Buying a Dental Practice When You Are Not a Dentist

The situation

Herman had run the operations side of a Waterloo dental practice for twelve years. He hired the hygienists, negotiated with suppliers, managed the schedule, handled billing, and knew the numbers better than anyone — including, at times, the owner. That owner, Tom, was a dentist in his early sixties who had built the practice from a single chair into a busy four-operatory clinic, and who was ready to retire. Tom trusted Herman with the business more than he trusted the idea of an outside buyer coming in and disrupting a staff and patient base that had taken decades to build. Informally, over coffee, the two of them agreed Herman should be the one to take it over.

Herman's household finances were modest rather than wealthy — he and his spouse Wilson, an early childhood educator like Herman had once been himself before moving into practice administration, were financing the purchase mostly through a small business loan rather than savings. The practice was valued, based on its cash flow and goodwill, at roughly $520,000. Herman came to our team assuming this would be a fairly standard purchase-of-business transaction: an agreement of purchase and sale, some due diligence, financing, and a closing date. That assumption did not survive the first meeting.

The legal problem

In Ontario, a dental practice cannot simply be owned by whoever is willing to pay for it. Regulatory rules governing the profession restrict ownership of a dental practice to licensed dentists, generally operating through a professional corporation. Herman managed the business side extremely well, but he was not a dentist, and no amount of operational experience changed that. If the deal were structured as a straightforward sale of Tom's professional corporation to Herman personally, it would not be a transaction our team could responsibly help him complete — a non-dentist cannot hold the shares of a dental professional corporation, and a lender or the college regulating dentists would not treat that structure as valid.

The second complication sat inside the practice itself. Tom was not the only dentist working there. An associate dentist treated a meaningful share of the patient roster under an associate agreement with Tom — a contract setting out how she was paid, her notice obligations, and restrictions on where she could practise if she left. That agreement had been signed years earlier and said nothing about what would happen if Tom sold the practice. If the associate dentist walked away during a change of ownership, a significant slice of the clinic's revenue would walk out the door with her, and the value Herman was paying for would not match what he actually received.

So the real problem was not one deal but two intertwined ones: who could legally own what, and how to keep the person actually delivering a large share of the clinical work in place through the transition. Neither problem was going to solve itself, and treating this as an ordinary business purchase would have put Herman's money at risk without giving him anything he could lawfully own.

What we did

1. Split the practice into two separate transactions. We structured the deal so that Herman, through a newly incorporated management company, purchased the non-clinical business — the lease, the equipment, the brand, the administrative staff contracts, and the management functions he already ran day to day. Separately, the professional corporation holding the dental licence and the clinical practice itself was sold to the associate dentist, who agreed to step into Tom's role as the owning dentist. Herman's company then entered into a management services agreement with her professional corporation, continuing to provide the operational services he had always provided, in exchange for a management fee built into the practice's ongoing revenue.
2. Confirmed the structure against the ownership rules before either party signed anything. Before drafting a single agreement, we verified that a management services arrangement of this kind — a non-dentist owning and running the business infrastructure while a licensed dentist owns the clinical practice and makes all clinical decisions — is a recognized and lawful way to organize a dental practice in Ontario, provided the dentist retains genuine control over patient care and professional matters. Getting this confirmed early avoided building an entire deal around a structure that would later be rejected.
3. Renegotiated the associate agreement as a condition of closing. We approached the associate dentist directly, well before the purchase agreements were finalized, to renegotiate her associate agreement alongside the sale rather than after it. In exchange for a modest increase in her compensation share and a defined path toward eventually owning the practice herself, she agreed to extended notice obligations and confirmed she would take over as the professional corporation's owner. Locking this in as a signing condition meant Herman was not paying for goodwill that could disappear the week after closing.
4. Allocated the roughly $520,000 purchase price between the two transactions. Working with the parties' accountants, the price was split into approximately $310,000 for the business assets, management infrastructure and goodwill purchased by Herman's company, and approximately $210,000 for the professional corporation shares purchased by the incoming dentist, reflecting that she was financing the clinical practice and licence while Herman financed the operations he already knew how to run.
5. Built the financing package around what a lender could actually secure. Herman's business loan was secured against the management company's assets and the management services agreement's revenue stream, not against anything tied to the dental licence itself, since a lender cannot take security over a professional corporation's clinical assets in the way it can over ordinary business equipment and receivables. This kept the financing achievable on a modest household income rather than requiring the larger capital base a straightforward practice purchase would have demanded.
6. Coordinated a single closing date for both transactions. Because the two sales depended on each other — Herman's deal only made sense if the associate dentist's purchase of the professional corporation also closed — we scheduled both to complete simultaneously, with each sale conditional on the other, so neither party was left holding half a deal.

The outcome

The transaction closed on schedule, with Herman's management company taking over the business side of the practice and the associate dentist becoming its new licensed owner. Tom received his roughly $520,000 across the two sales and retired without leaving loose ends behind. The patient base stayed largely intact through the transition, in part because staff and patients barely noticed a change — Herman had been running daily operations for years, and the associate dentist had been treating a large share of the patients already.

For Herman, the structure gave him what he actually wanted: ownership and long-term income from the business he had spent twelve years building, without pretending he could hold a licence he was never going to earn. His management fee under the services agreement now flows from a business he owns outright, rather than a salary he could lose if a new owner decided to bring in someone else. Wilson's income as an early childhood educator continued to provide household stability while the loan was serviced through the practice's own cash flow.

The associate dentist, now the practice's owner of record, kept the clinical control the regulatory rules require her to have, while still benefiting from Herman's operational management rather than having to learn billing, scheduling and supplier negotiations from scratch. What began as a deal that could not have closed in its original form became, once restructured, one that gave every party what they were actually looking for.

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