Matt Dickstein
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39488 Stevenson Place #100, Fremont, CA 94539
510-796-9144. mattdickstein@hotmail.com. mattdickstein.com

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Lawyer for Dentists, Dental Corporations and Group Dental Practices

By Matt Dickstein

Bringing a new partner into a dental practice

Thank you for finding my suite of articles on the basic corporate, business and contract law issues for dental corporations and group dental practices in California.  The articles in this suite are:

 

Overview
Should you incorporate your dental practice?
Legal compliance checklist for a dental corporation
Classifying a dentist as an employee or contractor
Dentist employment and independent contractor agreements
Compensation structures for group dental practices
Shareholder buy-sell agreements for dental corporations
May a dentist compete against his or her former practice?
Stealing employees
Bringing a new dentist into a dental practice          ◄You are here
Buy-in and buy-out of a dentist to a dental group
Buying and selling a dental practice
Preparing to sell a solo dental practice
Merging dental practices
Leases for dental offices
How a non-licensed person works with a dental practice; administrative / management service companies
Leaving a dental practice / closing a dental practice

This article gives an outline of how to bring a new dentist into a dental practice.  I go from common sense to legal advice, from the dentist’s purchase of ownership to the parties’ exit strategy and unwinding of the relationship.

Culture Fit

Before anything else, think hard whether the new dentist will fit in with the practice’s culture.  The primary risk is that the existing group and the new dentist might not fit together.  For example, the group and the dentist might differ on the required coverage hours or the handling of employees.

Compensation

A dental group’s compensation structure is the most important part of its culture.  The hardest thing to get right and keep right is a group’s compensation structure.  Every group has its own compensation structure ranging from “eat what you kill” to equal shares.  I talk about common factors in fixing compensation in two prior articles -

   Compensation structures for group dental practices
   Dentist employment agreements and independent contractor agreements. 

Buying into the Practice

After salary, think ownership.  Frequently the practice asks the dentist to wait a period of time (e.g. one year) before the parties discuss the buy-in.  This ensures that the new dentist fits-in before buying-in.  Dentist employment agreements sometimes have clauses for the dentist’s purchase of ownership in the practice.  Usually the clauses are vague and non-binding, and only express the parties’ expectations on the subject.  If the dentist’s buy-in is a material part of the deal, however, specify these deal terms:

  • The ownership percentage that the dentist will get
  • The purchase price
  • The period over which the dentist will pay the purchase price
  • The extent of the dentist's participation in control decisions for the practice, e.g. is the dentist on the board of directors?

Corporate Structure

The new dentist must buy into something, and usually that something is a dental corporation.  The dental corporation’s structure should protect both the incoming dentist and the existing group.  You need to shield each dentist from two kinds of liabilities: (1) liabilities arising from the acts of the other dentists in the group, and (2) general liabilities of the dental corporation (such as real property and equipment leases, etc.).  At the same time, the corporate structure must comply, to the letter, with the laws and regulations that govern dentists.

Group Liabilities

If the existing dentists are liable for group debts, be clear about the liabilities for which the new dentist will become responsible.  Will the new dentist guarantee existing loans or leases?  Will the new dentist step into a capital call?

Exit Strategy

Now that you’ve structured the entry of the new dentist, structure the exit.  The existing dentists and the incoming dentist all need an exit strategy.  The most common exit is the termination of the dentist’s employment plus the buy-back of his or her equity.  The practice also might give severance pay to the departing dentist.

This is where a buy/sell agreement comes in.  A buy/sell agreement is essentially an agreement for exiting a practice.  A buy/sell agreement works like this – the agreement names certain trigger events for buy-back (e.g. termination of employment, death) then it either requires or permits the buy-back of the dentist’s equity on the occurrence of that specific event.  Then the agreement sets a price for the buy-back.  For more on buy-sell agreements for a dentist practice, see Shareholder buy-sell agreements for dental corporations.

To learn a little theory on buying into a practice, and subsequently being bought out, read Buy-in and buy-out of a dentist to a dental group.

This article only gives a short roadmap about bringing a new dentist into a dental practice.  There is a lot more to this subject than introduced here.  Before you do anything, get competent legal counsel to help you.

Call me to schedule a legal consultation: 510-796-9144


Matt Dickstein, Business Attorney - 39488 Stevenson Place, Fremont CA 94539
(510) 796-9144      mattdickstein@hotmail.com     www.mattdickstein.com Google

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