Buying Shares vs. Assets in an Eyecare Practice: Pros, Cons, and How to Choose
Acquiring an optometry practice is a pivotal step, one that carries both opportunity and complexity. For aspiring practice owners, the decision often narrows to two main paths: buying optometry practice shares or buying assets. Though they might seem similar at first glance, the two approaches diverge significantly in terms of risk, continuity, and long-term implications. Understanding these differences is crucial—not only for securing your investment but also for navigating the eyecare practice transition with confidence.
The Case for Buying Eyecare Practice Shares
When you buy shares in an optometry practice, you are acquiring ownership in the entire business entity. This means stepping into the shoes of the current owners, inheriting all assets, optometry practice liabilities, contracts, and relationships tied to the business. In essence, the practice continues uninterrupted; patients walk through the same doors, employees clock in as usual, and contracts with suppliers remain untouched.
Another factor not to overlook is the ability to continue using the same income and sales tax accounts, which simplifies administrative continuity. The business retains its existing bank account, and you may also benefit from financial leverage already in place—such as an established line of credit.
The Value of Goodwill and Established Relationships
This continuity is a significant draw for many investors. Existing patient relationships and brand recognition transfer seamlessly, maintaining the trust and familiarity that patients associate with the clinic. There’s no need to renegotiate contracts or re-establish supplier agreements—optometry business decisions that can be time-consuming and potentially disruptive. Furthermore, the goodwill built up over years is part of the acquisition. This intangible and often underestimated asset, includes brand reputation, patient loyalty, and community trust.
Inheriting Historical Liabilities: Risks to Consider
But with that continuity comes risk. When you purchase shares, you also acquire the company’s historical baggage. Any unresolved legal disputes, impending legal actions, unpaid debts, or undiscovered liabilities are now yours to manage. Even with extensive due diligence, there is always the chance that hidden issues—like understated debts or unreported tax obligations—could emerge after the deal is closed. For this reason, thorough financial and legal inspections are non-negotiable. Understanding the full scope of the practice's obligations is crucial before signing on the dotted line.
The Case for Buying Eyecare Practice Assets
Buying assets, on the other hand, allows for a more selective acquisition. Rather than taking on the entire business entity, you choose specific assets: equipment, patient lists, inventory, and even eyecare practice goodwill, if negotiated. This granular approach not only provides clarity over what you’re acquiring but also shields you from inheriting the business's historical liabilities and legal risks.
Tax Advantages Through Asset Depreciation
The appeal of buying eyecare practice assets often lies in their simplicity and reduced risk exposure. You are not responsible for previous debts or legal complications, as those remain with the former entity. From a legal standpoint, you are creating a fresh start, free from the entanglements of the previous owner's potential financial or legal missteps.
Challenges of Renegotiating Contracts and Relationships
However, the cleaner slate comes with its own challenges. Since you are not purchasing the business as a whole, patient contracts, lease agreements, and supplier relationships do not automatically transfer. These must be renegotiated, a process that can be both time-consuming and uncertain. Long-time patients may question the change, potentially affecting retention. Staff may feel uneasy about their job security, leading to disruptions during the transition period.
Licensing can further complicate matters. Depending on the jurisdiction, you may need to apply for a new business license or secure permits before operations can resume. You’ll also need to register new accounts with the tax authorities for income tax, sales tax, and payroll. On the financial side, a new bank account must be opened, and any credit arrangements—such as a line of credit—will have to be re-established.
Navigating the Due Diligence Process
Whether buying shares or assets, due diligence is the backbone of a successful optometry practice valuation. For share purchases, the process often involves scrutinizing the company's financial records, legal history, and ongoing contracts. This includes evaluating existing leases, employee agreements, supplier contracts, and compliance with healthcare and tax regulations. A practice that appears financially healthy on paper can mask troubling liabilities—outstanding debt, unresolved lawsuits, or hidden tax obligations that only surface once ownership changes hands.
To illustrate how this might play out: Suppose a buyer discovers post-purchase that the previous owner had multiple unpaid supplier invoices that were not disclosed during negotiations. The result? A cascade of financial strain and legal wrangling that can derail the transition.
The Value of Forensic Audits and Expert Consultation
The depth of due diligence required for share purchases cannot be overstated. Beyond combing through financial records, prospective buyers must engage in forensic-level audits, tracing back several years of financial statements and legal filings. Consulting with financial analysts who specialize in eyecare practice acquisitions can reveal discrepancies that might otherwise be overlooked. It is also advisable to interview key employees and meet with primary suppliers to gauge the stability of these critical relationships.
Asset Acquisition Pitfalls: Ensuring Asset Quality
Asset purchases, while seemingly simpler, also require meticulous examination. Inventory lists, equipment conditions, and patient lists should be inspected thoroughly. If, for example, the equipment is outdated or the patient list is inflated with inactive clients, the value of those assets is diminished.
Imagine a situation where a buyer, after acquiring assets, finds that much of the equipment is in poor condition and requires immediate replacement. Without thorough inspection beforehand, the unexpected costs can erode the financial benefits of the acquisition. Having experts assess the condition of assets before purchase can mitigate such risks, ensuring the buyer knows exactly what they’re acquiring.
Legal Guidance: Protecting Your Investment and Reputation
In both cases, legal counsel is essential to parse through documentation and highlight risks that might otherwise go unnoticed. Engaging a lawyer experienced in optometry practice acquisitions can make the difference between a smooth transition and a litany of post-purchase surprises. Thoroughness at this stage protects not just your investment but also your reputation as the new owner of an eyecare establishment.
Strategic Considerations: What’s Your Endgame?
The choice between buying shares or assets in an eyecare practice depends on your long-term strategy. If you value brand continuity and established patient trust, shares may be the more practical option. Purchasing shares in a long-standing family practice, for example, allows you to carry forward the clinic’s identity, staff relationships, and patient loyalty without disruption. The business keeps operating under the same name, with familiar faces and processes in place. It’s a more turnkey solution—ideal if you don’t have the time or appetite to rebuild from the ground up. That said, acquiring shares also means taking on the full history of the legal entity, including any liabilities or unresolved issues.
Tax implications also play a role. Sellers may prefer one option over the other based on their personal tax situation. In many cases, the structure of the sale can influence the final price—asset sales often come with a higher asking price, depending on how the seller weighs their own tax burden.
Conversely, if your focus is on reducing risk and reshaping the practice on your terms, acquiring assets may offer a cleaner slate. This approach allows you to purchase specific elements of the business—such as equipment, patient records, and goodwill—without assuming past debts or legal baggage. Think of it as closer to launching a new clinic, with all the setup that entails. But for some buyers, that trade-off is worthwhile. It offers peace of mind, knowing you aren’t inheriting the consequences of someone else’s decisions.
The Role of Professional Guidance
Making the right choice is rarely straightforward. Financial advisors, legal experts, and business consultants can help dissect the pros and cons specific to your situation. From assessing risk to evaluating financial records, their insights can be instrumental in avoiding pitfalls and securing a seamless transition. Their expertise can spell the difference between a smooth acquisition and years of entanglement in financial and legal complications.
Final Thoughts
The decision to acquire an optometry practice through shares or assets is not merely a financial one; it’s a strategic choice that sets the stage for your business journey. Each path carries its own narrative—one of continuity and legacy, the other of fresh starts and controlled growth. Consulting with legal and financial advisors is not a luxury—it’s a necessity.
Vision Entrepreneur offers practical coaching to help you navigate each step with confidence—from planning and search to evaluation and eyecare practice acquisition.
Ready to move forward? Connect with our coaches for expert guidance.
