Important Exit Clauses to Include in Dental Partnership Agreements

Starting or entering a dental partnership is about so much more than sharing patients and office space. You also share long-term goals, risks, and responsibilities. Although you may hope that the partnership will last for years, possibly even decades, circumstances can always change. Due to this, exit clauses in partnership agreements are critical to ensure that any transition is fair, smooth, and legally sound if a partner should leave. Below, our nationwide dental practice business attorney explains the exit clauses to include in your agreement.

Buyout Clauses 

Buyout clauses define how to handle an exiting partner’s share of the practice after they leave. These clauses include:

• Valuation method: One of the most important factors in a buyout is to appraise the exiting partner’s interest. Common valuation methods include a multiple of earnings, market value, and asset-based valuation.
• Terms of payment: The agreement should also outline how the buyout is to be paid. This can include deferred payments over time, installment payments, or a lump sum. These terms ensure the departing partner is fairly compensated.
• Funding mechanisms: It is also important to determine where the buyout funds will come from. These can include insurance policies, taking out a loan, or using practice revenue. This helps guarantee financial stability throughout the transition.

Non-Compete and Non-Solicitation Clauses

Non-compete clauses prevent an exiting partner from opening a competing practice for a defined period of time and within a specific geographical location. Provisions in non-compete clauses should define ‘competing practice’ to ensure reasonable restrictions to strengthen enforceability.

Non-solicitation agreements prevent exiting partners from contacting the practice’s employees, patients, and other partners to join them after they leave. This safeguards the practice’s patient base and prevents key partners and employees from leaving.

Dispute Resolution Methods 

There are times a partner leaves a practice due to a business dispute. A dispute may even arise regarding the departure. It is important to include a clause regarding the dispute resolution method that will be used. For example, mediation is often more preferable than litigation because it is more cost-effective and less time-consuming. During mediation the disputing sides can present their case to a neutral mediator who can help foster compromise and communication.

In addition to the dispute resolution method used, these clauses should also outline who will incur the costs of dispute resolution. Most often each side pays their own legal fees, but some clauses stipulate that the party bringing the dispute is responsible for covering the costs.

Our Nationwide Dental Practice Business Attorney Can Draft Your Agreement 

At AGS Law, our nationwide dental practice business attorney is dedicated to helping dentists navigate the complexities of partnership agreements and other dental practice transitions. We can draft your partnership agreement, ensure it includes the protection you need, and make the entire process as easy as possible for you. Call us now at 801-477-6144 or chat with us online to schedule a consultation with our experienced attorney and to learn more about how we can help with your case.