San Francisco Business Lawyer Blog

If you have decided to open a new medical or dental practice, or are looking to relocate an existing one, it is important to know that medical and dental leases have certain unique provisions related to the specific purpose of the business. You should have at least a basic understanding of California commercial leases to know what questions to ask and what terms to look for (and to avoid) when beginning the process. While educating yourself about leases will certainly go a long way, and your real estate broker can offer some guidance, you should ultimately have a San Francisco business attorney review your lease and negotiate certain terms before you sign a commercial lease. A knowledgeable commercial lease lawyer will ensure that the lease serves your best interests and that you do not simply sign the landlord's standard medical office lease with key terms solely in the landlords favor.

Finding A Home For Your California Medical or Dental Practice

When you are starting a new medical or dental practice in California, it is wise to consider your initial costs. That said, the location you choose for your practice can determine your long-term success. Because many commercial leases are for terms of ten or fifteen years, it is imperative that you identify a location that suits your present needs but can also meet your reasonable expectations of growth.

There are many factors to evaluate when deciding on a location besides the office space itself. Safety, accessibility of parking, relative locations of competitors, and neighborhood demographics can all affect your practice and should not be disregarded. In considering the well being of your patients, consider that light, airy spaces can be comforting to those patients who already fear going to the doctor or dentist.

Questions You Should Ask A Prospective Landlord

Once you have found a location and are ready to talk with a prospective landlord, you should be prepared to ask the relevant and probative questions to ensure you are getting what you expect.

Ask questions about the landlord. Find out whether the landlord is an individual or an institution, local or remote, experienced or novice. Your startup practice cannot afford for you to spend substantial time resolving issues around the maintenance or repairs of the property.

Ask questions about the property. If the property has a high turnover rate, or if a medical practice recently moved out or failed in that location, be on your guard. Though not dispositive, these signs should warn you to look more closely at the property as a viable home for your practice.

Reviewing And Negotiating Your Commercial Lease

There is really no substitute for having a San Francisco commercial lease attorney review your lease before you sign, but there are certain key items a savvy tenant should know independently:

Seek the shortest term possible with renewal options (one year). If the location doesn't work out for you, it can be much easier to wait out a shorter lease than to break a long lease and deal with the repercussions of doing so.

Examine the expenses included in the lease. Often, landlords pass on expenses such as taxes, insurance, and common area maintenance to tenants in what is called a NNN lease. In contrast, a gross lease contains all expenses but should still be scrutinized to see what "all expenses" entails to that particular landlord.

Avoid providing a personal guaranty, if possible. Often, landlords require a personal guaranty, particularly when the tenant is a new or young company. Some landlords are willing to negotiate and release the personal guaranty after a number of years.

Consult A San Francisco Commercial Lease Attorney

Even if you believe that you have found a great place for your practice, at a great price, with a lease and landlord you are satisfied with, you should have an attorney review it for you to ensure that you haven't overlooked any important lease terms that could potentially hurt your practice. Finally, a qualified attorney will recommend modifications where appropriate and negotiate key lease terms to tailor the lease to your specific needs.

Related Blog Posts

How Do I Finance A California Startup Dental Practice?

What Do I Need to Know to Buy or Sell a California Dental Practice?

Sources

How To Pick A Site For Your Business, Robb Mandelbaum, Inc.com

How To Get A Good Deal On A Lease, Inc.com

Continue reading "What Do I Need To Know About Commercial Leases For My California Medical or Dental Practice?" »

Once you have made the exciting decision to start your own dental practice in California, your next question should be how to finance operations or purchase of the practice. Finding and securing the appropriate financing for a small business can be a daunting task. In this post, I will discuss the basics of what you need to know to finance your startup dental practice or purchase an existing practice. Of course, this is only a starting point and is no substitute for doing your own research and consulting a San Francisco business attorney with any questions about the process.

Few individuals have sufficient capital to "bootstrap" their own business, that is, to finance it with assets they already own. Instead, many people turn to loans as a source of financing. Particularly with something like a dental practice, where you may have student loans from your education, and where the costs of starting the practice can be quite high, loans may be your best bet when it comes to financing your new practice.

Loan Programs For Your Dental Practice

The decision to take out a loan is not one you should take lightly. The interest rates, payment programs, working capital lines of credit, and other terms of the loan can affect your ability to use the loan effectively as well as your ability to repay it.

