Can I use a structured installment sale to sell my practice?

Hans Goldstein structures installment sales for sellers and works alongside their CPAs. Email hans@goldsteinco.net or call 213-340-2018.

Which parts of a practice sale can spread?

A practice sale price is allocated across asset classes (IRC §1060, reported on Form 8594). For a professional practice, the big line is almost always goodwill.

Personal vs enterprise goodwill. If the practice is a C corporation, goodwill owned by the corporation is taxed once inside the corporation and again when the money comes out. Goodwill that belongs to you personally, and that you sell directly to the buyer, can avoid that second layer. Whether you have personal goodwill depends on facts such as whether you have an existing non-compete or employment agreement with your own practice. This is a CPA and attorney question to settle before the allocation is signed. See C corporation sale tax. In an S corporation or LLC, goodwill gain generally flows through to you as capital gain either way.

What changes when the buyer is a DSO or private equity group?

Dental service organizations and private-equity-backed platforms often pay part of the price as rollover equity in the buying company, part as an earnout, and part in cash, and they usually want you to keep working under an employment agreement. Only the fixed cash portion of the price can be structured. Rollover equity, earnouts and your future salary are separate consideration with their own tax rules.

The buyer still pays the cash at closing. The structured portion goes to an assignment company, which assumes the payment obligation and buys a fixed annuity from a highly rated life insurer (A or better by A.M. Best or equivalent). You are not carrying a note from the buyer. The payment schedule is set in the contract, and the payments depend on the claims-paying ability of the assignment company and the insurer behind it.

Timing matters most here. The structure must be in the purchase agreement, so raise it at the letter of intent stage, before the definitive agreement is drafted around a single cash payment. In a group practice, each selling partner can choose a different schedule. A common choice is a deferred start, so payments begin when your salary from the buyer ends.

What does this look like with real numbers?

Illustrative only. A married dentist sells a practice to a DSO in 2026 for $2,000,000 in cash (no rollover equity, no earnout). Assumptions:

• Goodwill: $1,800,000, zero basis, long-term capital gain.
• Equipment: $200,000 price with $150,000 of §1245 recapture.
• Cash at closing: $400,000 (the $200,000 equipment price plus $200,000 of goodwill). The other $1,600,000 of goodwill is structured over 10 years starting the year after closing.
• Other taxable income: $150,000 a year. The dentist materially participated, so the 3.8% net investment income tax is assumed not to apply to the sale gain (§1411(c)); interest on the payments is investment income and is not modeled here.

Federal figures use 2026 married-filing-jointly brackets (Rev. Proc. 2025-32), including AMT; state tax extra.

The structured version saves about $105,000 of federal tax in this example, before the interest income and the time value of paying later. If the dentist keeps a large salary from the DSO for the first few years, a deferred start keeps those payments from stacking on top of it. Have your CPA run your own allocation and income.

Frequently asked

Q: Can I structure the rollover equity a DSO requires? A: No. Only the fixed cash portion of the price can be structured. Rollover equity and earnouts follow their own tax rules.

Q: Are my receivables part of the structured amount? A: Receivables of a cash-basis practice are ordinary income because you have never been taxed on them. Many practices collect them before closing or carve them out of the sale. Have your CPA confirm how yours should be handled.

Q: My deal is at the LOI stage. Is it too late? A: No, as long as the definitive purchase agreement has not been signed and the deal has not closed. Raise it with your deal attorney now.

Q: Do law and CPA practices work the same way? A: The tax rules are the same. Professional ethics rules on selling a law practice add their own requirements, which your attorney will handle.

What should you read or run next?

• Can I use a structured installment sale to sell a business?
• What is taxed in the year of sale?
• What payment schedules can I choose?
• When do I have to set it up?
• Capital gains on selling a medical or dental practice in California
• C corporation sale tax
• Installment sale calculator
• All structured installment sale questions

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