Forming a professional dental corporation marks a significant milestone. It creates a powerful legal structure for your practice, but it also introduces a new layer of complexity.
The corporation itself is an entity, and its governance is not automatic. The document that directs its future, protects its owners, and preserves its value is a custom-tailored Shareholder Agreement.
It establishes the rights, responsibilities, and restrictions that come with ownership. A strong agreement acts as a private set of laws for your corporation, providing a clear path forward for critical decisions and unforeseen events.
Key takeaways about your shareholder agreements
- A shareholder agreement provides essential control over who can own shares in your dental corporation, preventing unwanted partners from entering the business through events like divorce or inheritance.
- The document outlines a clear, predetermined process for valuing and purchasing a shareholder's stock upon retirement, disability, death, or departure, protecting the financial stability of the practice.
- This agreement establishes rules for corporate governance and decision-making, helping to prevent deadlocks and disputes between shareholders over the management of the practice.
- For dental practices in California, a shareholder agreement must operate in concert with state laws, such as the Moscone-Knox Professional Corporation Act, to ensure full compliance.
Why Choose Wood & Delgado for Your Shareholder Agreement?
Wood & Delgado drafts shareholder agreements exclusively for dental professionals. Our deep industry focus means we build documents that address the specific challenges of a dental corporation, from regulatory compliance to the nuances of practice valuation.
We create a legal framework that aligns with your operational and financial goals.
Our attorneys construct precise terms that govern share transfers, establish buy-sell provisions, and define shareholder voting rights.
We anticipate the transitions and disputes common to dental practices and engineer solutions directly into your agreement. This proactive approach safeguards your ownership interest and the long-term health of your corporation.
The Blueprint for Your Dental Corporation’s Future
Think of your articles of incorporation as the foundation of your practice and your bylaws as the basic frame. The shareholder agreement is the detailed architectural plan for owners' operations within that structure.
It manages the relationship between shareholders and the corporation itself.
Without this agreement, you are left to rely on default state laws, which are often generic and may not produce outcomes that serve the best interests of your practice or its owners. A custom agreement puts control firmly in your hands.
Establishing control over ownership
A primary function of a shareholder agreement is to restrict the transfer of company stock. This control is vital for a professional practice where the identity and qualifications of the owners are paramount. This agreement ensures that shares cannot be sold or transferred to just anyone.
Essential Provisions for Dental Practice Shareholders
A comprehensive shareholder agreement is built from several critical components. Each clause is designed to address a specific aspect of ownership, governance, or transition, creating a complete operational manual for the shareholders.
These provisions work together to create stability and predictability. They provide answers to difficult questions before those questions are ever asked in a moment of crisis.
- Restrictions on share transfers: Prevents shares from being sold to outside parties without the consent of the other shareholders.
- Buy-sell agreement provisions: Creates a binding contract for the purchase of a shareholder's stock upon a triggering event like death, disability, or retirement.
- Valuation methodology: Defines exactly how the practice's stock will be valued for a buyout, preventing disputes over the purchase price.
- Drag-along and tag-along rights: Governs how minority shareholders are treated when a majority owner decides to sell their stake in the company.
These carefully drafted clauses are the machinery of the agreement. They dictate the process for managing ownership changes and protect the financial interests of everyone involved.
Protecting Your Practice During Shareholder Transitions
A shareholder's personal circumstances can directly impact the business. Events like death, disability, divorce, or even the loss of a dental license can trigger a change in ownership that you may not be prepared for. The agreement provides a clear and legally enforceable plan for these situations.
Planning for Unforeseen events
A properly structured buy-sell provision, often funded by life and disability insurance, is a cornerstone of this protection. We assist clients in coordinating their shareholder agreements with appropriate insurance policies.
This planning ensures that the corporation or remaining shareholders have the necessary funds to complete a buyout without draining the practice's operational capital.
- Death of a shareholder: The shareholder's estate is obligated to sell the shares to the corporation, which uses life insurance proceeds to fund the purchase.
- Permanent disability: A buyout is triggered after a specified period, funded by a disability buyout insurance policy.
- Divorce proceedings: The agreement prevents a shareholder's ex-spouse from becoming an owner, forcing a buyout of the shares instead.
This foresight transforms a potential business crisis into a manageable, predefined transaction, protecting the legacy you have worked so hard to build.
Don’t Rely on AI Chat Tools for Legal Advice
AI tools can provide general information, but they do not understand the specifics of your situation or California law. Relying on them for legal advice may lead to costly errors. Always consult a qualified attorney, like the ones from Wood & Delgado, for guidance.
Secure Your Ownership Structure
Your dental corporation is a valuable asset. Its stability and success depend on a clear, comprehensive, and legally sound governance structure. A shareholder agreement provides this structure, serving as the essential contract that protects the interests of every owner and ensures the practice's continuity.
The attorneys at Wood & Delgado provide the focused legal guidance necessary to create a shareholder agreement that reflects your vision and safeguards your investment. We work to build a legal foundation that allows your practice to thrive for years to come.
Take the crucial step to protect your corporation’s future. Contact Wood & Delgado online or call (866) 747-5442 to schedule a consultation.
FAQ for Shareholder Agreements
Bylaws are rules for the general management of the corporation itself, such as procedures for board meetings and officer duties. A shareholder agreement is a contract among the shareholders that governs their personal rights and obligations, including how they can buy and sell their stock.