In a multi-member dental practice, each of the dentists will need consider potential circumstances that would require a discussion about purchasing one of the dentist’s interests.
Typical Buy-Out Circumstances
Most would immediately consider the most obvious buy-sell event – upon retiring of a dentist. Other less common circumstances can arise and you need to consider each of the following as well:
- What happens upon disability?
- In the event of death, how is that handled? Will the company utilize life insurance?
- If a dentist voluntarily leaves, what would they receive?
- In the unlikely event that “cause” exists to require a dentist to leave, is there a reduced purchase price?
- What mechanisms exist in the event of a deadlock on a matter that requires a vote of the members?
- Can a dentist sell their interest without consent of the other members?
- Would an exiting party receive only what they paid as the buy-in or do they receive market value and would the payment differ depending the circumstances of the buy-sell event?
- What happens in the event of a divorce or bankruptcy of one of the owners and how does that impact the company?
We walk through these important questions and others as part of any practice that has more than one dentist. Each of these considerations are important and the agreement between the parties will become relevant at some point during the relationship, whether by retirement or one of the less likely circumstances. An ambiguous agreement or one that does not adequately address the different circumstances is highly likely to result in litigation so it is important to work through all of these iterations as the inception of the practice.