What to Include in Your Dental Practice Partnership Agreement

Dental partnerships are on the rise as more dentists choose to partner with others as opposed to opening up a solo practice. The diffusion of costs and potential for an expanded client base make partnerships attractive to many despite the loss of independence that can only come with a solo dental practice. If you have decided to start or enter a dental practice partnership, a partnership agreement is a must. While partnerships have many benefits, there is always the potential for discontentment bred between partners and mismanagement. Putting clear rules and objectives in a dental practice partnership agreement can help avoid disputes and, should disputes arise, manage the expectations of the partners as to how they will be resolved and addressed.

What to Include in Your Dental Practice Partnership Agreement

There are several key provisions that should be included in your dental practice partnership agreements. For starters, management rights should be explicitly laid out in a detailed manner. Establishing a partnership, after all, does not mean that all partners will or want equal managerial rights. It is not uncommon for more senior practitioners to want to defer more managerial rights and responsibilities to other partners. In order to establish unequal managerial authority, however, it must be specified in the partnership agreement. Otherwise, the default is equal management rights.

The partnership agreement can dictate whether and what management decisions require a vote of the partners and what matters may require a unanimous vote of the partners. Furthermore, the agreement can detail what should happen in the event that the partners cannot reach a decision on a matter requiring a vote. After all, partners are not going to agree all of the time, to be sure.

It is also common for a dental partnership agreement to contain restrictive covenants such as non-competition and non-solicitation clauses. Such provisions can shield the dental practice from a partner simply using the practice as a jumping-off point to start a different professional endeavor. In these restrictive covenants, partners may have limitations placed on them regarding their ability to either join another existing dental practice or to start up a new dental practice as well as restrict taking clients from the partnership. Non-competition and non-solicitation clauses should, however, be used judiciously and be reasonably limited in scope, as well as tailored to protect a legitimate business interest. Otherwise, the clauses may be found invalid and, thus, ineffective.

The partnership agreement should also detail things such as what the protocol is for the admission of new partners. Over the course of the partnership, there may be a wish to expand the partnership to include other dental practitioners. If this is the case, having the procedure detailed in the partnership agreement can be incredibly helpful. Will the admission of a new partner be subject to a vote among existing partners? Are there certain qualifications a potential new partner must possess in order to be admitted as a new partner? These are questions that should be answered in the partnership agreement.

It is also likely that, over the course of the partnership, some partners will want to leave at one point or another. The partnership agreement should address any issues incident to the exiting of a partner from the business. It should also stipulate whether partners exiting in violation of provisions in the partnership agreement should pay liquidated damages to the partnership.

Dental Law Attorneys

Mahan Dental Law can help draft a strong partnership agreement that reflects your unique goals and wishes for your dental practice. Contact us today.