PPP Issues When Buying or Selling A Dental Practice
Jordan Uditsky • December 1, 2020
As was the case for small businesses in almost every sector of the economy, the Paycheck Protection Program (PPP) provided a desperately needed lifeline for dental practices temporarily shuttered by the COVID-19 pandemic. These funds covered payroll, rent, mortgage payments, and other costs. One of the program’s most important and attractive features is that loans were completely forgivable as long as the borrower used the funds as allowed and satisfied other requirements.
But as critical as PPP loans have been, they present new and novel challenges for those seeking to buy or sell a dental practice that received funds from the program. Parties to a transaction need to consider how to account for the proceeds, ensure that forgiveness has been or will be obtained, and allocate responsibility liability for any unforgiven loans.
Recent SBA Guidance
As the U.S. Small Business Administration (SBA) manages the PPP program, following its guidance on how to treat PPP loans in the context of the sale or purchase of a practice is critical. For months after the program's launch, parties were flying blind as to what they needed to do to avoid problems with obtaining forgiveness on PPP loans and other issues that arise in a practice acquisition.
To clarify many of these issues, the Small Business Administration (SBA) issued guidance on Oct. 2
that outlines the procedures to follow when there is a change in a borrower's ownership.
What Constitutes a "Change In Ownership" for Purposes of PPP Obligations
Not all ownership transactions raise PPP issues. For purposes of the PPP, a "change of ownership" occurs when:
- At least 20 percent of the common stock or other ownership interest of a PPP borrower (including a publicly-traded entity) is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity.
- The PPP borrower sells or otherwise transfers at least 50 percent of its assets (measured by fair market value), whether in one or more transactions.
- A PPP borrower merges with or into another entity.
Continued Obligations of a PPP Borrower
The SBA's guidance clarifies that PPP borrowers remain liable for all repayment, certification, and documentation requirements related to the loan. Specifically, a borrower remains responsible for the following regardless of a change in ownership:
- Performance of all obligations under the PPP loan.
- The certifications made in connection with the PPP loan application, including the certification of economic necessity.
- Obtaining, preparing, and retaining all required PPP forms and supporting documentation and providing those forms and supporting documentation to the PPP lender or lender servicing the PPP loan (referred to as the "PPP Lender" in this Notice) or to SBA upon request.
- Compliance with all other applicable PPP requirements.
Notifying Lenders of Change in Ownership
Before closing any transaction that constitutes a change of ownership as described above, the PPP borrower must notify its PPP lender in writing of the contemplated transaction. The borrower must also provide the lender with a copy of the proposed agreements or other documents that would execute the proposed deal.
When SBA Approval Is Needed Before a Change of Ownership
Depending on the loan status or the nature of the transaction, the SBA may need to approve a change of ownership before it is consummated.
If the borrower has satisfied its PPP loan obligations, there are no restrictions on ownership change. This is the case when the borrower has repaid the note in full or has completed the loan forgiveness process and repaid any remaining balance on the loan.
For transactions closing before the borrower has satisfied its PPP loan obligations, a PPP lender may permit the transaction to proceed without prior SBA approval if:
- The sales or other transfers involve 50 percent or less of the borrower's common stock or other ownership interest.
- The sales or other transfers involve more than 50 percent of the common stock, other ownership interest, or assets of the borrower and the borrower:
- Submits a loan forgiveness application to its lender detailing its use of all PPP loan proceeds, together with supporting documentation.
- Establishes an interest-bearing escrow account controlled by the lender with funds equal to the PPP loan's outstanding balance.
Prior SBA approval is required for any changes in ownership not listed above. Much of the responsibility for obtaining that approval falls on the PPP lender, as outlined in the SBA's guidance.
For asset sales requiring SBA approval, the purchasing entity must assume all of the borrower's obligations under the PPP loan, including responsibility for compliance with the PPP loan terms.
Considering a Dental Practice Sale or Acquisition Involving a PPP Loan? Call the Dental Practice Lawyers at Grogan, Hesse & Uditsky Today.
The SBA’s guidance does provide clarity on many aspects of PPP loan treatment during the purchase or sale of a dental practice. However, integrating these loans into the transaction and pending forgiveness issues make it even more critical that parties engage in comprehensive due diligence and prepare meticulous documentation for such a consequential transaction.
At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you.
Please call us at (630) 833-5533 or contact us
online to arrange for your free initial consultation.
