7 Questions to Ask Before Buying a New Speech Therapy Practice

2026-08-21

Buying a speech therapy practice? Ask these 7 questions first to avoid tax surprises, valuation errors, and hidden liabilities. Practical guide for new owners.

Buying an existing speech therapy practice can be a smart shortcut to a full caseload and established revenue. But if you skip the right questions, you could inherit tax problems, overpay, or miss deductions. This guide walks you through seven questions to ask before you sign, with concrete steps you can take this week.

1. What is the tax basis of the practice assets?

The purchase price you pay is split among assets like equipment, goodwill, and a non-compete agreement. Each asset has a different tax treatment. For example, equipment can be depreciated over 5 to 7 years, while goodwill is amortized over 15 years. If the seller allocates too much to goodwill, your depreciation deductions shrink, increasing your taxable income in the early years.

Ask for the seller’s current tax basis in each asset class. Then, in the purchase agreement, negotiate a fair allocation that maximizes your depreciation. A common split for a small practice might be 20% equipment, 60% goodwill, 10% non-compete, and 10% other intangibles. Work with a CPA to set the allocation before closing.

Action this week: Request the seller’s depreciation schedule and asset list. If they won’t share, ask for a third-party appraisal to set the allocation.

2. Are there any unpaid payroll or sales taxes?

When you buy a practice, you can be held liable for unpaid payroll taxes, even if the prior owner was responsible. The IRS can place a lien on the business assets you purchase. Similarly, if the practice sold therapy materials or products, there may be unremitted sales tax.

Ask for proof of all tax payments for the last three years. This includes federal and state payroll tax returns, sales tax filings, and any tax liens. Run a lien search on the practice’s name and the owner’s personal name.

Action this week: Order a lien search through your state’s secretary of state or use a service like TLO. Also request a tax clearance letter from the IRS and state revenue department.

3. How is the practice structured for tax purposes?

Is the practice an S-corp, C-corp, LLC, or sole proprietorship? The structure affects how you’ll be taxed after the purchase. If you buy the assets of an S-corp, you can start fresh with your own entity, avoiding the seller’s tax history. If you buy the stock of a C-corp, you inherit its tax attributes, including any accumulated earnings or losses.

For most buyers, an asset purchase is cleaner because you can set up a new LLC or S-corp and depreciate the assets from the purchase price. A stock purchase is simpler legally but can bring hidden tax liabilities.

Action this week: Ask the seller for their entity type and tax ID. If it’s a C-corp, get a copy of their last three corporate tax returns to review for red flags.

4. What is the revenue mix, and how will it affect your tax deductions?

Speech therapy practices often have revenue from insurance, private pay, and school contracts. Each has different tax implications. Insurance revenue may require you to track co-pays and deductibles. Private pay is simpler but may have higher bad debt. School contracts might be paid in lump sums, affecting your cash flow and estimated tax payments.

Also, ask about the payer mix. If 80% of revenue comes from one insurance company, that’s a risk. For tax planning, you need to know if revenue is steady or seasonal. This affects your quarterly estimated tax payments.

Action this week: Get a revenue report by payer for the last 12 months. Calculate the percentage from each source. If one payer is over 50%, plan for a potential drop and adjust your tax withholding.

5. Are there any outstanding loans or leases that you’ll assume?

You might assume the lease on the office space, equipment leases, or a business loan. These have tax implications. Lease payments are deductible as rent, but if you buy out a lease, the cost is capitalized. Loans affect your interest deductions.

Ask for copies of all leases and loan agreements. Check the interest rates and remaining terms. A high-interest loan could eat into your cash flow, leaving less for tax payments.

Action this week: List all assumed debts and their monthly payments. Add them to your projected cash flow to see if you can cover them plus your tax obligations.

6. What is the condition of the equipment, and are there any upcoming capital expenses?

Speech therapy practices use specialized equipment like audiometers, therapy tools, and computers. If the equipment is old, you may need to replace it soon. That’s a capital expense, which you can depreciate, but it won’t be a full deduction in year one.

Ask for a maintenance log and the age of each major asset. If the practice uses electronic health records (EHR) software, check if the subscription is transferable and what it costs. Software subscriptions are deductible as operating expenses.

Action this week: Get a list of all equipment with purchase dates and estimated remaining life. Budget for replacements in the next 12 months and factor that into your tax planning.

7. What are the tax implications of the purchase price allocation in your state?

Some states have transfer taxes on the sale of business assets, and the allocation affects how much you pay. For example, if you allocate more to tangible equipment, some states charge a higher transfer tax. Others exempt goodwill.

Also, your state may have different depreciation rules or offer tax credits for small businesses. For instance, some states give a credit for hiring local employees or for purchasing energy-efficient equipment.

Action this week: Consult a local CPA or tax attorney who specializes in practice sales. Ask them to run a scenario with different allocations to see the state tax impact.

FAQ

Can I deduct the purchase price of the practice in year one?

No. You must depreciate or amortize the purchase price over several years. However, under Section 179, you may deduct up to $1,160,000 (2026 limit) for equipment purchases, but only if the practice is profitable and you have taxable income. Goodwill is always amortized over 15 years.

What happens if the seller had unpaid taxes?

If you buy the assets, you generally avoid liability for the seller’s taxes, but you could still face a lien on the assets. If you buy the stock, you inherit the liability. Always get a tax clearance letter before closing.

Should I buy the practice or the assets?

For most buyers, an asset purchase is better. It lets you start with a clean tax slate and depreciate the assets from your purchase price. A stock purchase is simpler but riskier for tax liabilities.

How do I handle the non-compete agreement for tax purposes?

A non-compete is an intangible asset that you amortize over 15 years. The seller must report it as ordinary income, so they may resist allocating too much to it. Negotiate a reasonable amount, typically 5% to 15% of the purchase price.

The bottom line

Buying a speech therapy practice can be a great move, but only if you ask the right tax questions upfront. Focus on the asset allocation, tax liabilities, and the practice’s financial structure. Work with a CPA who knows practice sales, and get everything in writing. The seven questions above will help you avoid costly surprises and set up your new practice for tax success. Start with the asset list and tax clearance letter this week, and you’ll be on solid ground before you sign.