TL;DR: When buying a dental practice, deciding between an asset purchase vs share purchase is one of the most important structural choices you’ll make. Asset purchases let you select what you take on, whilst share purchases mean inheriting the company’s entire history, including all liabilities. The choice affects everything from risk exposure to tax treatment, completion complexity, and NHS contract transfers.
Structure forms part of the wider legal process of buying a dental practice. For an overview of all stages from heads of terms through to post-completion, see our guide to buying a dental practice.
If you’re also trying to understand how long the process usually takes in practice (and why transactions often extend beyond initial timetables), see How Long Does It Take to Buy or Sell a Dental Practice?
What You Need to Know
- Asset purchase: You buy specific assets (goodwill and equipment) and start with a clean slate. Seller’s historic liabilities don’t transfer to you.
- Share purchase: You buy the entire company, inheriting everything it owns and owes, including historic tax bills, leases, employees and potential claims.
- Protection in share deals: Thorough due diligence plus warranties and indemnities help protect you, but you’re still managing existing problems.
- Why choose shares: When the practice already runs through a limited company (staff, contracts, property all in company name), a share purchase is often simpler and you have complete continuity.
- Critical first step: Speak to a dentist specialist accountant before committing. Tax implications differ significantly between structures.
When dentists ring me after shaking hands on a practice acquisition, the first question I ask is deceptively simple: are you buying the assets or buying the shares?
Most understand the basic distinction. Buying from a sole trader means an asset purchase. Buying a limited company means a share purchase.
What surprises me: by the time they call, they’ve often committed to a deal without fully understanding what their choice means. Sometimes they’re not even sure which structure they’ve agreed to until the heads of terms arrive.
This matters more than you’d think.
Asset Purchase vs Share Purchase: What Are You Actually Buying?
The difference between these two structures goes beyond legal terminology. You’re choosing between selecting what you take on and inheriting everything the company has ever done.
In an asset purchase, you’re buying specific things: the goodwill, the equipment. You pick and choose.
In a share purchase, you’re buying the company itself. The whole entity. Everything it owns, everything it owes, everything in its history.
This distinction creates entirely different risk profiles.
Bottom line: Asset purchases give you control over what you acquire. Share purchases come as a complete package.
Why Historic Liabilities Matter in Share Purchases
Here’s what catches buyers off guard with share purchases: you inherit the company’s history.
If the company has an outstanding tax bill from a year ago, it becomes your liability. Equipment on a four-year lease you don’t want? You’re locked in. Employment claim brewing? You own it.
The company is the same legal entity before and after you buy it. Liabilities don’t disappear because ownership changed hands.
With an asset purchase, none of this transfers to you.
The seller’s tax bill stays with the seller. Employment claims remain with the seller. You’re starting with a cleaner slate.
Often buyers prefer asset purchases precisely because they pick and choose which liabilities they take on rather than purchasing the company with all the bells and whistles.
What this means for you: In a share purchase, every historic obligation becomes yours. In an asset purchase, you leave the seller’s problems behind.
How Do You Protect Yourself in a Share Purchase?
As always, the due diligence process is vital.
You need to uncover every historic liability: loans, leases, hire purchase agreements, potential claims. Do a thorough enough job and you’ll find what’s lurking.
The sale agreement adds another layer of protection through warranties and indemnities. These give you recourse if undisclosed problems surface later or if existing problems turn out to cost the company.
The reality is: you’re still managing problems that already exist.
In share purchases, due diligence is more extensive and thorough because you’re acquiring the company in its present financial state and with all existing liabilities.
Translation: more time spent investigating.
Key takeaway: Due diligence plus warranties and indemnities protect you in share purchases, but you’re still dealing with pre-existing issues rather than starting fresh.
Why Would You Choose a Share Purchase?
If asset purchases are cleaner and lower risk, why would you ever choose a share purchase?
Sometimes the existing structure dictates the path.
If the entire practice runs through a limited company (all staff employed by the company, all contracts in the company name, the lease held by the company), then a share purchase often makes more sense. It may even be more tax efficient (now or in the future).
Everything’s already in the right place. Nothing needs transferring.
This is particularly relevant for property. If the company holds the freehold or leasehold, it stays exactly where it is. You don’t need to transfer or assign anything.