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Recent amendments to the Illinois Dental Practice Act (the “Act”), which Gov. JB Pritzker is expected to soon sign into law, will make it easier for newly minted dental professionals to begin practicing while their license applications are pending. The amendments, which would take effect on January 1, 2026, establish the following criteria under which license-pending dentists and dental hygienists can practice under the delegation of a licensed general dentist: The Applicant has completed and passed the IDFPR-approved licensure exam and presented their employer with an official written notification indicating such; The Applicant has completed and submitted the application for licensure; and The Applicant has submitted the required licensure fee. Once obtained, authorization for dentists and dental hygienists to practice under these provisions can be terminated upon the occurrence of any of the following: The Applicant receives their full-practice license; IDFPR provides notification that the Applicant’s application has been denied; IDFPR requests that the Applicant stop practicing as a license-pending dentist/dental hygienist until the Department makes an official decision to grant or deny a license to practice; or Six months have passed since the official date of the Applicant’s passage of the licensure exam (i.e., the date on the formal written notification of such from the Department). IDFPR has yet to post anything on its website regarding these amendments, but we will provide an update if and when it does. If you have any questions about these new provisions regarding the employment of license-pending dentists and hygienists, please contact Grogan Hesse & Uditsky today at (630) 833-5533 or contact us online to arrange for your free initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
As all dental practice owners know, insurance companies frequently make adjustments to their reimbursement amounts, leading to the common circumstance that a patient who paid a certain amount at the time of treatment may be entitled to a credit from the practice. That credit, usually kept on the practice’s books so that the patient can apply it to future services, has two distinct qualities that have significant legal and financial implications when a practice is about to be purchased or sold. Failure to account for and address such outstanding patient credits early in a transaction can lead to unwanted surprises as well as potentially costly penalties. That is because a patient credit is not only a liability on the books of the practice, it is also the as-yet unclaimed personal property of the patient. That latter characteristic comes with legal obligations under state unclaimed property laws. If you are buying or selling a dental practice, here is what you need to know about handling patient credits during and after the transaction. Accounting For Credits in the Purchase Price More often than not, unused patient credits remain just that – unused. If a practice purchaser knew for an absolute certainty that the patient would never return and ask for the credit to be applied to new services, it would not impact the underlying practice valuation or sale price. Of course, nothing is certain, and if a practice has thousands, tens of thousands, or hundreds of thousands of credits on the books, even a fraction of those credits, if redeemed, could have a significant impact on the practice’s profitability. That is why any patient credits should be disclosed, identified, and addressed as early in the transaction as possible so that neither the buyer nor seller find themselves in the uncomfortable position of renegotiating the purchase price or providing the buyer with a credit. Reporting and Accounting Obligations Under Unclaimed Property Laws Any business holding goods or funds that belong to a customer, client, or other company or individual cannot simply pocket that property or money because its owner may have forgotten about it or is unaware of its existence. If a business holding such property, which includes patient credits, loses contact with the owner for a certain period set by law (called the “dormancy period”), the company effectively becomes the trustee of that property, holding it for the benefit of the owner until they make a claim for its return. In Illinois, that claim may come after the owner searches the Illinois State Treasurer’s unclaimed property database . The information in that database comes from businesses that must provide the Treasurer’s Office with detailed and frequent reports about any unclaimed property they hold pursuant to the requirements of Illinois’ Revised Uniform Unclaimed Property Act (the “Act”). Most U.S. states have adopted this model act, so the following discussion of Illinois’ version is representative of unclaimed property laws generally. When Does Property Become “Unclaimed”? As noted, property is considered unclaimed and abandoned if it has not had any activity within a designated “dormancy period” and the holder is unable to locate the property owner. Under Sec. 15-201 of the Act, the dormancy period is three years for most types of property, though others have longer or shorter periods. For example, there is a 15-year period for traveler's checks, a five-year period for money orders, and a one-year period for payroll checks. Patient credits would fall under the three-year period. Reporting and Notice Obligations For Holders of Unclaimed Property Any for-profit and not-for-profit business entities that conduct business in Illinois are required to electronically report unclaimed property to the Treasurer’s Office on an annual basis. Even businesses not holding any unclaimed property must file a negative report advising as such if they meet any of the following criteria: Annual sales of more than $1,000,000; Securities that are publicly traded; A net worth of more than $10,000,000; or More than 100 employees. The deadline for Illinois dental practices to file unclaimed property reports for unused patient credits is May 1 of each year. The report should reflect one year of account activity three years prior to the last calendar year. Example: If your report is due May 1, 2018, your report will cover activity from January 1, 2014, through December 31, 2014. The detailed requirements as to what must be included in the report are set forth in Section 760.410 of the Illinois Administrative Code . At the same time the report is filed, unclaimed property must be remitted to the Treasurer’s Office. Holders of unclaimed property also must make efforts to reach out to the owner before filing their report and remitting the property. Specifically, the holder of property presumed abandoned shall send a due diligence notice to the apparent owner by first-class U.S. Mail between 60 days and one year before reporting the property. The required contents of the due diligence notice are set forth in Section 760.460 of the Illinois Administrative Code . Consequences of Non-Compliance Holders of unclaimed property face significant penalties for failing to comply with the reporting, notice, and remittance requirements of the Act. Interest and penalties may be imposed on the failure to file, pay, or deliver property by the required due date. Specifically, the state can charge interest at 1% per month on the value of the unreported/unpaid property and impose a penalty of $200 per day up to a maximum of $5,000 until the date a report is filed or the unclaimed property is paid or delivered. For businesses that may have neglected their obligations under the Act, Illinois (and most other states that have adopted the uniform act) offers a Voluntary Disclosure Agreement (VDA) program for unclaimed property holders. In exchange for voluntary compliance through an executed VDA, the Treasurer's Office will agree to forgo the right to assess penalties and interest outlined in the Act. How To Address Unclaimed Property Obligations in a Practice Sale As part of transactional due diligence, a practice purchaser should ensure that the seller has satisfied all of its reporting obligations under applicable law. If it has not, the purchaser should require the seller to complete a Voluntary Disclosure Agreement prior to closing and also include a robust indemnification clause in the purchase agreement should the practice later face penalties for noncompliance. Because of the financial complexities and legal risks involved relating to unclaimed patient credits, practice buyers and sellers alike should consult with experienced counsel to help them navigate this significant and oft-neglected aspect of the practice’s finances and operations. If you are a dental professional considering a sale, acquisition, or merger, please contact us at ddslawyers.com at (630) 833-5533 or contact us online to arrange for your complimentary initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
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Recent amendments to the Illinois Dental Practice Act (the “Act”), which Gov. JB Pritzker is expected to soon sign into law, will make it easier for newly minted dental professionals to begin practicing while their license applications are pending. The amendments, which would take effect on January 1, 2026, establish the following criteria under which license-pending dentists and dental hygienists can practice under the delegation of a licensed general dentist: The Applicant has completed and passed the IDFPR-approved licensure exam and presented their employer with an official written notification indicating such; The Applicant has completed and submitted the application for licensure; and The Applicant has submitted the required licensure fee. Once obtained, authorization for dentists and dental hygienists to practice under these provisions can be terminated upon the occurrence of any of the following: The Applicant receives their full-practice license; IDFPR provides notification that the Applicant’s application has been denied; IDFPR requests that the Applicant stop practicing as a license-pending dentist/dental hygienist until the Department makes an official decision to grant or deny a license to practice; or Six months have passed since the official date of the Applicant’s passage of the licensure exam (i.e., the date on the formal written notification of such from the Department). IDFPR has yet to post anything on its website regarding these amendments, but we will provide an update if and when it does. If you have any questions about these new provisions regarding the employment of license-pending dentists and hygienists, please contact Grogan Hesse & Uditsky today at (630) 833-5533 or contact us online to arrange for your free initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
As all dental practice owners know, insurance companies frequently make adjustments to their reimbursement amounts, leading to the common circumstance that a patient who paid a certain amount at the time of treatment may be entitled to a credit from the practice. That credit, usually kept on the practice’s books so that the patient can apply it to future services, has two distinct qualities that have significant legal and financial implications when a practice is about to be purchased or sold. Failure to account for and address such outstanding patient credits early in a transaction can lead to unwanted surprises as well as potentially costly penalties. That is because a patient credit is not only a liability on the books of the practice, it is also the as-yet unclaimed personal property of the patient. That latter characteristic comes with legal obligations under state unclaimed property laws. If you are buying or selling a dental practice, here is what you need to know about handling patient credits during and after the transaction. Accounting For Credits in the Purchase Price More often than not, unused patient credits remain just that – unused. If a practice purchaser knew for an absolute certainty that the patient would never return and ask for the credit to be applied to new services, it would not impact the underlying practice valuation or sale price. Of course, nothing is certain, and if a practice has thousands, tens of thousands, or hundreds of thousands of credits on the books, even a fraction of those credits, if redeemed, could have a significant impact on the practice’s profitability. That is why any patient credits should be disclosed, identified, and addressed as early in the transaction as possible so that neither the buyer nor seller find themselves in the uncomfortable position of renegotiating the purchase price or providing the buyer with a credit. Reporting and Accounting Obligations Under Unclaimed Property Laws Any business holding goods or funds that belong to a customer, client, or other company or individual cannot simply pocket that property or money because