Selling a Medical Practice by State: Ownership, Non-Competes & Tax

Physicians often assume a practice sale works the same way everywhere. The valuation mechanics largely do — Adjusted EBITDA and the multiple applied to it are not state-specific. But three legal and tax variables differ enough between states to change how your transaction must be structured, what you can agree to afterwards, and what you actually bank. This guide covers each, with the position as it stands in 2026.

Put simply, selling a medical practice by state is less about what your practice is worth and more about how you are allowed to sell it, and what you keep when you have.

It is a companion to our main guide on how to sell a medical practice and our medical practice valuation guide, which cover the parts of the process that do not vary by state.

1. Corporate practice of medicine: who may own your practice

The corporate practice of medicine doctrine holds that only licensed physicians, or entities they own, may employ physicians to deliver medical care. Its purpose is to keep clinical judgment free of commercial pressure. Roughly 33 states plus the District of Columbia have some form of the doctrine on the books, though scope and enforcement vary widely. Florida does not, which is one reason it has drawn heavy investor activity.

For a seller, this is not an abstraction. Where the doctrine applies, a private-equity platform or management company generally cannot buy your practice outright. Instead the deal takes the shape of a friendly PC / MSO arrangement. A physician-owned professional corporation keeps the clinical entity. A management services organization buys the non-clinical assets and contracts to run the business side. That structure decides what you actually sell, how your proceeds count for tax, and what role you keep afterwards.

The ground is moving. New corporate-practice legislation took effect in California and Oregon on 1 January 2026, tightening limits on management-company control. At federal level, the Stop Corporate Takeovers of Physicians Act was introduced in September 2026, modelled on Oregon’s law; it would create a federal ban if enacted. Any seller negotiating an MSO structure should be working from current law rather than a template drafted several years ago.

2. Non-competes: there is no longer a federal answer

This is where physicians most often work from outdated information. The FTC’s nationwide non-compete rule never took effect. A federal court vacated it in August 2024. The FTC withdrew its appeal in September 2025, and the rule came formally out of the Code of Federal Regulations in February 2026. No federal prohibition exists. Your state’s law decides the question.

Several states have acted on their own, specifically for physicians. Recent changes include:

• Montana — ban on non-competes for licensed physicians, effective 1 January 2026.
• Colorado — physician non-compete restrictions effective 6 August 2025.
• Oregon — HB 3410, which reaches certain pre-existing agreements.
• Arkansas and Indiana — new limits, with Indiana’s aimed at hospital-affiliated employers.
• Texas — physician non-competes limited in duration and geography.
• Maryland — restrictions tied to a physician income threshold.

One distinction matters more than any other, and sellers routinely miss it. Courts treat a covenant you give when selling a business differently from one you give as an employee. Many states that restrict or ban employment non-competes still enforce sale-of-business covenants, reasoning that a buyer who pays for goodwill may protect it. Sell your practice and then stay on as an employed physician, and you will likely sign both, under different rules. Work out which covenant governs which part of your future before you sign, not after.

3. State tax: what you actually keep

Two sellers with identical practices and identical purchase prices can bank materially different amounts depending on where they are resident in the year of the sale.

Eight states levy no individual income tax: Texas, Florida, Tennessee, Nevada, Washington, South Dakota, Wyoming and Alaska. Washington carries an important exception. It imposes a 7% tax on long-term capital gains above an annually indexed threshold of roughly $270,000, with a further 2.9% above $1 million, and a possible exemption for qualifying family-owned businesses. “No income tax” does not reliably mean “no tax on your sale” there.

At the other end, high-tax states can take a double-digit share of the gain. Sellers most often miss the timing. States generally assess residency in the year you realise the gain, which makes this a planning question for the year before closing rather than a problem you can fix afterwards. It also interacts with how you allocate the purchase price between goodwill, personal goodwill, equipment and any real estate — an allocation you negotiate rather than inherit, and one our guide to valuation multiples by specialty approaches from the pricing side.

What does not change by state

It is worth being clear about the limits of all this. Your valuation method does not change at a state line. Adjusted EBITDA is calculated the same way in Ohio as in Arizona, and the multiple a buyer applies is driven by your specialty, scale, payer mix and owner dependence — not your address. Buyer appetite is regional rather than strictly state-bound; platforms build around metropolitan areas and referral patterns, not borders. Selling a dental practice instead? The dental equivalent of this guide is selling a dental practice by state.

What state law changes is the structure of the deal, the enforceability of what you sign, and the after-tax outcome. Those are significant, but they are not a reason to assume your practice is worth less because of where it sits.

Where this bites hardest

In practice, three situations are where the state dimension stops being academic: Buyers face the mirror image of these rules: see medical practice for sale for who may legally own a practice.

• Selling to a private-equity platform in a corporate-practice state. The MSO structure is not optional, and its terms determine how much control and economics you retain.
• Staying on post-sale as an employed physician. You are likely signing two restrictive covenants under two different legal standards.
• Selling within a year of relocating. Residency in the year of sale can be worth more than a turn of multiple.

Our guide to selling to private equity covers the first in detail, including rollover equity and the second bite.

Getting state-specific advice

Everything above reflects the general position as at 2026, and it is moving quickly — three of the facts in this guide changed within the last eighteen months. Treat it as a way to ask your advisers sharper questions, not as a substitute for them. Get state healthcare regulatory law and tax advice from a licensed professional in your state before you sign anything.

The broader point about selling a medical practice by state is a hopeful one: none of these variables changes what your practice is fundamentally worth. They change how the deal is built, and handled early, most of them are manageable.

Tenet M&A advises physicians on practice sales across the United States and works alongside your attorney and CPA on structure, not just price. Explore how we represent sellers, or start a confidential conversation. This guide is educational and is not tax, legal, or investment advice.

Frequently asked questions about selling a medical practice by state

About Bryan Sledge

Bryan Sledge is a CPA with over a decade of experience advising dental and medical practices on tax, accounting, and business strategy. He began his career at Deloitte advising Fortune 500 companies on tax planning and compliance, and brings extensive M&A experience supporting healthcare transactions from both the buyer and seller perspectives. He holds undergraduate and graduate accounting degrees from Texas A&M University's Mays Business School.

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