Sale of a Practice Letter of Intent: Full Template and Negotiation Guide (2026)

A sale of a practice letter of intent is a different animal from a standard business LOI, because a professional practice carries licensing, corporate practice of medicine doctrine, Stark Law, HIPAA, DEA registration, and personal-vs-enterprise goodwill issues that ordinary M&A documents never touch. According to the American Medical Association’s 2026 Practice Transition data, roughly 64 percent of physician practices sold to corporate buyers are restructured into an MSO or MS plus PMG arrangement at the LOI stage, which means the LOI is where the entire deal architecture is set, not the closing documents.

What This Actually Means

A practice-sale letter of intent is a preliminary written offer a buyer (an associate buying in, another practitioner, a DSO, a veterinary consolidator, an MSO, an RIA aggregator, or a private equity platform) sends to a practice owner after initial financial review. It sets the price, structure, employment terms, and the binding clauses (exclusivity, confidentiality, expenses) that lock the seller in for 45 to 90 days. The LOI is the bridge between “we like your practice” and the 100-page asset purchase or membership interest purchase agreement.

What makes practice LOIs distinct is that a practice is not a freely transferable asset. A medical practice in California cannot be owned by a non-physician under the corporate practice of medicine (CPOM) doctrine. A dental practice in New York has similar restrictions. A law firm in any state cannot be owned by a non-lawyer under ABA Model Rule 5.4. A veterinary practice in 19 states has CPOV (corporate practice of veterinary medicine) limits. The LOI must specify the legal structure that solves this, typically an MSO (management services organization) holding non-clinical assets while a licensed-professional PC or PLLC retains clinical operations under a long-term management services agreement.

The American Bar Association’s Model Asset Purchase Agreement framework treats practice transactions as a specialty category. The American Dental Association’s Practice Transition guide and the American Veterinary Medical Association’s practice sale guidelines both recommend that the LOI explicitly address licensing transfer, controlled-substance registrations, patient-record custody under HIPAA, and post-close employment of the selling practitioner. If your LOI does not cover these, the deal will stall at definitive agreement.

The 10 Things You Need to Understand in a Practice LOI

1. Buyer Type and Structure (Associate vs. DSO/MSO vs. PE Platform)

The first question is what kind of buyer signed the LOI, because the structure, valuation, and post-close life are radically different. Associate buy-ins on dental, optometry, and veterinary practices typically run $1 million to $5 million, often structured as a 49 percent or 100 percent purchase with seller financing of 30 to 50 percent of the price over 5 to 10 years. Per the American Dental Association’s 2026 transition data, roughly 41 percent of solo-dentist transitions are still associate buy-ins, though that share is falling. DSO and MSO platform buyers (Heartland Dental, Aspen, Pacific Dental, MB2 Dental on the dental side; National Veterinary Associates, VetCor, Mars Veterinary Health on the vet side; private equity platforms like Webster Equity, Audax, Quad-C on the medical side) typically require $1 million-plus EBITDA and pay 6x to 11x EBITDA depending on specialty, geography, and growth. The LOI from a platform buyer will always specify an MSO restructure.

2. CPOM Doctrine and the MSO Structure

The corporate practice of medicine doctrine prohibits non-physicians from owning a medical practice in California, New York, New Jersey, Illinois, Texas (with carve-outs), Colorado, Iowa, Ohio, and roughly a dozen other states. The dental version (CPOD) applies in California, New York, Massachusetts, North Carolina, and several others. The legal workaround used in nearly every PE-backed deal is the MSO structure: a management services organization (which can be owned by anyone, including a PE fund) acquires all of the non-clinical assets (real estate lease, equipment, accounts receivable, employees other than clinicians, billing, IT, marketing, vendor contracts) and enters into a long-term (typically 25 to 40 year) management services agreement with a licensed-physician-owned professional corporation that retains the clinical operations. The selling physician usually keeps nominal ownership of the PC under a stock transfer restriction agreement giving the MSO the right to swap in a new physician owner. The LOI must specify this structure because it determines what you are actually selling. You are not selling your medical license. You are selling the management services rights, the equipment, the lease, the brand, and the goodwill.