U.S. SBA Loan Programs

The U.S. Small Business Administration (SBA) is an invaluable resource for individuals seeking financing for a new dental practice. While the SBA itself does not loan money to entrepreneurs, it establishes guidelines to which its commercial partners adhere in loaning money. On behalf of the borrowing entrepreneur, the SBA guarantees that the commercial loans will be repaid, thereby reducing the risk to the lender.

An SBA's "7(a) Loan Program" is the government's primary way of helping startup businesses and may be used for "any legitimate business purpose," including a dental practice. Eligible uses include:

• Construction of a New Building
• Working Capital
• Purchasing Real Estate
• Equipment Financing
• Leases
• Inventory

The terms and amounts for SBA 7(a) loans can vary from year to year, so it is important to seek the advice of a San Francisco startup business attorney early on in the financing process.

California Small Business Loan Programs

A new dental practice in California may be eligible for financing backed by the California Governor's Office of Business and Economic Development. This program may cover up to 90 percent of the loan amount, up to a guaranteed amount of $500,000. Because the terms of this loan program vary and are subject to negotiation, it is important to consult a California dental practice attorney to help determine whether this loan program is appropriate for your business's needs.

Start With A Business Plan

As with other startup businesses, you will need to present a business plan. This is a document that outlines the structure and organization of your business, how it will be managed and run, and how it will produce revenue. Though not a legal document, your business plan should be realistic in terms of projecting revenue and predicting expenses and other liabilities.

At the same time, however, the business plan is also your primary marketing device to the potential lender. It should demonstrate the likelihood of success of your business, predict and resolve any potential obstacles (including competitors or market factors), and portray your experience and work ethic in the best possible light.

Although your credit score may affect your ability to secure a loan, many lenders look beyond just the score to the history and any credit patterns. Dental practice lenders typically expect that many loan seekers have student loans and factor these loans into their analysis of the proposed business.

All in all, there are many factors to consider when planning to start a dental practice, or any other type of startup business. The financing of your business is a big step, and you should be willing to put in the time to ensure that whatever financing solution you use is well suited for your needs and feasible to repay.

Related Blog Posts:

What Do I Need to Know to Buy or Sell a California Dental Practice?

California Business Entity Choice Part 5: Should We Form A Professional Corporation (PC)?

Sources:

The Lowdown on Business Loans, Nolo

Getting Loans and Financial Assistance, California Governor's Office of Business and Economic Development

7(a) Loan Program, U.S. Small Business Administration

Continue reading "How Do I Finance A California Startup Dental Practice?" »

As an experienced San Francisco business attorney, I am dedicated to helping dentists and dental professionals in the purchase or sale of their practice. Investors, owners, and entrepreneurs throughout the San Francisco Bay Area place their trust in the Kabak Law Group to handle their business transactions. The purchase or sale of a dental practice is in many ways similar to other transactions, but there are some important distinctions to note, which I will discuss in this post.

For recent graduates or dental associates, buying a practice is an exciting time. For seasoned professionals, stepping away from the business may be just what the doctor ordered.

Before Buying, Do Your Due Diligence

The reason for hiring a good attorney is to protect your interests. Like the human mouth, it is often hard to gauge the fundamental health of a practice from a distance. Performing "due diligence" involves more than checking the former dentist's license and reviewing some patient files.

There are some important factors to consider when buying or selling a practice, including:

• Prior complaints, litigation, and liabilities
• Financial statements and tax returns
• Employee misclassification and errors
• Transfer of referral sources and patients
• Liens, unpaid taxes, workers' compensation


• The remedy of prior defective work
• Legal structure: stock or asset sales
• Negotiating a letter of intent or purchase agreement
• The negotiation of a price, and non-competition clauses
• Getting loan approval and closing the sale on time

California law limits the purchase and sale of a dental practice to dentists licensed in the state. This law has been amended, however, to allow dentists to own more than two practices, including out-of-state dentists who are credentialed into California. This has opened the market, freeing more dentists to enter and leave practice. While rumors of a profitable business travel by word of mouth, nailing down the details can be more complex. There is no "blanket contract" to cover all the terms and liabilities of the practice. Even the first step, the letter of intent, should be prepared or reviewed by an experienced San Francisco business lawyer. Every letter should provide the option for legal representation to confirm important terms regarding price, method of payment, non-competition provisions, and deadlines for loan approval and closing sale.

