Expense Sharing Agreements A unique type of partnership

Many dentists are realising the benefits of entering into an Expense Sharing Agreement. This is a type of partnership where expenses such as staff, dental equipment and rent are shared, but those involved do not share the fees that they personally earn at the practice. Entering into a partnership of this type has plenty of benefits. An Expense Sharing arrangement will provide many of the advantages that a conventional practice partnership offers (without some of the traditional disadvantages such as who is working harder than who).

For instance dentists will be able to interact with other dentists in a professional environment. This means they have the opportunity to discuss any professional ideas or concerns they may have. But despite being around other dentists they will still be able to determine how hard they wish to work and how much they wish to earn.

There are however risks associated with this type of arrangement.

First, it should be clearly understood that notwithstanding the name, from a legal perspective, this is a partnership and is governed by the same laws and regulations as a traditional partnership. One consequence of this is that, as between the practice and the outside world, the partners are jointly and severally liable for all practice liabilities (in other words they are each responsible for the entire amount, not just a percentage, even if they may be entitled – if asked to pay – to claim back a percentage from the other partner or partners).

An environment with multiple professionals, who each have their own plans and obligations, does not always help the practice to run smoothly. In fact if there is no general agreement as to how the practice should be run, this can easily be a recipe for a dispute somewhere down the line.

As a way of avoiding disputes between partners it is strongly advisable that a formal Expense Sharing Agreement is drawn up. Without this agreement, a partner can dissolve the partnership at any point without needing to consult their colleague, which can potentially lead to disastrous consequences.

Given that no two practices are the same the agreement will vary from practice to practice; there is no ‘one size fits all’ agreement. So it is worthwhile to enlist a specialist dental legal company when drawing up an Expense Sharing Agreement. Firms like Goodman Grant have a vast experience dealing with the legal concerns of those in the dental industry and provide an expert service.

Such agreements cover many different issues. For example, the written agreement will outline what should happen in the event of the prolonged absence of a partner. It is important that consideration is given at the outset as to what should happen in such circumstances and for the agreement to record what was agreed between the principals.

 In the event of the death of a partner the Expense Sharing Agreement will need to state what actions should be taken by the remaining partner(s) are they to have the right to buy the deceased partner’s share, or can it be put straight on the market so to speak. If the continuing partner does not wish to purchase the share then there should be provisions that the continuing partner will cooperate in the sale of the deceased partner’s share. Again, without such provision, the consequences, particularly for a deceased partner’s dependents can be disastrous.

The independence of having your own practice but with half the costs cut, is a very tempting thought. However, it is absolutely vital that genuine consideration is given to every aspect of the running of the practice and that this agreement is then recorded in a bespoke agreement, drafted by those with knowledge of the dental industry and of the issues which need to be addressed, thus avoiding the nightmare scenarios which can occur if there is no written agreement in place. This will significantly increase the chance of the practice running smoothly and successfully for all involved.
 

For more information please call Ray Goodman or John Grant on 0151 707 0090 or email [email protected] 

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