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The LaMaster Law Firm Blog

Tuesday, July 10, 2018

5 Pitfalls of Entering a Dental Partnership

There are many reasons as to why it has become much more common for dentists to partner up with other dental professionals. Instead of opening a practice of their own, by joining forces with someone else they can obtain both a better work-life balance, and a rise in the business’ value.

Other benefits of sharing a practice with another professional include:

  • Increased cash flow

  • State-of-the-art equipment

  • Shared overhead

  • Better marketing

However, there are some negatives to entering into a dental partnership. Luckily, many risks can be avoided with simple communication prior to collaboration. Some of the potential pitfalls include:

1. Financial Risk

When joining another practice, it is important to have a clear understanding of the financial health of the business. If the practice that you are joining did not manage its finances very well, it could put you at financial risk. It is very important to get to know all of the business vendors. It is equally important to ensure that the equipment is in good condition so as to avoid liability and further prevent financial difficulty as well as the safety.

2. Reputation

When joining a practice, the reputation of that practice is sure to follow you. That’s why it is so important to understand what that reputation is – good, or bad.

3. Conflict-of-Interest

As partners with someone else in a dental practice, you will likely have to share in the decision-making process. Because of this, it is not uncommon to have differences of opinion. If a conflict-of-interest should arise after the partnership has already been established, it may be important to then seek legal advice. Depending upon your co-owners decisions, the outcome of their decisions may serve as a direct reflection of you as well. Should you both decide to make any changes, it is always important to have any changes placed in writing in order to avoid future conflict.

4. Understanding of Agreement

It is important to have a clear understanding of the details of your purchase agreement prior to deciding whether or not to enter in the practice. If you do not have a proper valuation of the business, you could end up not receiving a fair percentage of ownership interest or you could end up with more debt than you were aware of due to situations such as pending litigation. Your purchase agreement is negotiable and is best done with the help of an experienced dental attorney. Knowing that you have received a fair deal at the beginning of a partnership will make the partnership easier going forward.

5. Partner Departure & Non-Competes

It’s normal not to think about your partner leaving the practice, especially when you are just joining, but it can certainly be a pitfall if you don’t. A good question to ask yourself is whether or not the practice is protected from a partner leaving and joining a competing practice. This can be easily remedied ahead of time with the drafting of a non-compete clause in your partnership agreement.

Speak with a Dental Practice Attorney

Above all else, the most important thing to remember is to discuss all issues and concerns with an attorney present prior to entering into a partnership, and to place all agreements – even if preliminary – in writing and notarized. Finally, an experienced dental attorney can provide additional potential drawbacks that you should consider.  If you have any questions or need to speak with an experienced dental attorney, fill out a contact form or call the LaMaster Law Firm at 269-760-1499 today!





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