A professional practice buyer checklist covers licensing body approval to acquire the practice, how client files transfer without breaching confidentiality, work-in-progress valuation, professional liability claims history, client concentration, and how enforceable the seller’s non-compete actually is — the items specific to buying a law, accounting or similar advisory practice.
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This checklist covers what to verify before buying a Canadian professional practice — a law, accounting, engineering, architecture or similar advisory firm. A professional practice’s value sits almost entirely in its client relationships and its people, which makes these checks distinct from due diligence on a business built around inventory or equipment.
Confirm the regulatory path to ownership
Confirm the buyer meets the licensing body’s requirements to hold an ownership interest in the practice before signing a binding agreementSeveral regulated professions restrict who can own an interest in a practice, and structuring a deal around an assumption that approval is a formality is a common and expensive mistake.
Confirm the practice’s registration with its licensing body is in good standing and check for any open disciplinary mattersAn open complaint or disciplinary proceeding against the practice or a partner can attach reputational risk to the buyer even for conduct that predates the sale.
Where the practice operates through a professional corporation, confirm its shares are held only by individuals eligible to hold them under the profession’s rulesA professional corporation with an ineligible shareholder on record is a structural problem that a licensing body can require fixed before it will approve the transfer at all.
Review client files, confidentiality and conflicts
Confirm how client files transfer and whether client consent or notice is required under professional conduct rulesClient information is often subject to stricter confidentiality obligations than ordinary business records, and a transfer plan that skips required notice can breach the profession’s own conduct rules.
Run a conflicts check on the practice’s existing client roster against the buyer’s current or prior client relationshipsAn undetected conflict of interest discovered after closing can force the practice to decline or unwind work with a client it just paid to acquire.
Calculate what share of billings comes from the largest few clients and ask how much of each relationship depends on the departing owner personallyA practice concentrated in a small number of relationships that follow the individual professional, not the firm, can lose meaningful value the moment that person steps back.
Value the work in progress and check trust obligations
Get a detailed schedule of work in progress and unbilled disbursements, and confirm how it will be valued and handled at closingWork in progress is often the largest asset on a professional practice’s books, and a vague or undocumented estimate is a common source of a post-closing dispute over price.
Where the practice holds client trust funds, request a recent trust account reconciliation and confirm there is no shortfallA trust account shortfall is a serious regulatory issue on its own, and it is one a buyer wants identified and resolved before taking over responsibility for the account.
Check insurance, staffing and non-compete enforceability
Confirm current professional liability insurance coverage and request a claims history for the practiceA pattern of prior claims, even ones that settled quietly, tells a buyer something about the practice’s risk profile that the financial statements will not show.
Confirm whether tail insurance coverage is arranged for claims arising from work performed before closingWithout tail coverage, a claim tied to pre-sale work can have no active policy responding to it once the seller’s own coverage lapses.
Review the seller’s proposed non-compete and non-solicitation terms and confirm, with a lawyer, how enforceable they are likely to be for this profession and provinceCourts weigh non-competes against regulated professionals more carefully than an ordinary business non-compete, so an unenforceable clause offers far less protection than it appears to on paper.
Confirm associate, staff and any partnership or shareholder agreements are reviewed, including how compensation and retirement or buyout provisions workAn unclear partnership or shareholder agreement can create disputes over authority and compensation almost immediately after a change in ownership.
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.