Dissolving vs. Selling Your Therapy Practice
If you’re a therapy practice owner thinking about your next chapter—whether retirement, relocation, or a new professional venture—you may be weighing two options: dissolving your LLC entirely or selling your practice and transferring ownership of the business.
These paths are very different, both in legal consequences and in how they impact your clients, colleagues, and assets/liabilities. Understanding those differences is the first step toward making an informed, confident decision.
Closing Your Business
This means formally shutting down the business, and it’s not as simple as walking away. There are two distinct steps: “Dissolution” and “Winding up”
Step 1: Dissolution:
Dissolution is the formal declaration that an LLC is ending. Each state has its own procedures. For example, in Colorado, this occurs when members follow legal protocols. In multi-member LLCs, this might mean member approval. For single member LLCs, this is simply deciding you don’t want the business anymore and filing official paperwork (like a Statement of Dissolution) with the Secretary of State. Once the documents are filed, the LLC is considered "dissolved," meaning it cannot conduct ordinary business any longer.
Step 2: Winding up:
After dissolution, the LLC enters the “winding up phase”. This is when the business wraps up all affairs—paying debts, notifying creditors, selling assets, closing bank accounts, canceling licenses, finalizing tax matters, distributing any remaining assets to members, etc. In Colorado, the manager or members are legally responsible for winding up the business following dissolution and may request court supervision if needed
As you can imagine, this process is far simpler for a single member LLC with very little debt and assets than for a multi-member LLC with a lot to work out before closing up shop.
No matter your set-up, closing a business for a mental health professional comes with additional considerations. This might include legally required client notifications & record handling, termination of care plans, and your ethical duty to refer patients to other qualified providers or agencies, particularly when continuing care is vital.
How much notice you should give your clients is up to you. However, many mental health professionals recommend giving 60 to 90 days’ notice before closing a practice when possible. Therapists working with clients in long-term treatment often choose to provide a longer transition period, sometimes six months or more, to properly support continuity of care.
It's also highly recommended to maintain professional liability coverage throughout the winding‑up period to protect against future claims.
Selling the business
Selling is about continuity. Instead of ending the LLC’s life, you’re transferring ownership, typically by selling your membership interest to a new individual or group. The LLC itself stays active. The clients, contracts, and business infrastructure remain in place, and the practice continues to operate under new leadership.
If you're preparing to sell, the process starts with organizing your financials, contracts, and client records. These need to be accurate, up to date, and compliant with HIPAA and other applicable standards. It’s essential to review any outstanding obligations—leases, vendor agreements, employee contracts—and make sure all liabilities are documented before entering negotiations.
Maintaining confidentiality throughout the process is critical. Clients have the right to know how their information will be handled, and in many cases, you’ll need to notify them of the upcoming change in ownership. Some clients may ask for their records to be transferred elsewhere or request copies for their personal files. Being transparent and respectful here is not only an ethical responsibility, it’s a way to preserve trust and goodwill during a major change.
You should make a plan to communicate with clients and ease the transition.
Introducing the new provider
Explaining how appointments and billing will continue
Offering continuity of care whenever possible can help ensure clients feel supported during this change.
You’ll also need a comprehensive asset purchase agreement that outlines the terms of the sale. This document should clearly lay out:
The purchase price
Payment terms
Any transition period you’ll be involved in. In many cases, sellers choose to remain involved for a short time to help with the hand-off, whether a few weeks of overlap or long-term behind-the-scenes support that should be documented.
It's wise to work with an attorney who understands both business sales and the specific nuances of healthcare or therapy practice ownership (like us!) The agreement should also address important legal issues like liability for past claims, confidentiality obligations, and whether any non-compete clauses are appropriate.
Once the deal is set, there are logistical details to manage. You’ll need to:
Update or transfer relevant business licenses, certifications, and contracts.
Notify insurers, vendors, licensing boards, and tax authorities of the change in ownership, and make sure all records reflect the transition.
If you’re part of insurance panels or payer networks, it’s important to understand their requirements for transferring participation to a new owner, or whether the new owner needs to reapply.
No matter how seamless the sale, HIPAA compliance must remain top of mind throughout. Protected health information (PHI) needs to be transferred securely, and any third parties involved in the process, like tech vendors or billing services, may need new or updated Business Associate Agreements (BAA). Keep documentation of every step you take to maintain compliance during the transition.
Don’t Forget About Intellectual Property (IP)
One often overlooked but incredibly important part of selling a therapy practice is handling intellectual property (IP). This includes anything you’ve created that adds value to your practice. This can include your website, logo, original forms, treatment manuals, workbooks, or even a catchy name for a group or practice.
When selling your practice, you’ll need to decide what IP is included in the sale and what isn’t.
Are you handing over the business name and logo?
Are you licensing or selling your custom client forms, handouts, or course materials?
Will the buyer take over your website domain or email list?
These decisions should be clearly spelled out in the purchase agreement to avoid confusion or conflict.
If your practice has any trademarks—state or federal—you’ll want to transfer ownership of those rights properly. Likewise, if you have copyrights in written materials (like blog posts, ebooks, or training guides), you'll need to decide whether to assign them to the buyer or retain them for personal use in a future endeavor. If you plan to continue working under a different brand or start another business, these boundaries are especially important.
Whether you’re winding down for good or preparing to hand over the reins, it’s important to start the process early. Both dissolution and sale involve careful legal, financial, and ethical considerations.
Whichever path you choose, don't go it alone. If you’re thinking about selling your therapy practice, we’d be honored to help. Our team understands the unique needs of licensed mental health professionals and can guide you through every step of the process, from drafting agreements to ensuring HIPAA compliance and IP rights, so you can move forward with peace of mind.
This blog is intended for educational purposes only and does not constitute specific legal advice for any individual. Reading this material does not establish an attorney-client relationship between the reader and our firm. For personalized legal guidance, please consult a licensed attorney in your jurisdiction.