Definition
A Stock Purchase is a transaction where a buyer acquires the ownership shares of your practice’s legal entity, like its Professional Corporation (PC) or Professional Limited Liability Company (PLLC). Instead of buying individual assets, the buyer purchases the entire company. This means they take on everything—your assets, staff, contracts, and all historical liabilities. For you as the seller, the proceeds are typically treated as long-term capital gains, which are taxed at a more favorable rate than ordinary income.
Why This Matters to Healthcare Providers
This transaction structure can significantly increase your after-tax payout from a sale. However, because the buyer inherits your practice’s entire history, good and bad, they take on more risk. A buyer will conduct deep Due Diligence and may adjust the purchase price or sale terms to protect against potential past compliance issues.
Example in Healthcare M&A
Scenario: A well-established, three-physician cardiology group is being acquired by a larger regional platform. The group has valuable, long-term contracts with several key insurance payers that are difficult to reassign to a new entity.
Application: To avoid disrupting these valuable payer contracts and simplify the transition, the buyer agrees to a Stock Purchase. They buy the shares of the existing professional corporation, allowing the practice to continue operating under its established provider and tax ID numbers.
Outcome: The selling physicians receive favorable capital gains tax treatment on the sale. The buyer benefits from a smooth transition without having to renegotiate critical payer agreements, a decision they made after their due diligence confirmed the practice had a clean compliance record.
Related Terms
The structure of your practice sale has major implications for your after-tax proceeds. Learn about our Tax-Efficient Sale Structures →
About the SovDoc M&A Glossary
Hand-curated by our deal-makers and analysts, the SovDoc glossary turns complex mergers-and-acquisitions jargon into clear, plain-English definitions.
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Frequently Asked Questions
What is a Stock Purchase in the context of healthcare practice sales?
A Stock Purchase is a transaction where the buyer acquires the ownership shares of your practice’s legal entity, such as a Professional Corporation (PC) or Professional Limited Liability Company (PLLC), meaning they purchase the entire company including assets, staff, contracts, and liabilities.
Why might a healthcare provider prefer a Stock Purchase over other sale structures?
A Stock Purchase typically results in the proceeds being treated as long-term capital gains, which are taxed at a more favorable rate than ordinary income, potentially increasing the after-tax payout from the sale.
What does the buyer assume in a Stock Purchase of a healthcare practice?
The buyer takes on everything from the practice including all assets, staff, contracts, and all historical liabilities, inheriting the practice’s entire history.
How does due diligence affect a Stock Purchase transaction?
The buyer conducts thorough due diligence and may adjust the purchase price or sale terms to protect against potential past compliance issues since they inherit all historical liabilities and risks of the practice.
Can you provide an example of when a Stock Purchase is beneficial in healthcare M&A?
In a scenario where a cardiology group with valuable long-term insurance contracts is acquired by a larger platform, a Stock Purchase allows the buyer to take over the existing professional corporation and maintain contracts without disruption, benefiting both buyer and seller with tax advantages and continuity.