the owner of three independent practices with four associates who were each assured
they would have the opportunity to purchase ownership in the practice. Three have
been with me more than six years, but I have no associate agreements. How do I proceed?
A: If you've read my column in the past, you know that you have committed a major management
sin by not having an associate agreement. These doctors can open a practice next
door to yours with no legal repercussions. They have a patient following and could
easily become a significant competitor. Part of "preventive management" is protecting
order to go forward with a potential sale, it would be wise to form a Limited Liability
Corporation (L.L.C.). This type of corporation will best protect the assets of the
practice and lower your tax liability. If you own any of the buildings (suites),
you can form a separate L.L.C. for the real estate. In order to save more on taxes,
you might also form a third corporation that owns the equipment.
Have the practice appraised.
You're professionally married to these doctors; do not attempt to negotiate without
a mediator to act as a non-emotional conduit between buyers and seller. If you attempt
this without professional help, the emotions and stress may take a toll.
Set a value for each share of stock and define
the amount that each associate may purchase. Do you want to maintain control? If
so, make only 49% available to the buyers. But there are some points to consider,
associate be offered a higher percentage of ownership if her service (number of
years) is greater than that of another?
be an adjustment of practice value based on the associates' contribution to the
offer the senior associates a "reduction" in their buy-in rate or possibly a small
amount of stock for services rendered?
be given first right of refusal to purchase any property (office)?
Another scenario is to sell one-fifth
of the shares to each associate. However, most associates don't take on management,
administrative or staff oversight duties. The seller must relinquish certain management
tasks in this scenario. But many sellers have a hard time delegating duties they
have performed for ten or twenty years.
The other side
Allow me to also list frequent comments I've heard
from many associates in this situation.
it for me?"
"If the owner
releases me, does the restrictive covenant apply?"
"Will I be
compensated better if I take on management duties?"
partial ownership for my service to the practice."
"Will I be
paid for my time outside the office attempting to build the practice?"
"I refuse to
pay for the portion of the practice that I built."
"I do not want
to be a partner unless I own as much as the senior partner (equal partnership)."
The misunderstandings, emotions and
invalid perceptions that abound in these statements require a mediator's help.
Develop a proper exit strategy and
you can reap great financial rewards. Procrastinate and you risk organizational
and economic disaster.
DR. KATTOUF IS
PRESIDENT AND FOUNDER OF TWO MANAGEMENT AND
CONSULTING COMPANIES. FOR INFORMATION, CALL
(800) 745-EYES OR E-MAIL HIM AT
THE INFORMATION IN THIS COLUMN IS BASED ON ACTUAL