With the current market conditions and in this regulatory environment, there can often be strength in numbers. Increasingly, dentists are merging practices to pool resources, streamline costs and expand. Additionally, many dentists who have hired associates often want to sell a portion of their ownership in the practice to the associate. Here are some of the issues we frequently see:
How Do I Merge With Another Practice?
If you are merging practices with another office, there are a number of logistical issues that need to be sorted out. Will one of the practices be folded into another practice through an asset purchase agreement? Will a new entity be created into which the assets of the previous entities will be transferred? How will the new entity be controlled and how will decisions be made? How will profits be distributed and expenses paid? If these issues are not resolved correctly and in writing, there can be significant tax consequences for both dentists and/or tremendous practical difficulties with the day-to-day operations of the business.
What Are The Potential Complications Of Merging Practices?
Some of the biggest practical problems in merging offices include bringing together the staff, merging computer systems and creating a uniform single entity out of what had been two separate practices. Each separate office will have its own identity and its own way of doing things. You should work with your new partner to create a new list of standards, communicate those standards to the employees and, if you do not already have one, create an employment handbook to remind the staff of your expectations.
How Can I Bring An Associate On As A Partner?
When dentists bring associates in, it is often with the idea that, if the associate works out, the owner will eventually sell some or all of the practice to the associate. This can be a good way to ensure that the associate will remain loyal to the practice, and also to ensure that the patients will receive continuity of care after the original owner retires. If the owner has set up a corporation or limited liability company, he or she can simply transfer a portion of the stock or a percentage of the membership interest to the associate. However, the organizational documents (an operating agreement for a limited liability company or corporate bylaws for a corporation) will also need to be amended to reflect the transfer of ownership and to document how decisions will be made among the owners of the company.
Do I Have To Sell My Interest To An Associate All At Once?
Depending on their circumstances, many dentists also like to set up a schedule, where the ownership of the practice transitions to the new associate over time. For example, the associate may get a 25% ownership in the practice every year for four years, until he or she owns all of the practice. However, any transfer must be properly documented in order to ensure an orderly and enforceable transition of ownership, as well as to establish a procedure in the event something unforeseen happens before ownership is completely transferred (e.g. death, disability, bankruptcy, etc.).
How Do I End The Partnership?
Although it may not be something you are thinking about at the time you bring on a partner, your organizational documents must include some provision for how the practice will end. You will want to incorporate terms that provide direction in the event of the death, disability or bankruptcy of one of the dentists. You should also consider whether you want to restrain the dentists’ ability to sell their interest in the practice without the other dentist’s consent, and you should decide how the practice should be wound down if one of the partner’s leaves.
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While we are making an effort to share general knowledge with the dental community and answer dentists’ questions, this not a substitute for individualized advice from an experienced healthcare lawyer. If you would like to speak with our attorneys and have them take an in-depth look at your particular situation, please feel free to contact us directly.