Can You Have an Oral Partnership Agreement?
This is a common question from dentists considering partnerships. While oral agreements can be legally binding, dental business attorneys strongly advise against them for dental practices. When working with dental partnerships agreement, lawyers have seen how oral agreements lead to serious problems.
Even if you trust your dental partners inside and out, and believe their word is enough to start your partnership, you should always have a written agreement. Discuss drafting a partnership agreement with a dental business lawyer today.
Why Dentists Consider Oral Agreements
The temptation to rely on verbal agreements is understandable, especially when working with friends or colleagues you trust. Some dentists think written agreements signal distrust or create unnecessary formality. Others want to save money or avoid what they see as legal red tape.
Many dentists initially hesitate to create formal written agreements, as they have several concerns. Often, they’re partnering with dental school classmates, long-time colleagues, or even family members. The idea of requiring a written contract can feel awkward or unfriendly.
Dentists often say, “We’ve known each other for years – we trust each other completely.” Some worry that asking for a written agreement might offend their potential partner or suggest a lack of trust. Others might assert, “We’ve worked together before and never had any problems.” This history of successful collaboration can make formal agreements seem unnecessary.
Cost concerns also drive many dentists toward oral agreements. Starting or buying into a practice involves significant expenses, and some dentists try to reduce costs by skipping what they see as optional legal work. They might think, “We can always write it down later if we need to.” Unfortunately, this approach often leads to much higher costs down the road.
Some dentists resist written agreements because they want to maintain flexibility. They believe oral agreements allow them to adapt more easily as circumstances change. Some dentists say, “We don’t want to be tied down by rigid rules” or “We can just figure things out as we go along.” This desire for informality feels natural, especially among friends.
The perception of legal complexity also pushes some dentists away from written agreements. They worry about getting trapped in complicated legal documents they don’t understand. Some might think they don’t want lawyers making everything more complicated than it needs to be. Others fear that formal agreements will create unnecessary bureaucracy in their daily practice.
However, these concerns often stem from misconceptions about attorneys and written agreements. A well-crafted partnership agreement doesn’t create distrust or rigidity – instead, it provides clarity and protection that strengthen professional relationships. Further, dental business attorneys do not complicate matters; they aim to simplify them. Attorneys know how to create agreements that preserve flexibility while protecting everyone’s interests.
Remember, the strongest partnerships are built on clear understanding and mutual protection. Let an attorney create an agreement that supports your partnership while preserving the trust and collegiality you value. The right law firm has helped countless dental partnerships start right and stay strong with properly written agreements.
The Hidden Risks of Oral Agreements
Dental business attorneys have represented many practices in addressing problems caused by oral agreements. Memory fades, and people remember conversations differently. Without written terms, partners often disagree about profit sharing, decision-making rights, and practice responsibilities. These disputes can destroy both friendships and practices.
Protecting Your Practice with Written Agreements
A proper written partnership agreement protects everyone involved. It provides clear answers to important questions before problems arise. Dental attorneys regularly create agreements that cover the following.
Partner Rights and Responsibilities
One of the most common disputes we see involves unclear partner roles and duties. A proper written agreement spells out each partner’s work schedule, clinical responsibilities, and management duties. It defines who handles hiring, firing, and vendor relationships. Agreements can help dental partnerships avoid conflicts by clearly defining these roles from the start. Without written terms, partners often disagree about who should handle various practice duties, leading to resentment and conflict.
Profit and Loss Sharing
Money matters need crystal clear terms. Agreements should detail exactly how profits are calculated and distributed and spell out how to handle practice expenses, equipment purchases, and unexpected costs. The agreement also defines how losses are shared during slow periods or when investing in growth. Partnerships can fall apart over financial misunderstandings that might have been prevented with clear written terms.
Decision-Making Processes
Every practice faces important decisions about equipment purchases, hiring staff, adding services, or changing locations. Your agreement should clearly state how these decisions are made, including detailed processes for both routine and major decisions, and what requires unanimous agreement versus a majority vote. This prevents gridlock and ensures your practice can move forward efficiently.
Exit Provisions
Partners sometimes need to leave the practice. Agreements should include clear processes for both voluntary departure and forced exit situations. They should define notice periods, transition responsibilities, and patient retention rights. The agreement also covers non-compete provisions and confidentiality requirements. Having these terms in writing prevents costly disputes when partnerships end.
Disability and Death Planning
These difficult situations require careful planning, and agreements should include detailed provisions for temporary and permanent disability, defining how the practice continues operating and how the disabled partner is compensated. They should also include clear terms for what happens after a partner’s death, protecting both the practice and the deceased partner’s family.
Buy-Out Structure
Every partnership agreement needs clear buy-out terms and define how practice value is calculated, as well as payment terms and funding methods. Partnership agreements cover both voluntary and involuntary buy-outs, including retirement, disability, and death situations. Clear buy-out provisions help partners plan for the future and prevent disputes over practice value.
Dispute Resolution
Even with the best planning, disagreements can arise, so your agreement must include structured dispute resolution processes that help partners resolve conflicts without costly litigation. It should define mediation and arbitration procedures, saving time and money while preserving relationships. Having these processes in writing helps partners work through disagreements professionally.
Getting Help from Wood & Morgan
Don’t risk your practice’s future on a handshake deal. Call a dental business attorney today for a consultation about creating a proper partnership agreement. They will protect your practice and your relationships with clear, comprehensive written terms that work for everyone involved.