Drafting a Partnership Agreement for Your Dental Practice

Partnerships are very common in dental practices. A partnership is a business arrangement in which two or more individuals or entities are responsible for a business’ operations and share in the profits and liabilities of the business. Partners may sometimes enter into a verbal agreement but it is recommended that they draft a formal partnership agreement. Below, our dental transitions attorney outlines the most important factors to consider when drafting your agreement.

Clearly Defined Business Structure 

While you may know that you want to enter into a partnership, there are many different types to consider. These include general partnerships, limited liability partnerships (LLPs), limited liability companies (LLCs), or a professional corporation. The type of business structure you choose will have its own requirements and legal and tax implications. As such, it is important to give the structure of the practice careful thought so you choose the right one.

Roles and Responsibilities 

A partnership agreement (sometimes structured as an operating agreement) should clearly outline the roles and responsibilities of each partner. These include which partner or partners will handle administrative tasks, clinical duties, and management responsibilities. This will ensure there is a fair workload distribution and accountability within the dental practice.

Financial Issues 

A partnership agreement should also outline financial issues such as profit distribution, capital contributions, how expenses are handled, and arrangements for compensation. Provisions for periodic financial reviews and adjustments should also be included.

Decision-Making Authority 

A partnership agreement should also include provisions regarding decision-making authority. This includes meeting protocols, voting rights, and resolving deadlock issues. Including these provisions promotes collaboration, transparency, and allows for a more effective management of the practice.

Non-Compete and Non-Solicitation Clauses 

There may be a time when one partner wants to leave the practice and create their own solo practice. A non-compete agreement can prevent a dentist from establishing a practice within a certain location in proximity to the partnership’s practice. Non-solicitation clauses prevent any partner from soliciting patients or employees in the same geographic location.

Exit Strategies 

There will likely come a time when at least one partner wants or needs to leave not only the partnership, but the profession altogether. This may be due to disability, retirement, or the departure of a partner. A sudden exit can create confusion and make things very difficult for the remaining partners in the business. A partnership agreement should outline succession planning and exit strategies that provide remaining partners with a framework for how to proceed.

Dispute Resolution 

Disputes in a dental practice partnership are inevitable, but litigation is not. Litigation is the costliest and lengthiest way to resolve a dispute. It can also greatly affect a practice’s operations. Including dispute resolution methods such as mediation can help resolve disputes more quickly and more affordably than litigation.

Our Dental Transitions Attorney Can Draft Your Agreement 

Drafting a partnership agreement for your new dental practice is not something you should do on your own. At AGS Law, our dental transitions lawyer can draft an agreement that clearly outlines the above provisions and that will give your practice the best chance of success. Call us now at 801-477-6144 or contact us online to schedule a consultation and to learn more about how we can help.

Source:

law.cornell.edu/wex/contract