its owner may have forgotten about it or is unaware of its existence. If a business holding such property, which includes patient credits, loses contact with the owner for a certain period set by law (called the “dormancy period”), the company effectively becomes the trustee of that property, holding it for the benefit of the owner until they make a claim for its return. In Illinois, that claim may come after the owner searches the Illinois State Treasurer’s unclaimed property database . The information in that database comes from businesses that must provide the Treasurer’s Office with detailed and frequent reports about any unclaimed property they hold pursuant to the requirements of Illinois’ Revised Uniform Unclaimed Property Act (the “Act”). Most U.S. states have adopted this model act, so the following discussion of Illinois’ version is representative of unclaimed property laws generally. When Does Property Become “Unclaimed”? As noted, property is considered unclaimed and abandoned if it has not had any activity within a designated “dormancy period” and the holder is unable to locate the property owner. Under Sec. 15-201 of the Act, the dormancy period is three years for most types of property, though others have longer or shorter periods. For example, there is a 15-year period for traveler's checks, a five-year period for money orders, and a one-year period for payroll checks. Patient credits would fall under the three-year period. Reporting and Notice Obligations For Holders of Unclaimed Property Any for-profit and not-for-profit business entities that conduct business in Illinois are required to electronically report unclaimed property to the Treasurer’s Office on an annual basis. Even businesses not holding any unclaimed property must file a negative report advising as such if they meet any of the following criteria: Annual sales of more than $1,000,000; Securities that are publicly traded; A net worth of more than $10,000,000; or More than 100 employees. The deadline for Illinois dental practices to file unclaimed property reports for unused patient credits is May 1 of each year. The report should reflect one year of account activity three years prior to the last calendar year. Example: If your report is due May 1, 2018, your report will cover activity from January 1, 2014, through December 31, 2014. The detailed requirements as to what must be included in the report are set forth in Section 760.410 of the Illinois Administrative Code . At the same time the report is filed, unclaimed property must be remitted to the Treasurer’s Office. Holders of unclaimed property also must make efforts to reach out to the owner before filing their report and remitting the property. Specifically, the holder of property presumed abandoned shall send a due diligence notice to the apparent owner by first-class U.S. Mail between 60 days and one year before reporting the property. The required contents of the due diligence notice are set forth in Section 760.460 of the Illinois Administrative Code . Consequences of Non-Compliance Holders of unclaimed property face significant penalties for failing to comply with the reporting, notice, and remittance requirements of the Act. Interest and penalties may be imposed on the failure to file, pay, or deliver property by the required due date. Specifically, the state can charge interest at 1% per month on the value of the unreported/unpaid property and impose a penalty of $200 per day up to a maximum of $5,000 until the date a report is filed or the unclaimed property is paid or delivered. For businesses that may have neglected their obligations under the Act, Illinois (and most other states that have adopted the uniform act) offers a Voluntary Disclosure Agreement (VDA) program for unclaimed property holders. In exchange for voluntary compliance through an executed VDA, the Treasurer's Office will agree to forgo the right to assess penalties and interest outlined in the Act. How To Address Unclaimed Property Obligations in a Practice Sale As part of transactional due diligence, a practice purchaser should ensure that the seller has satisfied all of its reporting obligations under applicable law. If it has not, the purchaser should require the seller to complete a Voluntary Disclosure Agreement prior to closing and also include a robust indemnification clause in the purchase agreement should the practice later face penalties for noncompliance. Because of the financial complexities and legal risks involved relating to unclaimed patient credits, practice buyers and sellers alike should consult with experienced counsel to help them navigate this significant and oft-neglected aspect of the practice’s finances and operations. If you are a dental professional considering a sale, acquisition, or merger, please contact us at ddslawyers.com at (630) 833-5533 or contact us online to arrange for your complimentary initial consultation. We focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you. Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.
Once again, mandatory Beneficial Ownership Information (BOI) reporting deadlines under the Corporate Transparency Act (CTA) have been put on hold. Not only have all deadlines been scrapped but domestic reporting companies may soon be permanently relieved of any CTA obligations whatsoever. Just days after stating it would enforce new March 21, 2025 deadlines, FinCEN issued a February 27, 2025, alert announcing that “ it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update” BOI reports by the current deadlines “until a forthcoming interim final rule becomes effective and new relevant due dates in the interim final rule have passed. FinCEN said that no later than March 21, 2025, it “intends to issue an interim final rule that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.” Just two days after FinCEN’s announcement suspending existing deadlines, the Department of the Treasury went even further. In a March 2, 2025 release , the department said that “not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.” That is because “the Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.” The bottom line is that it appears the new administration has decided to kill the CTA altogether as to domestic reporting companies. We will, of course, provide updates as warranted. If you have questions about this latest development or the CTA generally, please contact Jordan Uditsky at Grogan Hesse & Uditsky, P.C.