3. Goodwill Allocation: Personal vs. Enterprise

This is the single most tax-impactful clause in a practice LOI, and the one most owners miss. The IRS, under IRC Section 1060, requires the purchase price to be allocated across asset classes for tax purposes. In a practice sale, goodwill is typically 60 to 85 percent of the price. The critical question is how much of that goodwill is personal goodwill (attached to the selling practitioner’s personal reputation, patient relationships, and referral sources) versus enterprise goodwill (attached to the practice’s brand, location, systems, and trained staff). Personal goodwill, under the Martin Ice Cream case and subsequent tax court decisions, can be sold directly by the practitioner (not through the C-corp or S-corp), which avoids the entity-level tax in a C-corp sale and provides flexibility in basis allocation. On a $5 million practice sale, a 70/30 split favoring personal goodwill can save the seller $300,000 to $600,000 in federal tax. The LOI should specify the intended allocation framework, even if the exact numbers are finalized at definitive agreement.

4. Professional Licensing Transfer Logistics

A practice cannot operate for one day without an active state license held by a qualified practitioner. The LOI must specify how this is handled. In most asset-sale practice deals, the buyer (or the buyer’s PC) obtains its own license to operate at the practice address before close. The selling practitioner’s individual professional license is not transferred (licenses are personal, not assignable), but the practice’s facility license, lab license, x-ray registration, and any specialty certifications are either transferred or replaced. State-specific timing varies. California Medical Board processing runs 4 to 8 weeks for a new corporate medical license. New York State Department of Education licensing for dental and medical PCs takes 6 to 12 weeks. Florida Department of Health takes 30 to 60 days for medical office licensing. Illinois Department of Financial and Professional Regulation (IDFPR) takes 60 to 90 days. The LOI should make closing contingent on receipt of all required licenses or carry-over arrangements.

5. DEA Registration and Controlled Substance Transfer

DEA registrations are not transferable. The selling physician must close their DEA registration at the practice address, and the buyer’s physician must obtain a new DEA registration for the same address. The drug inventory (Schedule II through V) must be physically counted, witnessed, and either transferred under DEA Form 222 (for Schedule II) or destroyed under DEA-approved disposal. State pharmacy board notification is required in most states. The LOI should specify that closing is contingent on the buyer’s DEA registration being active and a clean controlled-substance inventory transfer being completed within X days of close. Failure to handle this correctly creates serious DEA exposure for both buyer and seller.

6. HIPAA and Patient Record Custody

Patient records contain protected health information (PHI) and cannot be accessed by a prospective buyer during diligence without a business associate agreement (BAA) or until the buyer is the legal custodian post-close. The LOI must include a carve-out: during diligence, the buyer receives only anonymized or aggregated practice metrics (patient counts, payer mix, revenue per patient, no-show rates, top CPT or ICD codes by volume) but not individually identifiable records. At close, custody of records transfers to the buyer or to the buyer’s PC under HHS Office for Civil Rights guidance. Patient notification requirements vary by state, with some (California, Texas, Florida) requiring written notice within 15 to 30 days of close with a stated record-retention period (typically 7 to 10 years for adults, longer for minors).

7. Non-Compete and the California Exception

California Business and Professions Code Section 16600 generally voids non-compete agreements, but Section 16601 provides a critical exception for the sale of a business or practice: a non-compete is enforceable if the seller is selling the goodwill of the business and the geographic scope is limited to where the business operated. This makes California one of the few states where a practice-sale non-compete actually sticks. Typical practice non-competes run 3 to 7 years with a 5 to 25 mile radius for primary care, 15 to 50 miles for specialty practices, and statewide or national for highly specialized services. The LOI should specify duration, radius, and scope. Push back on anything longer than 5 years or wider than 15 miles for a primary care practice, and demand a carve-out for working at a hospital or academic institution if you plan to continue practicing.

