How to Sell a Dental Practice in NJ: Steps, Taxes and DSO Offers

What you are actually selling

In an asset sale, the buyer buys the practice's assets, such as the equipment, the records and the goodwill, rather than the owner's shares. IRS Publication 544 puts it this way: “The sale of a business is usually not a sale of one asset. Instead, all the assets of the business are sold. Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss.”

That is why the price split matters. The Form 8594 instructions say an allocation of the purchase price “must be made to determine the purchaser's basis in each acquired asset and the seller's gain or loss on the transfer of each asset.” They sort business assets into seven classes and allocate the price through them in order, with goodwill last. Equipment and furniture are generally Class V, and goodwill is Class VII. A covenant not to compete entered into with the sale is a Class VI asset.

A sale can also be a stock sale (the buyer takes over the entity) or the sale of a partnership interest. Spiro Leunes, CPA, made this point when he approved our valuation guide on October 6, 2026: to arrive at the proper valuation you must understand who the parties are, what type of transaction it is (an asset sale, a stock sale, or a partnership interest), and the dental practice specialty. He has not reviewed this page.

To see how the buyer and the deal type change the value itself, read the dental practice valuation guide, which carries Spiro Leunes, CPA's approved points in full.

The sale timeline, step by step

None of the sources on this page gives a total length for a sale. What the ADA and the NJ Division of Taxation do give is the length of specific steps. The table uses only those; where a step has no published length, it says so.

The ADA's tip sheet says the “general rule of thumb is that the ideal timeframe from listing the practice for sale to closing is between four and six weeks,” because a short window keeps more patients from looking for a new dentist. Preparation and valuation before you list come on top of that.

• Start the paperwork early. The bulk sale notice needs the signed contract, so a late contract pushes the closing date in New Jersey.
• The ADA's list of who to notify includes your professional liability carrier and every dental benefit plan you contract with.

Prepare the records a buyer will ask for

The ADA's tip sheet says that, at a minimum, a seller may need practice accounts including financial statements and balance sheets, federal tax returns, staff employment contracts, job descriptions and a report of all staffing expenses. It also asks for an inventory of every piece of equipment and data on the patient base.

Assemble these before you list. Our due diligence guide for buyers asks the buyer's accountant to reconcile tax returns, financial statements, books, deposits and practice-management reports for the same periods, so expect those questions and have the explanations ready.

• Financials: profit and loss statements, balance sheets and federal tax returns.
• Staff: employment contracts, job descriptions and total staffing expense.
• Equipment: brand, model or type, serial number, year of manufacture, owner's manual, bill of sale, warranty, maintenance and repair history, inspection records.
• Facility: mortgage or lease, upgrades, and documents showing compliance with federal, state and local rules.
• Patients and production: active patients, dentist and hygiene production, hours worked, accounts receivable, new patients per month and referral sources, case acceptance, recare scheduled, collection rate, fee-for-service to managed care ratio.

To see the same sale from the buyer's side, read the financial due diligence guide for buying a dental practice.

Federal taxes when you sell a dental practice

Because each asset is treated as sold separately, one sale can produce ordinary income and capital gain at the same time. Depreciated equipment can produce ordinary income. Publication 544 says the gain treated as ordinary income on section 1245 property is the lesser of “the depreciation and amortization allowed or allowable on the property” and the gain realized, and that any gain above that part is a section 1231 gain. So the more depreciation was taken on chairs and imaging, the more of their gain, up to that depreciation, is ordinary income.

Net capital gain has its own rates. IRS Topic 409, which shows the thresholds for 2025, says the rate on most net capital gain is no higher than 15% for most individuals, some gain may be taxed at 0%, and a 20% rate applies above the 15% thresholds. The portion of unrecaptured section 1250 gain from selling real property, such as a building you own, is taxed at a maximum 25% rate.

Both sides report the split. The Form 8594 instructions say that, generally, “both the purchaser and seller must file Form 8594” and attach it to their income tax returns when a group of assets that makes up a trade or business is transferred, and to “attach Form 8594 to your income tax return for the year in which the sale date occurred.” Because both sides file, agree the allocation in the contract.

• Publication 537 defines an installment sale as “a sale of property where you receive at least one payment after the tax year of the sale.” Seller financing and payments that depend on later results can fall under it.
• Publication 537 also says you must report depreciation recapture income “in the year of sale, whether or not an installment payment was received that year.” Plan cash for that tax.
• This guide does not say which rate applies to goodwill or whether a stock sale fits your practice. Ask your CPA before you sign a letter of intent.

For the wider December checklist, see the year-end tax planning guide. A sale that closes in December or January lands in different tax years.

New Jersey: the bulk sale notice (Form C-9600)

New Jersey adds a state step before closing. The Division of Taxation says a bulk sale is the sale, transfer or assignment of a business's assets, in whole or in part, outside the ordinary course of business. Its FAQ says business assets can include goodwill, equipment, leases and supplies, the kinds of assets a dental practice sale moves.

The duty sits with the buyer, but the effect lands on the seller. The Division's FAQ says “the purchaser of business assets, other than in the ordinary course of business, must notify the State at least 10 business days in advance of the sale.” The notice is Form C-9600 with a copy of the executed contract showing the price and terms, sent by registered, certified or overnight mail; hand delivery and fax are not accepted, and there is no filing fee.