In an asset purchase, property always needs dealing with. Freeholds must be transferred. Leaseholds must be assigned, or surrendered and regranted. This adds time, cost, and complexity.
For an overview of common lease issues in dental practice sales, see: The Lease Terms That Kill Dental Practice Sales
In short: Share purchases work well when the practice already operates as a company and everything sits in the right place.
What Happens on Completion Day?
The practical differences between these structures become clearest when money changes hands.
Asset purchases are more streamlined. The transaction is relatively straightforward: you buy specific assets, the seller keeps their liabilities, and you move forward.
Share purchases involve more moving parts.
You need greater involvement from accountants because the tax implications and liabilities are more complex. You need a specialist dental accountant to specifically advise, but the implications differ between the two structures.
Then there’s the completion accounts mechanism.
Quick comparison: Asset purchases follow a simpler path. Share purchases need more professional input and time.
How Do Completion Accounts Work in Share Purchases?
In a share purchase, the final price often isn’t fixed at completion.
Here’s how it works: the purchase price adjusts based on the company’s net asset position at completion. If the company has £100,000 more in assets than liabilities, the price increases by £100,000. If there are £100,000 more liabilities, it decreases by £100,000.
You typically produce a pro forma balance sheet before completion to estimate the position. You make a pre-completion adjustment based on this estimate. The assumption is the numbers won’t change dramatically between that point and completion.
You don’t know the final number immediately, though.
Asset purchases don’t have this mechanism. The price is the price.
What this means for you: Share purchases create price uncertainty that gets resolved months after completion. Asset purchases give you price certainty from day one.
How Do Staff Transfers Work?
Staff transfers work completely differently depending on your structure.
Asset purchase: Employed staff transfer automatically via TUPE. For a detailed explanation of how TUPE operates in a dental practice purchase, see TUPE When Buying a Dental Practice: Key Legal Points for Dentists.
Self-employed associates don’t transfer automatically. Their contracts need novating to you or you need new contracts in place with them at completion. For a deeper dive on associate transfers in asset purchases, see Buying a Dental Practice? Don’t Assume the Associates Come With It
Share purchase: Nothing changes from an employment perspective.
The company remains the employer before and after the sale. Nothing is legally different. Their contracts stay exactly as they were.
This is one area where share purchases are genuinely simpler. TUPE doesn’t apply to share purchases because the same company would continue to be the employer.
Key point: Share purchases mean seamless employment continuity. Asset purchases require TUPE compliance and contract novations for self-employed associates.
What Happens with NHS Contracts?
NHS contracts add another layer of complexity, and the asset versus share choice affects how you handle them.
Share purchase: If the NHS contract sits in the company name, you’re generally fine. Sometimes you need NHS consent for the change of control, but the contract stays where it is.
Asset purchase: This gets trickier.
Where the NHS contract is held by an individual, you hit a technical problem: NHS contracts cannot be sold outright.
Instead, you use the Partnership Route. The buyer gets added onto the NHS contract with the seller in partnership at completion. Following completion, the seller is removed, leaving the buyer as the sole contract holder.
You’re briefly in partnership with the seller to facilitate the transfer.
It sounds convoluted. Once you’re familiar with the process, though, it’s fairly straightforward. This route has been used for the past decade for NHS contract transfers.
Bottom line: Share purchases keep NHS contracts in place. Asset purchases need the Partnership Route when contracts are held personally.
What About Tax Implications?
The tax implications differ significantly between asset and share purchases.
You need specialist accountant advice before making this decision.
The tax treatment affects both buyer and seller differently depending on the structure and circumstances (see HMRC guidance on business asset disposal relief). These differences often create tension in negotiations.
Don’t make this choice without understanding the tax position for your specific situation.
Critical point: Tax considerations can often outweigh legal considerations when choosing between an asset purchase vs share purchase. Get specialist advice early.
What Questions Should You Ask Your Advisers?
Before you commit to either structure, you need clear answers to these questions:
How is the practice currently structured? Is it a sole trader operation or does it run through a limited company? What’s in the company name versus the individual’s name?
Where does the property sit? If it’s in the company, a share purchase keeps it there. If it’s held personally or by a landlord, you need to understand the transfer implications.
What’s the NHS contract position? Is it in the company name or the individual’s name? What’s the transfer process for your chosen structure?