8. Post-Close Employment and Patient Handoff

Most practice sales include a post-close employment agreement for the selling practitioner ranging from 1 to 5 years. For PE and DSO platform deals, 3 to 5 years is standard. The selling practitioner’s role is to maintain patient continuity, transition referral relationships, and train any incoming associates. Compensation typically runs 25 to 40 percent of collections after a base draw, or a flat salary in the $300,000 to $500,000 range for primary care and $400,000 to $800,000 for higher-paying specialties. The LOI should specify the term, base salary, productivity bonus formula, vacation, malpractice coverage (tail insurance is critical, see below), and termination provisions. Termination for cause should be narrowly defined (typically loss of license, fraud, or material breach), and termination without cause should trigger an acceleration of any unvested earnout or rollover equity.

9. Stark Law, AKS, and Physician Compensation Compliance

Federal Stark Law (42 USC 1395nn) and the Anti-Kickback Statute (42 USC 1320a-7b) constrain how physicians can be compensated after a sale, particularly for Medicare and Medicaid patients. Compensation tied to referrals or to volume of designated health services (lab, imaging, DME) creates Stark exposure. Post-close employment agreements must use a fair-market-value compensation methodology, typically tied to wRVU (work relative value units) production rather than overall practice revenue. The LOI should reference a commitment to Stark-compliant compensation structure and require an FMV opinion from a qualified valuation firm (HealthCare Appraisers, VMG Health, or similar) before close. AKS issues arise when the purchase price exceeds fair market value or when the seller continues to refer patients in a way that looks like the excess price is paying for those referrals. A defensible FMV opinion at LOI stage is cheap insurance against a six-figure compliance disaster three years post-close.

10. Tail Insurance and Malpractice Coverage

If the selling physician carries claims-made malpractice insurance (the standard for most physicians), a tail policy is required at close to cover claims arising from pre-close services that are reported post-close. Tail policies typically cost 150 to 250 percent of one annual premium, paid as a lump sum at close. On a high-claims specialty (OB/GYN, neurosurgery, spinal surgery), a tail can be $40,000 to $150,000. The LOI must specify who pays for tail coverage. Buyer-paid tail is increasingly standard in PE deals, but DSO deals and associate buy-ins often shift this to the seller. A seller-paid tail on a $5 million deal is a meaningful haircut to net proceeds and should be negotiated at LOI, not at definitive agreement.

Worked Example: A Full Sample LOI for a Medical Practice MSO Acquisition

Below is a full sample sale of a practice letter of intent for a hypothetical transaction: Heritage Medical Partners MSO LLC acquiring Acme Medical Group PC, a 4-physician internal medicine practice in suburban Atlanta, for $8.5 million. The structure: $6 million cash at close, $1.5 million rollover equity in the buyer’s MSO, $1 million earnout over 24 months tied to EBITDA targets, and a 25-year management services agreement between the new MSO and the retained physician PC. This is a typical lower-middle-market structure for a profitable primary care practice at roughly 7.5x trailing EBITDA of $1.13 million.

HERITAGE MEDICAL PARTNERS MSO LLC
2500 Cumberland Parkway, Suite 600
Atlanta, GA 30339

June 3, 2026

Dr. Robert Acme, M.D.
Managing Partner
Acme Medical Group, P.C.
1450 Northside Drive, Suite 200
Sandy Springs, GA 30327

Re: Letter of Intent to Acquire Acme Medical Group, P.C.

Dear Dr. Acme:

This letter of intent (this "LOI") sets forth the principal terms and
conditions on which Heritage Medical Partners MSO LLC, a Delaware
limited liability company (or its designated affiliate, "Buyer" or
"MSO"), proposes to acquire substantially all of the non-clinical
assets and the management services rights of Acme Medical Group,
P.C., a Georgia professional corporation ("Seller" or the "Practice"),
and to enter into a long-term management services agreement with a
restructured physician-owned professional corporation ("New PC").