Other Considerations in Buying Or Selling a California Dental Practice

Once the letter of intent is signed, the terms are difficult to change. Any drafting issues and unsettled negotiations with the buyer, seller, or landlord should be completed before closing the sale. In stock sales, the buyer assumes all the assets and liabilities of the business, while the seller pays taxes once on the appreciation of shares. In asset sales, the buyer takes only the assets and the seller incurs a double tax on the corporation and its shareholders. Once the parties agree to the sale terms, they can negotiate a more detailed dental purchase contract known as the Buy-Sell Agreement. If the seller makes any materially misleading representations about the practice in the Agreement, the buyer may recover part of the purchase price. The buyer should also ensure that the seller sign a non-competition covenant before closing the sale.

A qualified team of brokers, equipment technicians, practice management consultants, and accountants can be helpful in ushering you through the process. But it is essential that you retain an attorney experienced in dental practice acquisitions to perform an independent review of the sale. At Kabak Law Group, we are dedicated to protecting your interests in buying or selling a dental practice.

Related Blog Posts:

California Business Entity Choice Part 5: Should We Form A Professional Corporation (PC)?

What Do I Need To Know About Commercial Leases For My California Medical or Dental Practice?

Sources

Laws and Regulations, Dental Board of California
California Business and Professions Code §§ 1625-1636.6,1800-1808

Continue reading "What Do I Need to Know to Buy or Sell a California Dental Practice?" »

While many people consider the San Francisco Bay Area as a destination primarily for technology companies, as a San Francisco business attorney, I know that business formation extends well beyond tech startups. I frequently advise doctors, dentists, dental and medical professionals and other licensed professionals about the importance of forming a California professional corporation.

California Professional Corporations

A professional corporation, also known as a PC, is a corporation subject to special provisions of the corporate code. The California Corporations Code classifies any California corporation that provides "professional services" as a PC. These professional services include the practice of medicine, dentistry, law, accounting, architecture, and any other professional service that requires a license or registration by a state agency governing the profession. The PC may not engage in any other type of business. Because licensed professionals cannot form limited liability companies (LLCs) to render professional services, PCs offer the best choice for licensed doctors and dentists and certain other professionals to shield their personal assets from the debts and liabilities of the business.

Operations and Management

A California PC is a corporation; therefore, the same formation process applies. The PC is a separate legal entity created by the filing of articles of incorporation with the California Secretary of State. The articles must contain the name of the corporation, its corporate purpose, the name of the incorporators, the name and address of the corporate agent for service of process, and the number and types of shares the corporation is authorized to issue.

Shareholder Requirements

There are certain shareholder requirements in professional corporations. The shares of a professional corporation may be issued only to appropriately licensed professionals. Additionally, the shares of a PC may be transferred only to other licensed professionals or back to the corporation. These and other requirements make it essential that PCs have buy-out agreements with their shareholders.

Officer and Director Requirements

There also are certain requirements concerning officers and directors. If a PC has only one shareholder, who must be a licensed professional, such shareholder must serve as a member of the board of directors, and may be its only member of the board. Additionally, the sole shareholder must serve as the professional corporation's president and treasurer. However, the other officers of the PC do not need to be licensed professionals.

Where the PC has two shareholders, licensed professionals, the PC is required to have at least two directors, which must include the two shareholders, and between them they must divide the officer positions of president, vice president, secretary, and treasurer.

No requirement prevents a one or two shareholder professional corporation from having more than one or two directors or additional officers who are not shareholders. Other terms governing management may be set forth in the PC's articles and bylaws.

Limited Liability Protection

A California PC provides limited liability protection for the debts and obligations of the business with one important exception. The PC does not shield individual licensed professionals from liability arising from the professional services they render. Doctors and dentists named in a malpractice lawsuit, for example, cannot use the PC to protect their personal assets. They are not personally liable, however, for malpractice committed by other licensed professionals in the PC, or for claims that are not based on malpractice. The PC, therefore, protects the owners against personal liability for any claims unrelated to the provision of professional services, including workplace related lawsuits by employees, harassment claims, breach of contract, fraud and other claims unrelated to professional liability.

Taxation