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Buying a existing practice....Things to ask a CPA

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  • Buying a existing practice....Things to ask a CPA

    I am in the process of buying an existing practice (solo practice where the physician is retiring). He has sent me alot of the practice's financial information.  I am planning to send all of this information to a CPA.  What is the role of the CPA in this part of the process (other than telling me the value of the practice)? Are there specific things that I should ask the CPA?  What are some questions that I need to ask a CPA to look for?  Thanks in advance.

  • #2
    What specialty are you in?  Many solo practices are no longer worth much these days as the days of prosperous solo practice in many areas and specialities are drying up.  Please be sure you go in with eyes wide open.

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    • #3
      Yeah, what are you buying exactly?

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      • #4
        Agreed. What are you buying? What is the building worth (or what is the liability on the lease)? What is the equipment work (or what is the amount due, or lease due on the equipment)? How has the business been being run? (LLC, C sorp, S corp, a checkbook?!), What is the AR (accounts receivable)? Does the practice make money? How much has the last MD been making/taking out of the business? What is the % overhead (staff costs, rent/mortgage, etc etc compared to overall revenue)? What has been the patients insurance mix/breakdown? How many staff come with the deal? Are there any goofy contracts with the employees? Why hasn't the closet university hosopital or medical system bought the practice yet? Who does the billing and how much has that been costing?

         

        There is some honest ekepticism on these sorts of things... Many/most of the time, it's often a better deal for your to just rent a building and start a net new practice - you don't actually have anything to buy, or more specifically, they don't actually have anything of value to sell. There are people here who have done it (and some who passed on lousy oppourtunities and moved along) so If you keep asking, you may get some more advice!

        What's your timeline for the process?

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        • #5
          There is a lot of ways to structure things to decrease tax pain on both sides.

          Doing it as an all stock deal is bad for the buyer, as you get no tax benefits.

          Once the sales price of the practice is set, there are ways to value various components to maximize depreciation.  The brokers who helped with my buy-in used various valuations for goodwill, for a management fee paid to my partner, and valuations of equipment to allow me to depreciate about half of the practice in year one, and the rest will take about 10 years.  At the same time, they set it up so that my partner was able to sock a significant portion of the sale into some combination of tax sheltered retirement plans.

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