Except for the provisions of Sections 11, 12, 13, 14, and 15 below,
which are intended to be binding, this LOI is non-binding and merely
a statement of the parties' present intent to negotiate a definitive
agreement on the terms set forth herein.

1. PARTIES AND STRUCTURE
   Buyer: Heritage Medical Partners MSO LLC, a Delaware LLC.
   Seller: Acme Medical Group, P.C., a Georgia professional corp.
   Selling Physicians: Robert Acme, M.D., Susan Acme, M.D.,
   Marcus Lin, M.D., and Patricia Ortiz, M.D., each a Georgia-
   licensed physician and shareholder of Seller.

   Structure: At close, Buyer will acquire substantially all of
   Seller's non-clinical assets (real property lease, equipment,
   leasehold improvements, furniture, fixtures, intangible
   property other than medical records, accounts receivable
   net of reserves, vendor contracts, and the trade name "Acme
   Medical Group"). Seller's clinical operations, medical
   records, professional licenses, and physician employment
   relationships will be transferred to a newly formed Georgia
   professional corporation ("New PC") owned by Robert Acme,
   M.D. (or another Buyer-designated Georgia-licensed
   physician). Buyer (MSO) and New PC will enter into a 25-year
   Management Services Agreement granting MSO exclusive
   non-clinical management rights in exchange for a fixed
   management fee plus a percentage of New PC's net operating
   income, structured to comply with federal Stark Law and
   the Georgia corporate practice of medicine doctrine.

2. PURCHASE PRICE
   Total enterprise value: $8,500,000.

   Payable as follows:
   (a) Cash at Close: $6,000,000.
   (b) Rollover Equity: $1,500,000 in Class A units of Heritage
       Medical Partners MSO LLC, subject to a 5-year vesting
       schedule (20 percent per year, accelerated on a sale of
       the MSO) and customary tag-along and drag-along rights.
   (c) Earnout: Up to $1,000,000, payable over 24 months
       post-close, contingent on New PC achieving adjusted
       EBITDA of at least $1,150,000 in Year 1 and $1,250,000
       in Year 2. Earnout pays $0.80 per dollar of cumulative
       excess EBITDA, capped at $1,000,000.

3. PURCHASE PRICE ALLOCATION (IRC Section 1060)
   The parties intend to allocate the purchase price as follows,
   subject to a final allocation in the definitive agreement
   based on a qualified appraisal:
   - Tangible personal property: $400,000
   - Accounts receivable: $350,000
   - Goodwill (enterprise): $2,250,000
   - Personal goodwill (allocated directly to each selling
     physician under Martin Ice Cream): $5,000,000 total,
     proportional to historical patient panel and collections.
   - Non-compete consideration: $200,000
   - Management services rights: $300,000

4. POST-CLOSE EMPLOYMENT
   Each selling physician will enter into a 3-year employment
   agreement with New PC at the following terms:
   - Base salary: $400,000 per year for each physician.
   - Productivity bonus: 32 percent of personal wRVU
     production above a baseline of 5,800 wRVUs annually,
     calculated at a defensible fair-market-value conversion
     factor consistent with Stark Law.
   - Benefits: Health, dental, vision, 401(k) with 4 percent
     employer match, 6 weeks PTO, $5,000 annual CME allowance.
     Tail malpractice insurance fully paid by Buyer at close.
   - Termination: For cause limited to loss of license,
     conviction of a felony involving fraud, or willful
     misconduct. Termination without cause triggers acceleration
     of all unvested rollover equity and any unpaid earnout.

5. NON-COMPETE AND NON-SOLICITATION
   Each selling physician will agree to a non-compete for
   5 years post-employment (not post-close), within a 15-mile
   radius of any Acme Medical Group location, and to a
   non-solicitation of patients, employees, and referral
   sources for 5 years. The non-compete will carve out work
   at academic medical centers, hospital-employed positions
   outside the 15-mile radius, and non-clinical industry roles.

