Become a Partner
If you’re entering a partnership in private practice, use the checklist below to guide your transition and develop a plan of action. Be sure to click on each action item for a list of supporting tasks and resources.
- This checklist assumes the practice exists. For new practice start-ups, also consider the checklist for building a practice from scratch.
- For an associateship leading to buy-in/partnership, consider both checklists for becoming an associate and partner as they may overlap during the hiring process. The employment agreement and buy-in agreement are entirely separate agreements, but may be presented at the same time.
Still searching for partnership opportunities? Start with this checklist.
Please note: This checklist is for your informational use and not intended to replace the advice of professional advisors and specialists, including, but not limited to, attorneys and certified public accountants.
Establish relationships with industry-specific advisors and specialists
- A practice transition specialist to assist with the valuation and partnership agreement
- An orthodontic/dental consultant to assist with the due diligence analysis to ensure accurate representation of practice details
- An attorney to review the partnership agreement
- An accountant to assist with the analysis of the practice from a financial and tax perspective
Helpful Resources:
Expect to sign a Non-Disclosure Agreement prior to receiving specific information about a practice in order to maintain confidentiality
Helpful Resources:
Prepare for possible interviews via phone or web conferencing software
- Learn as much as you can about the practice/organization (e.g., mission statement, philosophy, goals, community, patient-base, staff information, etc.)
- Write a list of questions to ask during the interview
- Anticipate potential interview questions and make note of specific examples to support your responses
Helpful Resources:
Schedule a visit/interview to the practice or facility
- Request an itinerary before the visit
- Gather documents to bring with you (CV/résumé, credentials and certifications, references, letters of recommendation)
- Tour the office or facility including satellite locations (consider the office/facility size and design, equipment, operations, the ability to accommodate another orthodontist, accessibility, parking, surrounding neighborhood, transportation, and businesses nearby)
- Ask questions about the practice/organization and get to know your potential colleagues and staff
- Explore the community (consider educational, recreational, and cultural facilities, cost of living, availability of housing, and climate)
Send “thank you” emails or handwritten letters after each interview or visit
- Show appreciation for the employer’s time and consideration
- Reiterate your interest in the opportunity and the practice/organization
- Restate your qualifications for the position
- Provide any information that may have been requested during the interview
Work with an advisor to determine the fair market value (FMV), which can be obtained through a practice valuation
- Review economic conditions, financial statements, and tax returns
- Evaluate other factors such as your compatibility with the owner’s practice philosophy, work ethic, and reputation; location, design, and condition of office; age and condition of equipment; lease and real estate information; gross revenue, production, collections, and profitability; patient volume and flow; patient chart information; fee schedule; staff information; management systems; and marketing, etc.
Helpful Resources:
Work with an accountant to conduct cash flow projections to find the trigger point of affordability, decide on a financial structure, and calculate the income distribution formula
Determine the trigger point of affordability (when the associate has sufficient collections to afford the purchase of fractional interest)
- The trigger point occurs when the “after-tax flow in the first year of the buy-in equals or exceeds the after-tax cash earnings of the associate in the prior year” (Hill, 2006)
Decide on a financial structure to address the transfer of tangible and intangible assets
- Two structures include the stock sale structure and the asset sale structure
- Compare alternative structures to determine the best outcome
Helpful Resources:
Calculate an income distribution formula to determine how profits will be allocated to the owners
- Choose a simple or two-tiered distribution formula (e.g., pro rata to each partner’s production/collections, by ownership percentage, or a combination of both)
- Compare alternate distribution formulae by conducting multiple cash flow projections to ensure equity and fairness among owners
Work with an accountant/financial professional to test the financial outcome of the transition plan
Work with an advisor to prepare a binding or non-binding letter of intent (LOI) or buy-in letter that outlines the agreed upon terms and conditions set forth in the partnership or shareholder/stockholder agreement (separate from an employment agreement)
- The letter may include the purchase price, proposed sale date, payment plan, real estate purchase details, as well as distribution of income, expenses, responsibilities, and patients
- The handling of irreconcilable differences may also be addressed
Helpful Resources:
Work with an attorney to prepare the partnership or shareholder/stockholder agreement
- The agreement may include the purchase price, payment plan, compensation plan, management duties, conflict resolution, as well as distribution of income, expenses, responsibilities, and patients
- The handling of various scenarios such as such as death, disability, retirement, and future buy-ins or buy-outs may also be addressed
- Other legal documents may include an operating agreement, bylaws, employment and associateship arrangements
Helpful Resources:
Work with an attorney to determine the legal structure of your practice (e.g., limited liability company, partnership, etc.), draft or amend necessary documentation, and register practice name and ownership changes with the state government
- Consider how each structure will affect day-to-day operations, taxes, and personal assets
Helpful Resources:
Understand federal and state laws, regulations, and requirements affecting the practice and obtain necessary business licenses and permits
- Obtain your state dental license and DEA license (if needed)
- Determine whether it is necessary to re-apply for an Employer Identification Number (EIN) and other local and state licenses and permits
- National Provider Identification (NPI)
- Local occupancy, zoning, and building permits
- Local inspection requirements
- Understand HIPAA, OSHA, infection control, and waste management regulations
- Apply for life, health, disability, malpractice, general liability, property, and workers’ compensation insurance
- Understand anti-kickback statutes and self-referral (“Stark”) laws that may apply to you
Helpful Resources:
- Stay Legally Compliant
- State Dental Boards
- DEA Registration Resources
- Employer ID Numbers
- National Provider Identification (NPI) Application
- Apply for Licenses and Permits
- Health Information Privacy
- AAO OSHA and Infection Control Resources
- Organization for Safety, Asepsis and Prevention
- Managing Your Hazardous Waste
- Get Business Insurance
- A Roadmap for New Physicians: Fraud and Abuse Laws
