There are a number of reasons why more than one dental professional would want to work together and form a dental partnership. Profits are shared, but so are expenses, in a partnership. While there are some benefits to entering a dental partnership, dental professionals considering such an arrangement should be aware of the potential disadvantages. After all, all partners in a general partnership have unlimited liability to each partner. This means if one partner incurs a debt or judgment against them, the other partners could be held responsible for paying on that debt or judgment. A solid dental partnership agreement, however, can help combat this substantial disadvantage as well as provide many other benefits.
Partnership Agreements for Dental Professionals
Well-drafted partnership agreements can be a great equalizer among dental practice partners that have different strengths and weaknesses. One partner may be at the beginning of their career and another may be more senior in their dental practice experience. Working in a partnership can mean that the partner’s complement each other and provide coverage when one party is out for vacation or illness. A comprehensive partnership agreement can help set some valuable ground rules for the partnership and protect both partners.
In your dental practice partnership agreement, there are a number of things that should be addressed. For starters, you will want to detail the division of management rights. In some situations, equal management rights among the partners may be the best fit, but this is not always the case. Sometimes, such as when a junior partner joints a partnership of more senior dentist partners, you will want different management rights for different partners. In your partnership agreement, specify who has the authority to make what decisions. Be specific as to who can delegate this authority under certain circumstances.
Your dental partnership agreement should also address if and when new partners can be admitted to the partnership. Expanding your practice may be something you have in your business plans and providing for this growth is important to address in the partnership agreement. As for admitting new partners, any capital contribution a new partner would be required to make should also be detailed in the partnership agreement.
In addition to providing for the admission of new partners, your partnership agreement should also provide for when partners want to leave the practice. Oftentimes, restrictive covenants such as non-compete clauses and non-solicitation clauses are included in partnership agreements. This is to help protect the dental practice from a partner leaving with proprietary information for their own use should they go out and join another dental practice or start their own.
Other areas that should be covered in a partnership agreement include:
- Buy-sell rights
- Majority and minority rights
- Issues pertaining to financing
- Partnership structure
- Conditions for partners exiting the practice
Dental Law Attorneys
You can count on the dedicated team at Mahan Dental Law to create a comprehensive dental partnership agreement that will protect everyone’s best interests as well as the practice itself. Contact us today.