6. WORKING CAPITAL TARGET
   Seller will deliver target net working capital at close
   (current assets excluding cash, minus current liabilities
   excluding debt) of $475,000, based on the trailing 12-month
   average through April 30, 2026. Dollar-for-dollar true-up
   within 90 days of close.

7. EXCLUSIVITY
   Seller agrees that for a period of 45 days from execution
   of this LOI, neither Seller nor any of its representatives
   will solicit, encourage, or negotiate with any third party
   regarding a sale of the Practice or any material assets.

8. CONDITIONS TO CLOSING
   (a) Satisfactory completion of business, legal, financial,
       and clinical operations due diligence within 30 days.
   (b) Issuance of all required licenses and approvals,
       including Georgia Composite Medical Board approval of
       New PC, DEA registration of New PC's physicians at the
       practice address, and Medicare/Medicaid revalidation.
   (c) Execution of definitive Asset Purchase Agreement,
       Management Services Agreement, employment agreements,
       non-compete agreements, lease assignment, and customary
       ancillary documents.
   (d) Receipt of a qualified Stark Law fair-market-value
       opinion on physician compensation structure.
   (e) Tail malpractice insurance bound at close.
   (f) No material adverse change in Seller's business,
       patient panel, or payer mix.

9. DUE DILIGENCE
   Buyer will receive access to: trailing 3 years of financial
   statements and tax returns; payer mix by CPT category;
   patient counts, no-show rates, and aggregated panel metrics
   (NO individually identifiable PHI prior to close);
   employee census with redacted identities until diligence
   day 30; material vendor contracts; lease; equipment list;
   pending or threatened litigation; payer audits; OIG or CMS
   inquiries; and Stark/AKS compliance documentation.

10. HIPAA AND PATIENT RECORDS
    During diligence, Buyer will receive only de-identified or
    aggregated practice data under HIPAA's Safe Harbor method
    (45 CFR 164.514(b)). Custody of all PHI and patient records
    will transfer to New PC at close. Patient notification of
    the transition will occur within 15 days post-close,
    consistent with Georgia Composite Medical Board guidance,
    with a 7-year record retention commitment.

11. CONFIDENTIALITY (BINDING)
    The parties' existing mutual NDA dated April 12, 2026
    continues in full force. The terms of this LOI are
    themselves confidential.

12. EXPENSES (BINDING)
    Each party will bear its own expenses. Buyer's broker
    fee, if any, will be Buyer's responsibility.

13. NO-SHOP (BINDING)
    Section 7 is binding from the date of execution.

14. GOVERNING LAW (BINDING)
    This LOI is governed by Delaware law. Any disputes will
    be resolved in the Delaware Court of Chancery.

15. BINDING NATURE (BINDING)
    Sections 11, 12, 13, and 14 are legally binding.
    All other provisions of this LOI are non-binding
    statements of present intent and subject to the
    execution of definitive documents.

If the foregoing terms are acceptable, please countersign
below by June 13, 2026.

Sincerely,

________________________
Michael Heritage, Managing Director
Heritage Medical Partners MSO LLC

Accepted and agreed:

________________________
Robert Acme, M.D.
Managing Partner, Acme Medical Group, P.C.
Date: _______________

How the Numbers Work in This Example

Acme Medical Group generated $4.6 million in collections in the trailing 12 months ending April 2026, with $1.13 million in normalized EBITDA after add-backs (owner above-market compensation, family member payroll, personal auto, and one-time IT investment). At a 7.5x multiple, the enterprise value is $8.5 million. This sits at the high end of the 6.5x to 8.5x range Capstone Partners’ 2026 Healthcare M&A report cites for primary care platforms in the $1 million to $2 million EBITDA band.

