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

Dentists selling a practice are usually told the process is the same everywhere. The valuation mechanics are. Collections, Adjusted EBITDA, hygiene mix and associate coverage drive the number regardless of where you practise. But three variables differ by state, and in dentistry the first has been changing faster than in almost any other area of healthcare.

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

This sits alongside our main guide on how to sell a dental practice, our breakdown of how much a dental practice is worth, and our comparison of companies that buy dental practices.

1. Corporate practice of dentistry: what a DSO may actually own

Every state restricts the corporate practice of dentistry in some form, and roughly two-thirds impose meaningful limits on who may own a practice and who may direct clinical judgment. This is the reason the DSO model exists in the shape it does: in most states a DSO cannot own the clinical practice outright, so it acquires the non-clinical assets and contracts to provide management services, while a licensed dentist remains the nominal owner of the professional entity.

For a seller, the question is not whether that structure is legal in the abstract. It is how much control the management agreement transfers, and whether that arrangement will withstand scrutiny in your state. Two developments in 2026 made that question considerably sharper.

California. In May 2026 the state’s attorney general reached a settlement with Aspen Dental over alleged breaches of corporate-practice rules, involving $2 million in penalties and $300,000 in patient restitution. The structural terms mattered more than the money. Aspen agreed not to select or replace practice owners, not to require a dentist to forfeit ownership if the management agreement ended, and not to restrict other practice activities. The settlement also barred it from owning the practice property, and from setting management fees or staff compensation as a share of revenue or profit.

Colorado. Rules adopted by the state dental board, effective 30 June 2026, go further still: DSOs are prohibited from acting as proprietors of dental practices, and only Colorado-licensed dentists or dental hygienists may own their respective practices.

Read together, these set a direction of travel. Terms that were standard in DSO management agreements a few years ago — fees calculated as a percentage of collections, buyer control over who owns the professional entity, forfeiture on termination — are precisely the terms regulators are now testing. If you are evaluating a DSO offer, the structure of the management agreement deserves as much attention as the headline number.

2. Non-competes: and why the dental answer may differ from the physician one

No federal rule applies. A federal court vacated the FTC’s nationwide non-compete rule 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. Enforceability is now a matter of state law alone.

Here is the point dentists most often get wrong. A number of states have recently banned or sharply limited non-competes — Montana from 1 January 2026, Colorado from August 2025, plus Oregon, Arkansas, Indiana, Texas and Maryland. Several of those measures are written specifically for physicians. A dentist reading a headline about their state banning healthcare non-competes may find, on reading the statute, that it does not apply to dentistry at all. Do not assume a physician protection extends to you.

The second distinction applies equally in dentistry: a covenant given as part of selling the practice is generally treated more favourably to the buyer than one given as an employee, because the buyer has paid for goodwill and is entitled to protect it. A dentist who sells to a DSO and then stays on under an associate agreement is typically signing both, under two different standards. Which covenant governs which period of your life after closing is worth establishing before you sign.

3. State tax on the proceeds

Eight states levy no individual income tax: Texas, Florida, Tennessee, Nevada, Washington, South Dakota, Wyoming and Alaska. Washington is the exception that catches people out. It taxes long-term capital gains above an annually indexed threshold of roughly $270,000 at 7%, with a further 2.9% above $1 million, subject to a possible exemption for qualifying family-owned businesses.

States generally assess residency in the year the gain is realised. That makes this a planning question for the year before closing, not something to address afterwards. It also interacts with how you allocate the price between goodwill, personal goodwill, equipment and any real estate — an allocation you negotiate rather than inherit, and one that affects each side’s tax position differently.

What does not change by state

Your practice is valued the same way everywhere. Collections, Adjusted EBITDA, hygiene production as a share of revenue, associate coverage, payer mix and new patient flow drive the number. A practice in Ohio and an identical one in Arizona are worth broadly the same to a buyer with scale. Selling a medical practice instead? See selling a medical practice by state.

Buyer appetite is regional rather than strictly state-bound — DSOs build density around metropolitan areas and referral patterns rather than state lines, so a practice just over a border from an active market is often better positioned than its address suggests. State law changes the structure of your deal and your after-tax outcome; it rarely changes what your practice is fundamentally worth.

What to do with this

If you are considering a sale, three practical steps follow. Establish early whether your state’s corporate-practice rules constrain the structure a buyer can offer, because that determines what you are actually selling. Read any restrictive covenant against your state’s current law rather than a headline, and check whether it applies to dentists at all. And raise residency and price allocation with your CPA in the year before you intend to close, not after.

Getting state-specific advice

The position above is current as at 2026, and it is moving quickly — two of the most consequential facts here date from the first half of this year alone. Use this guide to ask sharper questions of your advisers, not to replace them. Get state dental regulatory law and tax advice from a licensed professional in your state.

One closing thought on selling a dental practice by state: none of this changes what your practice is fundamentally worth. It changes how the deal must be built, and handled early, most of it is manageable.

Tenet M&A advises dentists 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 dental 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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