The Division then sends one or more letters. An escrow letter tells the buyer how much of your sale money to hold back at closing. A returns required letter tells you which returns and taxes must be filed and paid to clear the case. A clearance letter says no escrow is needed. If the buyer closes before the 10 business days pass without an escrow from the Division, the FAQ says the buyer “will be held responsible for the tax obligation of the seller.”

• The FAQ says the escrow is figured from established tax obligations, audit information and any unfiled returns, so file and pay what is due before the sale.
• Set the closing date at least 10 business days after the Division will receive the notice. Business days exclude weekends and holidays.
• The Division sends its letters by first-class mail only, and there is no way to expedite them.

What the sale contract should cover

The ADA's tip sheet tells sellers to read the contract carefully and pay special attention to patient records and access to them, restrictive covenants, the transition of goodwill, tax consequences, collection of accounts receivable, the current office lease, which equipment is owned or leased, whether current employees will be kept and for how long, and how continuing patient care and cases that need retreatment will be handled.

On retreatment, the ADA suggests a threshold, a set-aside “basket” or an agreement that the buyer cannot hold the seller liable for every case, with disputes sent to an arbiter. Each party should have its own attorney review the contract.

• Patient records: who keeps them, how you can reach them after the sale, and how they move. HHS says a covered entity that has a business associate handle protected health information needs a written contract or other arrangement.
• Non-compete: where and for how long you cannot practice. For tax, a covenant not to compete is a Class VI asset on Form 8594.
• Accounts receivable: whether they are sold or you collect them yourself.
• Lease: whether the landlord must consent to an assignment.
• Staff: who is kept and on what terms.

Selling a dental practice to a DSO

A dental support organization (DSO) runs business functions for dental practices. The ADA Health Policy Institute counts a practice as DSO-affiliated “if some outside entity managed some or all of its nonclinical functions, such as billing, marketing, human resources or more.” Its September 2025 workforce report says 16.1% of U.S. dentists were affiliated with a DSO in 2024, up from 7.2% in 2015, and puts New Jersey at 13%.

Spiro Leunes, CPA's approved point for our valuation guide covers a sale to a private equity group. In his words: a private equity valuation uses a multiple of EBITDA, which varies by geographic market and specialty. It has to take into account a deduction for a replacement dentist: depending on specialty, the new dentist is paid a percentage of what the owner/seller produced, which can be from 30 to 40 percent of collections. Very often the lab fee may also be deducted.

In plain terms, as our valuation guide explains it: after the sale, whoever does the dentistry is paid a share of collections, often the selling dentist who stays on as an employee, and that pay comes out of the profit before the multiple is applied, even if you stay. Ask any DSO buyer how its price is figured. The ADA's career guide makes the wider point: “If you have seen one DSO, you have seen one DSO.”

• How much of the price is paid at closing, and how much later, in the buyer's stock or on results? Payments after the year of sale can make it an installment sale on Form 6252.
• How long must you work for the DSO after closing, at what pay, and what happens if you leave early?
• Who decides materials, schedules and treatment plans? Dentists in the ADA's research on DSO employment named control as what they disliked.
• How large is the non-compete, and how much of the price is allocated to it?
• Who owns and controls the patient records, and the practice's name, after the sale?
• Who may own a dental practice in New Jersey, and is the DSO's structure set up for that? That is a question for a New Jersey healthcare attorney, not an accountant.

For the other two deal types Spiro describes, a sale to another dentist and a partnership interest, see section 05 of the dental practice valuation guide.

What it costs to sell a dental practice

The ADA's article on the cost of selling, by Bill Robinson, says the largest cost is usually the broker, and gives a range for each of the main fees. These are the article's figures, not quotes; ask every adviser for a written fee before you sign.

• Ask the broker what is and is not included in the fee, and check for an exclusivity clause, before you sign anything.
• Ask your CPA what the sale will leave you after tax, not only what it will sell for.

Questions to ask a CPA before you sell

A CPA who works with dental sales should be able to answer these in plain terms before a letter of intent is signed.

• Is this an asset sale or a stock sale, and which does the buyer want?
• How should the price be split across equipment, goodwill and a non-compete, and what does each split leave me after federal tax?
• How much depreciation recapture will the equipment produce, and in which tax year?
• If part of the price is paid later, will the installment method apply, and what is due in the year of sale anyway?
• Which New Jersey returns must be filed before closing so the bulk sale escrow is small?
• Which state issued your CPA license, and does your firm hold the permit it needs to serve a New Jersey practice?

To confirm a license in New Jersey's own record, use the NJ CPA license lookup guide.

One CPA profile on this site, Spiro Leunes, CPA of MRL Advisory Group, records the firm's own description: MRL's website describes accounting, tax, advisory, and practice-acquisition services for dentists, dental support organizations, medical practices, and related organizations. It describes bookkeeping, financial statements, records cleanup, payroll, financial review, budgeting, performance analysis, due diligence, valuation support, purchase-structure analysis, and transitions. LA Trusted Professionals has not independently validated service delivery, client counts, transaction counts, nationwide coverage, results, or outcomes. The profile lists a New York CPA license and does not claim a New Jersey license; it is not an endorsement.

Questions to ask before acting.