The tax math is where the personal goodwill allocation matters. Without the personal goodwill carve-out, the entire $7.55 million of intangibles would be sold by the PC, generating ordinary income at the entity level (Georgia C-corp rate of 21 percent federal plus 5.75 percent state), then distributed to the shareholders as a dividend taxed again at the 20 percent qualified dividend rate plus 3.8 percent net investment income tax. The effective tax rate approaches 49 percent. With $5 million allocated as personal goodwill sold directly by each physician shareholder, that portion is taxed once at the 20 percent long-term capital gains rate plus 3.8 percent NIIT, for an effective 23.8 percent rate. The savings to the four selling physicians collectively: roughly $1.25 million in federal and state tax versus the no-allocation scenario. This is why the LOI must address goodwill allocation at the LOI stage and not leave it to the definitive agreement.

Common Mistakes Practice Sellers Make at LOI Stage

Signing Without an FMV Opinion on Compensation

If the LOI specifies post-close compensation without referencing a qualified Stark Law fair-market-value framework, the seller is exposed to a federal compliance audit three to five years post-close. A defensible FMV opinion from HealthCare Appraisers, VMG Health, or Pinnacle costs $10,000 to $30,000 and protects both sides. Insist on this before signing.

Accepting 90-Day Exclusivity

Practice deals close in 75 to 120 days, but a 90-day exclusivity period gives the buyer too much room to grind on price during diligence. Push for 45 days with a one-time 15-day extension if both parties are making material progress. The 2026 SRS Acquiom data shows 60 days as the median exclusivity period on private deals between $5 million and $25 million.

Letting the Buyer Set the Goodwill Allocation Later

Buyers prefer to allocate as much of the price as possible to depreciable or amortizable assets (equipment, leasehold improvements, customer lists amortized over 15 years) and as little as possible to non-compete consideration (which is also amortized but creates ordinary income to the seller). Sellers want personal goodwill as high as possible. If the LOI does not specify the allocation framework, the buyer’s tax position will dominate the definitive agreement negotiation. Set the framework at LOI.

Underestimating the Non-Compete Radius

A 25-mile radius on a primary care practice locks the seller out of most of metropolitan Atlanta, San Diego, or Phoenix. If the seller plans to continue practicing in any capacity (part-time, locum tenens, academic), the radius and duration must be negotiated at LOI. Once the LOI is signed with a 25-mile, 7-year non-compete, the buyer will not loosen it materially in the definitive agreement.

Ignoring Tail Insurance Cost

A $40,000 to $150,000 tail policy is a real number, and on a $3 million to $5 million practice it materially affects net proceeds if the seller pays. Specify buyer-paid tail in the LOI. If the buyer refuses, factor the cost into the price you accept.

Not Carving Out Licensing Indemnity Risk

Standard APA indemnity provisions make the seller responsible for pre-close compliance issues for 18 to 36 months. For a practice, this can include payer audit clawbacks, Stark or AKS allegations, or state licensing complaints. The LOI should establish indemnity caps (typically 10 to 20 percent of purchase price for general representations and a higher cap or no cap for fundamental representations like title and authority) and survival periods that are reasonable for healthcare-specific risk.

Timeline From Signed Practice LOI to Close

Practice deals typically run 75 to 120 days from signed LOI to close, slower than non-regulated business deals because of licensing, payer credentialing, and Medicare or Medicaid revalidation. Here is the typical sequence.

Days 1 to 14: Diligence kickoff. Buyer’s counsel issues the document request list. Seller’s accountant prepares trailing 36-month financials, normalized EBITDA bridge, and payer mix analysis. Buyer’s healthcare consultant or operations team begins clinical operations review (anonymized).

Days 15 to 30: Initial diligence review. First red flags surface (payer audit history, OSHA citations, EMR migration risk, lease assignment hurdles). Buyer engages valuation firm for Stark FMV opinion on post-close compensation.

Days 31 to 50: Definitive agreement drafting. Buyer’s counsel produces first draft of APA, MSA (if MSO structure), employment agreements, non-competes, lease assignment, and ancillary documents. Seller’s counsel begins markup.

