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GWarren For Business & Nonprofits
GWarren For Business & Nonprofits, Attorney
Category: Business Law
Satisfied Customers: 355
Experience:  30 yrs Counsel, AVP Corp Governance Fortune 100 finance/ins, Nonprofit Bds, law firm. OH NJ license
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I am a dentist in a 50% partnership and I am in negotiations

Resolved Question:

I am a dentist in a 50% partnership and I am in negotiations to buyout my partner so that I own 100%. Unfortunately, we only have a contract for an operating agreement, and no exit strategy or buyout contract. I purchased the 50% ownership for 287000 in 2006 as the practice valuation was 575-600,000. Now, we value the practice at 690,000. He wants me to pay 690,000 minus 287000 to buy the rest. In my opinion, I own 50%, so I should only have to pay 345000 which is half the 690,000 to buy the rest of the practice. I have also produced 90% of the work the last year +, though he has done most of the business aspects. Where should I proceed? thank you in advance.
Submitted: 5 years ago.
Category: Business Law
Expert:  GWarren For Business & Nonprofits replied 5 years ago.
Thank you for contacting justanswer.

As you have been in the practice as a partnership for a number of years there should be sufficient proof of a 50/50 partnership based on IRS filings and other books and records for the joint dental practice. That should help establish that you need only pay half of the current book value of the combined practice, irrespective of the non-monetary contributions each of you currently bring to the success of the practice. Are there also state filings for the practice with the Secretary of State that will reinforce the equal co-ownership of the dental practice?

A partnership is typically defined as co-ownership. Unless the practice was a limited partnership consisting of a general and limited partners with differing levels of participation, a true partnership would be presumed. Uncertain whether your contract or reference to an operating agreement relates ownership interests, however, absent proof otherwise you should be able to support your 50 percent ownership and limit the buyout to 50 percent of the current value of the practice.

Typically the most difficult aspect can be valuing the practice in a buyout arrangement, yet it appears you have comfortably addressed that issue with your dental partner. There are specialists who value dental practices in addition to accountants and brokers who can provide that service if the allocation issues continue. The ADA may be able to provide you with practice valuation expertise and experts if needed to help you in the negotiation process. There are also attorneys conversant with such arrangements.

See for example the following link to a public domain website:

http://www.wickenslaw.com/format_2005/Dental_Practice/Dental_Practice.htm

Hopefully you will be able to keep the negotiations on a collegial basis to enable a fair value settlement with your partner. If your dental partner continues to insist on limiting your value to a 2006 figure, it may be appropriate to advocate that the practice be limited to that year's value as well for consistency.

I hope this is responsive to your question. If you would like further clarification, please let me know.

GWarren For Business & Nonprofits, Attorney
Category: Business Law
Satisfied Customers: 355
Experience: 30 yrs Counsel, AVP Corp Governance Fortune 100 finance/ins, Nonprofit Bds, law firm. OH NJ license
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