What Should a Dental Partnership Agreement Include?

A dental partnership agreement is the foundation for a successful professional relationship between dental practitioners. This legally binding document outlines each partner’s rights, responsibilities, and expectations, helping prevent conflicts and ensuring smooth practice operations. A comprehensive partnership agreement is essential for long-term success, whether establishing a new practice or bringing in additional partners to an existing one.

Partnership Structure and Ownership

The agreement should clearly define the type of partnership being formed, whether a general partnership, limited partnership, or professional corporation. Each structure has different legal and tax implications that affect liability, profit distribution, and decision-making authority. The document must specify each partner’s ownership percentage, which typically corresponds to their initial capital contribution. However, this can be negotiated based on other factors such as experience, patient base, or sweat equity.
Ownership percentages directly impact profit and loss distribution, voting rights, and decision-making power within the practice. The agreement should detail how these percentages change over time, such as through additional capital contributions or the admission of new partners. Clear documentation of ownership stakes prevents future disputes and provides a framework for major business decisions.

Financial Contributions and Capital Requirements

Every partner’s initial financial contribution must be explicitly stated, including cash investments, equipment contributions, and the value of any existing practice assets brought into the partnership. The agreement should outline whether partners are required to make additional capital contributions in the future and under what circumstances these might be necessary.
Beyond initial investments, the document should address ongoing financial obligations, including how practice expenses will be shared, who is responsible for loan guarantees, and how unexpected capital needs will be funded. This section should also specify the process for determining the fair market value of contributed assets and establish procedures for regular financial assessments.

Management and Decision-Making Authority

The partnership agreement must establish a clear management structure defining each partner’s daily operations, role, and responsibilities. This includes designating who has authority over clinical decisions, business management, staff supervision, and financial matters. Some practices operate with equal management rights among all partners, while others designate a managing partner with broader decision-making authority.

The document should specify voting procedures for significant decisions, such as equipment purchases, facility renovations, staff hiring and termination, or changes to practice policies. Establish thresholds for different choices, such as requiring unanimous consent for certain major expenditures while allowing majority votes for routine business matters. Clear decision-making protocols prevent gridlock and ensure efficient practice management.

Compensation and Profit Distribution

One of the most critical sections addresses how partners will be compensated for their work and how practice profits will be distributed. The agreement should distinguish between compensation for clinical services and profit distributions as owners. Some practices use production-based models where partners receive a percentage of their collections, while others employ salary-plus-bonus structures or equal profit-sharing arrangements.

The compensation structure should account for different types of work within the practice, including patient care, administrative duties, marketing efforts, and continuing education requirements. Specify how expenses will be allocated, whether certain costs are deducted before profit calculations, and how bonuses or incentive payments will be determined. Clear compensation terms reduce friction and ensure all partners feel fairly rewarded for their contributions.

Patient and Practice Relationships

The agreement must address the ownership and responsibilities of the patient relationship. It must define whether patients belong to individual partners or the practice as a whole, affecting continuity of care and practice value. It must also establish protocols for patient transfers between partners, coverage arrangements during absences, and procedures for handling patient complaints or malpractice issues.

The document should also outline each partner’s commitment to the practice, including minimum working hours, call coverage responsibilities, and participation in practice development activities. Specify policies regarding outside employment, competing practices, and professional development requirements to ensure all partners remain committed to the practice’s success.

Restrictive Covenants and Competition

Non-compete clauses are standard in dental partnership agreements, though their enforceability varies by state. These provisions typically restrict departing partners from practicing within a particular geographic area and time frame after leaving the partnership. The agreement should define the scope of these restrictions, including specific geographic boundaries and duration limits that courts are likely to uphold.

Beyond non-compete clauses, consider non-solicitation agreements that prevent departing partners from recruiting practice staff or actively pursuing existing patients. Confidentiality provisions protect practice financial information, patient records, and business strategies. These protective measures help preserve practice value and prevent unfair competition from former partners.

Partnership Changes and Dissolution

The agreement must establish procedures for admitting new partners, including qualification criteria, valuation methods, and integration processes. It must also specify voting requirements for adding partners and outline how new partners’ ownership stakes will be determined and financed.

Equally important are provisions for partner departures, whether voluntary or involuntary. The document should address retirement procedures, disability situations, death benefits, and termination for cause. Establish clear timelines for departure notifications and transition periods to ensure continuity of patient care.

Practice Valuation and Buyout Provisions

Perhaps the most complex section involves determining practice value for partnership transactions. The agreement should specify valuation methods, whether using fixed formulas, professional appraisals, or predetermined multiples of revenue or earnings. Consider different valuation approaches for various scenarios, such as retirement, disability, or termination.

Buyout terms must address payment structures, including down payments, financing arrangements, and payment schedules. Specify interest rates for installment payments and establish security provisions protecting the departing partner’s interests. Include provisions for adjusting valuations based on practice performance or market conditions during the transition period.

Insurance and Risk Management

The partnership agreement should require comprehensive insurance coverage, including professional liability, general liability, disability, and life insurance. Specify minimum coverage amounts and establish procedures for regularly reviewing and updating policies. Consider key person insurance that provides financial protection if a partner cannot work.

Address how insurance claims will be handled and whether partners are jointly or individually responsible for deductibles and claim impacts. Establish protocols for reporting potential claims and managing risk factors, sometimes affecting the entire practice.

Legal and Administrative Provisions

Include standard legal provisions such as governing law, dispute resolution procedures, and amendment processes. Specify whether conflicts will be resolved through mediation, arbitration, or court proceedings. Establish precise communication requirements for major decisions and create record-keeping obligations for partnership activities.

The agreement should also address practical administrative matters such as banking arrangements, accounting procedures, tax elections, and regulatory compliance responsibilities. It should include provisions for regular partnership meetings and establish protocols for documenting essential decisions.

A well-drafted dental partnership agreement is a roadmap for successful collaboration and protection against future conflicts. While templates can provide starting points, every practice has unique circumstances that require customized provisions.

Investing in professional legal counsel during the drafting process helps ensure your agreement addresses all relevant issues and complies with applicable state laws, ultimately protecting all partners’ interests and supporting long-term practice success

Contact a Dental Partnership Lawyer Now

Dental partnership agreements can be complicated. For best results and avoid contractual issus down the line, you should always contact a dental partnership attorney in your area. They will ensure your agreements are solid and represent all parties appropriately. Contact us now!