Buying a clinic is a significant milestone in a physician’s career. Whether you’re an established practitioner or transitioning from an associate role, purchasing a medical practice offers the potential for increased autonomy, income, and long-term asset building. However, this opportunity also comes with complex financial, tax, and business structure considerations that can make or break your investment.
At MMT CPA we’ve helped numerous healthcare professionals navigate this journey. Here’s what you need to know before finalizing the purchase.
1. Understand the Financing Landscape
Purchasing a clinic requires capital — often hundreds of thousands of dollars — whether you’re buying a turnkey practice or an existing clinic with patient records and staff. Thankfully, Canadian banks and specialized healthcare lenders often view physicians as low-risk borrowers, offering favorable loan terms and flexible repayment options.
Key tips:
- Get pre-approved before negotiations begin. This gives you leverage when discussing price and terms with the seller.
- Consider working with lenders who specialize in financing for medical professionals. These lenders often offer tailored loan products with competitive terms, flexible repayment options, and an understanding of the unique financial profiles of physicians.
- Assess your working capital needs: Beyond the purchase price, you may need funds for renovations, equipment upgrades, or a marketing push post-acquisition.
Remember, the financing structure should align with your cash flow projections. A thorough financial review with your accountant can help you understand what’s sustainable.
2. Tax Implications: Buy the Shares or the Assets?
When purchasing a clinic, you typically have two options: buy the shares of the existing corporation or buy its assets (equipment, goodwill, patient lists, etc.). Each option has distinct tax implications:
- Share Purchase:
- Often favoured by sellers, as they may qualify for the Lifetime Capital Gains Exemption (LCGE) (up to $1,016,836 in 2024).
- The buyer inherits all existing liabilities, including legal and tax risks.
- May allow for a smoother transition of contracts, leases, and licenses.
- Often favoured by sellers, as they may qualify for the Lifetime Capital Gains Exemption (LCGE) (up to $1,016,836 in 2024).
- Asset Purchase:
- Offers a “clean slate” — you buy only what you want (e.g., patient records, equipment).
- Provides depreciation (CCA) opportunities for tax purposes.
- Could be more complex if transferring patient contracts or lease agreements.
- Offers a “clean slate” — you buy only what you want (e.g., patient records, equipment).
Consulting with a tax advisor before the purchase is critical. The best structure depends on multiple factors, including the clinic’s condition, corporate history, and your long-term business goals.
3. Choose the Right Business Structure
Most physicians operate through a professional corporation, but it’s important to structure ownership appropriately at the time of purchase.
Here are a few options to consider:
- Solo ownership: You operate the clinic under your own professional corporation.
- Holding company structure: This adds an extra layer between you and the clinic, allowing for income splitting (where permitted), tax deferral, and asset protection.
- Partnership or cost-sharing arrangements: Ideal if you’re purchasing the clinic with one or more partners, but it’s crucial to define roles, revenue distribution, and exit clauses clearly.
Don’t overlook the GST/HST implications, especially if you’re buying assets. While most medical services are exempt, certain administrative services or retail components (like skincare products) may not be. Having an accountant familiar with provincial tax rules in British Columbia and Alberta can prevent costly mistakes.
4. Due Diligence: Know What You’re Buying
Buying a clinic is more than a financial transaction — it’s also a legal and operational commitment. Before finalizing the purchase, ensure you perform comprehensive due diligence:
- Financial records: At least 3 years of financial statements, tax filings, and patient volume reports.
- Legal and compliance checks: Confirm licensing, lease agreements, and any outstanding liabilities or lawsuits.
- HR review: Understand employee contracts, benefits, and payroll obligations.
An accountant can help identify red flags and assess the true value of the business. It’s also advisable to work with a lawyer to review the purchase agreement and any transfer of contracts.
5. Plan for the Transition
A smooth transition period can protect the goodwill you’re purchasing — namely, the patient base and reputation. Consider negotiating a transition support clause with the seller, where they remain for a few months post-sale to introduce you to patients and staff.
Additionally, have a post-acquisition plan in place:
- Marketing to retain and attract patients.
- Operational improvements.
- Technology upgrades (e.g., EMR systems).
Having an accountant on your advisory team ensures that your cash flow and budget support these goals from day one.
Next Steps for Prospective Clinic Owners
Owning a clinic can be a rewarding step for physicians ready to move into business ownership. But it’s essential to approach the purchase strategically — with careful attention to financing, tax efficiency, and business structure.
At MMT CPA, we specialize in helping healthcare professionals make informed, financially sound decisions. From clinic valuations to incorporation advice and tax planning, we’re here to support your journey.
Thinking about buying a clinic? Reach out to MMT CPA today to schedule a consultation with our healthcare accounting specialists.