What are the tax implications for you specifically? This is where your accountant becomes essential. The answer depends on your personal circumstances, not just the deal structure.
What liabilities exist in the company? If you’re buying shares, you need thorough due diligence. What loans, leases, or potential claims are you inheriting?
What’s the completion accounts position? If you’re buying shares, understand the estimated net asset position and how the price adjustment mechanism works.
Essential step: Get clear answers to all these questions before committing. Each one affects your risk profile and cost structure differently.
Asset Purchase vs Share Purchase. What’s the Bottom Line?
Here’s my one piece of advice if you’re sitting across from me at the start of a transaction: speak to a dentist specialist accountant before making this decision.
The legal mechanics are manageable once you understand them. Asset purchases are generally more streamlined. Share purchases involve more complexity but sometimes make more sense given how the practice operates.
What matters is understanding what you’re taking on.
You’re not buying a practice alone. You’re choosing between two fundamentally different ways of acquiring it, each with its own risk profile, cost structure, and long-term implications.
The choice between assets and shares isn’t something to figure out later. It’s the first question to answer, not the last.
Get the decision right and everything else follows more smoothly. Get it wrong and you’re trying to solve problems you could have avoided from the start.
Frequently Asked Questions
What’s the main difference between an asset purchase and a share purchase?
In an asset purchase, you buy specific assets (goodwill and equipment) and leave the seller’s liabilities behind. In a share purchase, you buy the entire company, inheriting everything it owns and owes, including all historic liabilities.
Which structure is less risky for buyers?
Asset purchases are generally less risky because you start with a clean slate. You choose what you take on and avoid inheriting historic tax bills, unwanted leases, or potential employment claims. Share purchases require thorough due diligence to uncover all existing liabilities.
Why would anyone choose a share purchase if asset purchases are cleaner?
When the practice already operates through a limited company with all staff, contracts, and property in the company name, a share purchase often makes more sense. Everything stays in place and nothing needs transferring, which saves time and cost.
How does property transfer differ between the two structures?
In a share purchase, property (freehold or leasehold) held by the company stays exactly where it is. In an asset purchase, freeholds must be transferred and leaseholds must be assigned or surrendered and regranted, adding time and cost to the transaction.
What happens to staff in each type of purchase?
In an asset purchase, employed staff transfer automatically via TUPE, whilst self-employed associates need their contracts novated or new contracts put in place. In a share purchase, nothing changes because the company remains the employer.
How do NHS contracts transfer in asset versus share purchases?
In a share purchase where the NHS contract is in the company name, it stays in place (sometimes needing NHS consent for change of control). In an asset purchase where the contract is held personally, you use the Partnership Route: the buyer is added to the contract in partnership with the seller, then the seller is removed after completion.
What are completion accounts and why do they matter?
In a share purchase, the final price adjusts based on the company’s net asset position at completion. You don’t know the final number immediately. The process involves producing accounts 3 to 4 months after completion, and disputes are common. Asset purchases don’t have this mechanism – the price is fixed.
Do I need specialist tax advice before choosing?
Yes. Tax implications differ significantly between asset and share purchases and often outweigh legal considerations. The treatment affects both buyer and seller differently depending on the structure. Speak to a dentist specialist accountant before making this decision.
Key Takeaways
- Structure dictates risk: Asset purchases let you choose what you take on. Share purchases mean inheriting the company’s entire history, including all liabilities.
- Due diligence is critical in share purchases: You need thorough investigation to uncover historic liabilities, plus warranties and indemnities for protection, but you’re still managing pre-existing problems.
- Property makes a difference: If the company already holds the property, a share purchase avoids the time and cost of transfers or assignments required in asset purchases.
- Staff transfers work differently: Asset purchases trigger TUPE for employed staff and require novations for self-employed associates. Share purchases mean seamless employment continuity.
- NHS contracts need different approaches: Share purchases keep contracts in place. Asset purchases need the Partnership Route when contracts are held personally.
- Price certainty varies: Asset purchases give you a fixed price. Share purchases use completion accounts that adjust the price months after completion, often causing delays and disputes.
- Tax advice is essential: Tax implications often outweigh legal considerations when choosing between structures. Get specialist accountant advice before committing to either path.