At some point in your career, you will probably buy a practice, sell a practice, or consider a partnership. No one thinks that things are going to go wrong, but having a contract that plans for contingencies is not only the smart way, but the only way to go about these transactions. When it comes to partnerships, it is equally as important. In fact, statistics say that 70% to 90% percent of partnerships fail. It might be safer to plan on when your partnership fails as opposed to if your partnership fails.

David Cohen is a dental practice attorney who specializes in helping dentists with the legal contracts necessary to navigate acquiring, running, or leaving a practice. David’s father is Dr. Michael Cohen the founder of the Seattle Study Club. David found a way to merge his love of law with his family history of dentistry. Today, we discuss partnership agreements, legal entities, complications, goodwill transfers, personality compatibility, state laws, and many more issues that can come up with the legal workings of running a practice.

You can find David here:

Cohen Law Firm

(972)379-7513

David@CohenLawFirmPLLC.com

Show Notes

[02:47] David specializes in helping dentists all over the country with legal contracts.

[03:10] He draws the contracts for things like purchases and sales and bringing associates to practices.

[03:31] He also helps with the real estate transactions.

[03:37] His father is a periodontist who started the Seattle Study Club.

[04:10] Even though David didn't go into dentistry like his dad, he found a way to connect his law practice to dentistry.

[04:41] Reasons why partnerships fail. It's key to be proactive from the beginning and make sure that there is a partnership contract in place.

[05:22] How there are many partnerships without agreements or without the proper agreements.

[05:41] There are three phases of partnership. How to get into the deal. How to operate through the deal. How to get out of the deal.

[05:52] Getting into the deal begins with the purchase.

[05:58] The partnership agreement outlines how to operate through the partnership and at the end how to get out of it.

[06:37] One of the biggest reasons that partnerships break up are personality differences.

[07:03] David actually recommends personality testing to make sure that the personalities are compatible when forming a partnership.

[07:51] Have a plan for dissolving your partnership when you designed the agreement.

[10:31] Considerations when buying a practice.

[11:09] Look at the structure of your business. Create an optimal legal structure.

[12:06] Forming a new entity can separate the practice from a liability standpoint.

[12:57] You also have to understand the laws of the state that you are in.

[14:02] Avoid conflicts of interest by having different parties represent each side.

[14:52] The percentage should probably be based on what levels the doctor can produce at.

[19:58] Complications when a young dentist buys a mature practice and the seller wants to stay on for a long time.

[20:50] A one-year period is the typical time for the seller to create a goodwill transfer of the practice.

[23:03] Have open conversations with the seller and the buyer before the transaction takes place.

[28:45] It's important to have the same levels of respect from the staff for both doctors in a partnership.

[29:22] When is a dentist ready or not ready to sell.

[29:51] It's important to have a team when doing anything. Things like CPAs and financial planners are really important. Part of when a doctor is ready to sell depends on the financials.

[32:19] What you get when selling your practice depends on what type of practice you have and who you are selling it to.

[34:07] How to start the transition process and find someone to buy your practice.

[34:26] Brokers can be help for finding potential buyers when trying to sell a practice.

[35:01] You can also do some lunch and learns at dental schools to start building relationships and create interest in your practice.

[35:27] Questions to ask brokers.

[40:22] The buying and selling process is 2 to 3 months at a minimum and maybe longer depending on the circumstances.

[44:13] Noncompete laws and reasonable expectations when buying a practice.

[46:05] Standards for a healthy dental partnership. How to operate through and how to get out of the deal. This includes management and decision-making.

[46:45] It's also important to know how you split the money and how you will split the cost.

[47:21] Consider all factors when getting out of a deal and have clear guidelines.

[50:01] Communicating and having meetings helps avoid having issues that you will need to turn to the contract to resolve.

Links and Resources:

Seattle Study Club

Cohen Law Firm

(972)379-7513

David@CohenLawFirmPLLC.com