges on having a common goal and clear communication among the parties. 

Acquisitions/Asset Sales of Veterinary Practices

Unlike a joint venture, an acquisition involves the owner of a veterinary practice selling his or her assets A veterinary professional who has made a sufficient gain and is considering a transition may decide to cash in and sell the practice. The key question is whether to structure the deal as a share purchase or an asset purchase. 

While the seller can take advantage of the capital gains exemption in a share purchase, doing so could result in a lower purchase price. Although the exemption is not available in an asset purchase, there may be a tax liability for recapture that would be payable by the seller depending on the purchase price is allocated, however.

In an asset sale, the purchaser buys specific assets of the practice and does not assume the liabilities. The buyer must determine which assets are necessary to operate the practice so that unwanted assets can be excluded. The main benefits to the buyer are avoiding the liabilities of the practice and being able to depreciate those assets against income, which could result in tax savings. 

Why Choose Mahan Law

If you are considering a practice transition, deciding whether to enter into a joint venture or sell the practice's assets depends on your objectives, as well as market conditions and potential tax implications. When you consult with us, we will help you weigh the pros and cons of each arrangement and determine how best to achieve your goals. 

Our experienced veterinary attorneys regularly collaborate with a respected network of appraisers, accountants and financial professionals with expertise in veterinary practice valuations and structuring transactions. Above all, we will always work in your best interests.

Contact Our Experienced Veterinary Attorneys 

Whether you are considering entering into a joint venture or selling your veterinary practice, you need the informed representation the attorneys at Mahan Law provide. Contact our office today to learn how we can help.