Bringing in a partner to your dental practice can be a strategic move to expand your business, share responsibilities, and increase practice profitability. However, it’s essential to carefully consider the legal and business implications of forming a partnership. In this blog post, I’ll discuss the key legal and business considerations involved in bringing in a partner to your dental practice. Here are some of the key things to be considered:
Partnership Structure
- Determine the type of partnership structure that best suits your practice’s needs, such as a general partnership, a limited partnership, a professional service corporation (“PA” or “PC”), or, the most standard form in my dental practice experience, a professional limited liability company (“PLLC”).
- Consult with legal and financial advisors to evaluate the tax implications, liability protection, and management structure of each partnership option.
Partnership Agreement
- Draft a comprehensive partnership agreement that outlines the rights, responsibilities, and obligations of each partner.
- Address key issues in the partnership agreement, including ownership percentages, decision-making authority, profit distribution, buyout provisions, and dispute resolution mechanisms.
Financial Considerations
- Determine the financial terms of the partnership, including each partner’s capital contribution, profit-sharing arrangement, and compensation structure.
- Consider how expenses, overhead costs, and practice revenues will be shared among partners, and establish a clear accounting and financial reporting system.
Due Diligence on Potential Partners
- Conduct due diligence on potential partners to assess their professional qualifications, clinical skills, reputation, and compatibility with your practice culture.
- Obtain references from colleagues, mentors, and professional networks to verify the qualifications and integrity of potential partners.
Regulatory Compliance
- Ensure that the formation of the partnership complies with state dental practice regulations, professional licensing requirements, and any other applicable laws and regulations.
- Address any licensure, credentialing, or insurance requirements for new partners joining the practice.
Exit Strategies
- Develop exit strategies and contingency plans in the partnership agreement to address potential scenarios such as partner retirement, disability, death, or dissolution of the partnership.
- Include provisions for buy-sell agreements, buyout options, and dispute resolution mechanisms to facilitate a smooth transition in the event of a partner’s departure.
Professional Liability Protection
- Consider the impact of adding a new partner on the practice’s professional liability insurance coverage and risk management strategies.
- Ensure that the partnership agreement includes provisions for indemnification, liability limitation, and professional conduct standards to mitigate potential legal risks.
Conclusion
Bringing in a partner to your dental practice involves careful planning, negotiation, and documentation to ensure a successful and mutually beneficial partnership. By addressing these legal and business considerations upfront and seeking guidance from experienced attorneys and advisors, you can position your practice for long-term growth and success under a partnership structure.