4 Closing Costs of Buying a Private Practice
Buying an accounting practice is about more than the upfront costs of the deal. When it’s time to close the deal, several additional costs can come up, and it’s always a brilliant idea to account for those when planning your budget. Here are four expected closing costs of buying a private practice that you’ll likely encounter during the transition.
Legal Fees
One of the primary closing costs involves legal fees. Given the complexities of buying a practice, requesting legal review and documentation of all the minor details in the deal itself is normal.
Attorneys will draft and review purchase agreements, conduct due diligence, and ensure you meet all contractual obligations. These services come at a cost, typically ranging from $5,000 to $15,000, depending on the transaction’s complexity and the attorney’s expertise. Investing in incompetent legal assistance is essential to protect your interests and avoid pitfalls.
Accounting and Financial Advisory Fees
Another significant cost when you buy an accounting firm goes toward accounting and financial advisory services. CPAs play a pivotal role in evaluating the economic health of the practice you intend to purchase. They will scrutinize financial statements, verify assets and liabilities, assess tax implications, and provide a comprehensive financial analysis. This process ensures that you’re making an informed decision and helps structure the deal favorably.
Financing Fees
One of the considerable closing costs when buying a private practice usually goes toward covering the financing fees. These extra fees may include loan origination, appraisal, and interest rate lock fees. These fees may vary depending on the specifics of your business credit score, and it’s a good idea to understand the specifics of the loan before you sign on with them.
Lenders typically charge a loan origination fee, a percentage of the loan amount, usually between 0.5 percent and 1 percent. An appraisal fee is also necessary to determine the practice’s fair market value, which can cost between $500 and $5,000. If you choose to lock in an interest rate for your loan, there may also be associated fees.
Regulatory and Licensing Fees
Finally, purchasing a private practice often involves regulatory and licensing fees. Depending on your practice’s nature and location, you may need to obtain specific licenses or permits to operate legally. The costs for these licenses and permits vary widely, ranging from several hundred to several thousand dollars.
Navigating the process of buying a private practice doesn’t have to be challenging or overly complex. Understanding the fees for acquiring a business can help you make informed, well-adjusted decisions and find something suitable.
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