Buying Into a Professional Practice? Plan Your Buyout Before You Sign.

The offer to become a partner is a milestone. For a Texas physician, dentist, veterinarian, CPA, or other licensed professional, it usually arrives after years of building a patient or client base for someone else's practice. The instinct is to sign quickly and celebrate. The better instinct is to ask one question first: how do I get out?

Every ownership interest ends. Partners retire, relocate, become disabled, die, divorce, lose a license, or simply stop getting along. The buy-in documents decide what happens on each of those days. Negotiating the exit at the entrance — while everyone is optimistic and aligned — is far easier than negotiating it later, when the interests of the departing owner and the remaining owners have split apart.

What you are actually buying

A buy-in is rarely a single purchase. It is usually some combination of equity in the practice entity (a PLLC or professional association), an interest in a separate real-estate entity that owns the building, an interest in an equipment or management company, and — sometimes — an interest in an ancillary business such as an imaging center or surgery center. Each may have its own governing document, its own valuation, and its own exit rules.

Before signing, ask for every document that governs every entity you are buying into: the Company Agreement or bylaws, any existing buy-sell agreement, employment agreements, the lease, loan guarantees, and the most recent financial statements and tax returns. If the practice will not share them, that is itself useful information.

Price: how the buy-in is valued

Professional-practice valuations typically separate hard assets (equipment, receivables, cash) from goodwill (the value of the patient or client relationships and the practice's reputation). Much of the goodwill may be personal to the senior owners rather than transferable to the practice — a distinction that matters for both price and tax treatment.

Understand the formula and the inputs: whose compensation is normalized, how receivables are counted, whether the price is paid in cash, through a note, or through reduced compensation over several years, and whether the same formula will be used when you leave. A buy-in formula that is generous to the sellers today will be the formula used against you when you are the one selling.

The formula that sets your buy-in price is usually the formula that will set your buyout price. Read it as both buyer and seller.

The buyout triggers you should define now

A well-drafted buy-sell agreement addresses each way an owner can leave, and treats them differently where appropriate:

Death and disability. Is the practice obligated to buy the interest? At what price, and over what period? Is the obligation funded by life and disability buyout insurance, and who owns the policies?

Retirement. What notice is required? Is there a minimum age or years of ownership before a full-value buyout applies? Is the buyout paid over time, and is it subordinated to the practice's bank debt?

Voluntary departure. If you leave to join another group or open your own practice, is the price discounted? Do restrictive covenants apply, and are they enforceable?

Termination for cause and loss of license. Texas generally requires that a professional entity be owned by licensed professionals in that profession. Loss of license should trigger a mandatory, prompt buyout — the agreement should say how it is priced.

Divorce. In Texas, an interest acquired during marriage is presumptively community property. The agreement should give the practice and the owner the right to buy back any interest awarded to a non-professional spouse, and should address how that interest is valued.

Non-competes and the 2025 Texas physician rules

Restrictive covenants are often the most consequential term in a professional buy-in. Texas enforces non-competes only if they are reasonable in time, geographic area, and scope, and Texas Business & Commerce Code § 15.50 imposes additional requirements for physicians — including a buyout of the covenant and continued access to patient records. Legislation effective September 1, 2025 further limited physician non-competes, including caps on duration, geographic radius, and the buyout amount, and extended related protections to certain other health-care professionals.

For owners, the covenant in the employment agreement and the covenant in the Company Agreement must work together. Conflicting covenants — or a covenant that no longer complies with current Texas law — can undermine the very protection the practice is relying on. Have both reviewed against the statute in effect on the day you sign.

Guarantees, debt, and what you owe on the way out

New owners are frequently asked to personally guarantee the practice's line of credit, equipment financing, or lease. Ask whether the guarantee is joint and several, whether it is capped, and — critically — whether you will be released when you leave. A departing owner who remains on a guarantee after being bought out carries the risk without the reward.

Control: voting, compensation, and deadlock

Equity percentage and control are not the same thing. Review which decisions require unanimous consent, who sets compensation, how new owners are admitted, and what happens if the owners deadlock. A junior owner with a minority interest and no voice in compensation may find that ownership changes very little day to day — except the size of the guarantee.

Tax: structure the price before you agree to it

How the buy-in is characterized — purchase of equity, purchase of personal goodwill, or compensation-based vesting — changes the tax result for both the buyer and the sellers. The same is true at exit, where redemption payments, installment notes, and allocations to goodwill each carry different consequences. The time to align the tax treatment is before the price is fixed, not after.

A short pre-signing checklist

1. Obtain every governing document for every entity involved. 2. Understand the valuation formula and apply it to your own future exit. 3. Confirm each buyout trigger, price, and payment term. 4. Confirm buyout insurance and ownership of the policies. 5. Review non-competes against current Texas law. 6. Identify every personal guarantee and its release terms. 7. Review control, compensation, and deadlock provisions. 8. Model the tax result at entry and at exit. 9. Coordinate the buy-in with your own estate plan and marital-property planning.

How Lone Star ★ Counsel can help

We represent Texas physicians, dentists, and other licensed professionals buying into, restructuring, and transitioning out of practices — including review and negotiation of Company Agreements, buy-sell agreements, employment agreements, and restrictive covenants, with tax and valuation analysis informed by nearly 30 years as both an attorney and a CPA. See our pages on Texas Professional Practice Buy-Ins and Texas Business Succession Planning.

Considering a buy-in offer? Call (888) 517-4575 or visit LoneStarCounsel.com to request a confidential consultation. Please do not send Social Security numbers, account numbers, or copies of sensitive documents through the general website form.

LONE STAR ★ COUNSEL is a dba of Pratt Law Group, PLLC. This article provides general information about Texas law and is not legal advice for a particular practice or professional. Every buy-in depends on the specific facts, the governing documents, licensing rules, and the Texas statutes in effect at the time of signing.

Every ownership interest ends. Plan the exit at the entrance. — Planning Today. Protecting Tomorrow.® — Lone Star ★ Counsel  |  (972) 712-1515