Days 51 to 75: Licensing filings. Buyer’s PC (or new PC under MSO structure) files for state medical board approval, DEA registration at practice address, Medicare and Medicaid enrollment, and CLIA waiver (if lab on premises). This is the rate-limiting step in 60 percent of practice deals.

Days 76 to 90: Definitive agreement finalization. Working capital target finalized. Schedules attached. Closing date set.

Days 91 to 120: Sign and close. Tail insurance bound. Funds wired. Patient notification letters mailed. Vendor and employer-of-record transitions executed. New PC operational under MSA.

Frequently Asked Questions

What is the typical exclusivity period in a sale of a practice letter of intent?

45 to 60 days is appropriate for practice deals under $25 million in enterprise value. Buyers will ask for 90 days but a confident seller, particularly one represented by an experienced practice transition advisor, can typically negotiate to 45 days with a single 15-day extension if both sides are making material progress. The SRS Acquiom 2026 data shows 60 days as the median across private deals in the $5 million to $25 million range.

Should the LOI include the goodwill allocation?

Yes, at least as a framework. The exact allocation will be finalized in the definitive agreement based on a qualified appraisal, but the LOI should specify the intent to use a personal goodwill carve-out under Martin Ice Cream (T.C. Memo 1998-2) for the selling practitioners. Without this in the LOI, the buyer’s tax counsel will resist the allocation in definitive document negotiations, where the seller has far less negotiating power.

Who pays for the tail malpractice insurance in a practice sale?

Increasingly, the buyer pays in PE and DSO platform deals because tail cost is a known number that gets baked into the bid. In associate buy-ins and smaller deals, sellers often pay. A $40,000 to $150,000 tail on a $3 million to $5 million practice is meaningful, so the LOI should specify who is responsible. If the seller pays, factor it into the net-proceeds calculation when comparing offers.

Can a non-physician PE fund actually own a medical practice in California?

No, not directly. Under California’s CPOM doctrine, only California-licensed physicians can own a medical professional corporation. The workaround is an MSO structure: the PE fund (or its operating company) owns the MSO, which acquires all non-clinical assets and enters into a long-term management services agreement with a physician-owned PC. The PC retains nominal clinical ownership under a stock transfer restriction agreement giving the MSO the right to designate a successor physician owner. This structure is the standard for nearly every PE-backed California medical practice acquisition.

How long should the post-close employment term be for the selling practitioner?

Three years is the standard for PE and DSO platform deals. One to two years is more common in associate buy-ins. The buyer wants 3 to 5 years to ensure patient retention and referral continuity. The seller usually wants flexibility to retire or reduce hours. Push for a 3-year term with a defined glide path (full schedule Year 1, 80 percent Year 2, 60 percent Year 3) and the right to negotiate part-time or locum status thereafter at fair-market compensation.

Is personal goodwill always available in a practice sale?

Not always. Personal goodwill works best when the selling practitioner has a strong personal patient and referral base, has not signed a comprehensive non-compete with the existing PC, and has not been an employee of a hospital or large group that already owns the goodwill institutionally. For solo practitioners and small partnerships, personal goodwill is usually available. For employed physicians selling a stake in a larger group, the analysis is more complex and requires a qualified valuation. The Martin Ice Cream case and subsequent rulings (Norwalk, H&M Inc.) provide the framework but each fact pattern requires its own analysis.

What to Do Next

If a buyer has sent you an LOI on your practice, the worst thing you can do is sign it without an experienced practice transition advisor reviewing the MSO structure, the goodwill allocation framework, the non-compete, the post-close compensation, and the licensing carve-outs. Practice LOIs are not standard business LOIs. The clauses that hurt you most are the ones that look most innocuous, and the savings from negotiating them properly run into the high six figures on a typical $5 million to $10 million transaction.

CT Acquisitions reviews practice-sale LOIs at no cost for owners considering a sale. We are buyer-paid, which means our review is free to you. We flag the MSO structure issues, the goodwill allocation traps, the non-compete radius, and the tail insurance assignment. We also help owners run a structured process to ensure they are getting the right buyer, not just the first one through the door.