Partnership formations (whether as part of a buy-in or practice startup) require an up-front discussion about the prospective partners’ goals, strengths, weaknesses, and business compatibility. We also need to discuss the partners’ proposed financial contributions, ownership percentages, partner compensation and scheduling, management roles, and (if applicable) owner-as-landlord lease. This approach is intended to expose potential problems early in the process, allowing the partners to adjust the terms of (or abandon) their proposed partnership before spending additional time and money. This process takes some time but is essential to reveal possible problems quickly. Please see my article “Successful Business Partnerships” for my recommendations on essential partnership terms (opens in a new window).
- Confirm the Partnership Structure. We need to discuss and confirm that partnership is the preferred structure. Sometimes, the better structure may be a single corporation, a group solo arrangement, sublease or straight associate position. Please see my article “Professional Group Practice Options” for details (opens in a new window).
- Partnership of Corporations Recommended. Professional corporations for each partner (available separately) are strongly advised to avoid personal liability for the wrongful acts and omissions of other partners and staff, and partnership debt. For details on the incorporation process, please see my Incorporation Page. If you already have a professional corporation in place, a second corporation is rarely necessary or advisable.
- Partnership Agreement. After we agree to a partnership structure, we then need to reach agreement on the professional, operational, professional, financial, legal/ethical, and succession planning elements of the partnership agreement. Income, expenses and assets can be shared equally, prorata to workdays or production or collections, or allocated separately to the partners. The document is comprehensive, over 30 single-spaced pages before exhibits, and includes extensive practice management guidelines, partner duties, compensation formulas, allocation of expenses, and buy-out terms on retirement, loss of license, disability or death.
- Compensation. Compensation formulas are a big focus. To avoid the unfairness and resentment that comes from changing work schedules and duties, professionals need to be compensated in two ways: payment for work completed (salary, day rate or percentage) and profit sharing (based on ownership or other consideration).
Legal consultation and documentation for dental and orthodontic partnership formations and restatements are available at flat rates for the initial consultation and first draft. Extensive structural changes after the first complete draft is at hourly rates. Partnership amendments (minor or as part of a buy-in or buyout) are available at hourly rates. Joint partnership representation is available at flat rates only with attorney’s consent and clients’ conflict of interest disclosures and consent – see FAQ: Joint Legal Representation for further details. Prospective partners, contact me for a free 30-minute consultation to get started on your partnership buy-in!