Do you need to pay an attorney?

When brokers suggest that something is free, you might need to take a second look.

Many dental practice brokerage houses have sets of documents that were not prepared by an attorney. Some of these are excellent - and some are not good at all and are really marketing tools to get a dentist to list his or her practice with them.

The really good brokers will always tell you verbally, as well as state on these documents, that you should have your own attorney or advisor review the agreements that they forward to you prior to having them executed. The ability to have these documents in most cases assists the dentist’s own attorney or confidante, since it is rare to find an attorney who has performed significant services on behalf of a dental client either through litigation or in any type of transactional work. The attorneys don’t understand or aren’t familiar with work in progress, remakes, the value of goodwill, etc.

Related article: Why you need an expert evaluator

They also do not know how to account for those situations in an agreement. Dentists seem to be the last profession to be involved with any kind of professional litigation from patients or clients. Divorce or lawsuits between one another regarding employment agreements, partnership disputes or some other type of business arrangement are common in all professions and dentists are no different, but the litigation from their own clientele has been minor to this point.

What’s typically included in these documents?

It is typical for a dentist to not want to spend the money to have additional advisors involved with a situation when he or she thinks they understand what is included on the paper work that they are requested to have their advisor review before signing.

It is important to realize that the documents prepared by the non-attorney dental practice broker may be excellent, but they are still only templates that have been prepared based on their own experience in working with dentists all across the country. They may have a lot of additional points that only those associated with dentists on a regular basis would know about, but they have included the language about having one’s own attorney review the documents to protect their client from signing something that has not been “localized.”

How does the dental practice broker upgrade and enhance the content of the template agreement?

A dental practice broker with a good reputation has normally had the experience of representing many dentists with valuations, transitions and advisory services. The expertise developed from working with dentists for years has enhanced the knowledge of the dental practice broker. That understanding to continually update the template agreements is offered to the dentist so that the documents become state of the art.

There is no need to offer these templates for free in order to get the practice listing for the transition. Less-qualified brokers use the gimmick of the free agreements as a marketing tool to get the dentist to think that he or she is getting something for nothing. Template agreements from the reputable practice broker should not be for free. They represent years of work and experience and the ability to assist the local advisor or attorney with expertise that the typical attorney cannot possibly have.

In a divorce valuation, for example, the prepared agreement could involve an equitable distribution state, one that is community property or some other type of arrangement where goodwill is the most significant asset value that the dentist owns. The relationship between personal goodwill and the dental practice goodwill is something that would most likely be foreign to the attorney. The practice broker or dental practice evaluator would know much more about this than the attorney.

Related article: Why divorce makes selling practices so complicated

Cost-benefit relationship and the value of the asset

It may seem to the dentist that the payment for the attorney review is not necessary. One must consider the value of the asset being sold, the time it took to create that value and what the transition will mean for the rest of the dentist’s life.

There is also the after-tax effect of the payment to the attorney and the ability to be as sure as one can be about any future ramifications from the content of the agreements and their cost.

The bottom line is that for that feeling of comfort, the dentist’s local attorney should review the document template prepared by the experienced dental practice broker. If the dentist does not have an attorney, asking the dental practice broker for a referral would be a good idea. The dental practice broker with the expertise and knowledge needed to have an excellent template of the documents needed for a transition or other type of transaction will not be afraid of a second opinion.