Get Help with Your Associate Buy-Ins

There are many companies across Los Angeles that base their business models on making associate buy-ins. These complex transactions are conducted to provide companies the ability to charge an excessive amount of compensation for associate buy-in services. Although this is a common practice across our state, many companies still get it wrong. This is due, in part, to the fact that there are various buy-in models to choose from. Many models on the market needlessly penalize owners or their associates by way of tax consequences, problems associated with the buy-in period, and questionable ownership rights.

It is imperative that you are able to examine the associate buy-in process and understand the conflicting nature that may exist between the associate and the owners rather than assuming no conflicts exist. Working with a knowledgeable business lawyer in the Los Angeles area will help to ensure that you are fully aware of what your associate buy-ins involve and how it can impact you.

The attorneys at Leiva Law Firm are well-versed in handling business law matters for clients across Southern California. Our team can help you with associate buy-ins to ensure you understand your rights and responsibilities as you move forward. Our team will help you understand what options you have and guide you throughout the buy-in process. The knowledgeable attorneys at Leiva Law Firm are available to help you at your earliest convenience. Contact our law firm today to schedule a case evaluation so we can get started with your associate buy-ins as soon as possible.

Timelines for Associate Buy-Ins

Quite often, dentists in group practices hesitate to offer an equity position to new candidates immediately. Choosing the wrong partner can have overwhelming consequences for the future of the group. As a result, many dentists prefer to hire associates and get to know them well before moving forward to offer an equity opportunity to them.

When it comes to completing an associate buy-in, there is generally a timeline that each transaction goes through from start to finish. Having a better understanding of the process will help you anticipate when problems arise and help you better move forward with your transactions.

The Honeymoon Period: This period gives the associates a time to become acquainted with one another. This time can also be used to determine if the associate relationship can be permanent. It is crucial that dentists use this time to look at the practice’s compatibilities and philosophies. At the beginning of the honeymoon phase, an associate employment agreement should be presented to each associate and signed. It is crucial to establish goals early on and develop an agreed upon compensation formula. Additionally, have the practice appraised and determine the financial parameters for associate buy-ins in the future. Take this time to develop exit strategies that allow both sides to exit gracefully while having very little impact on the financial stability of the practice. Furthermore, a restrictive covenant is also necessary.

Commitment Phase: After a few months, the associate and the owner of the practice can now make a sound commitment to each other. The phase following the honeymoon phase is the commitment phase, which can last between six and eighteen months. During this phase, you will want to submit a letter of intent which highlights the terms of your associate buy-in. This letter should be signed and come with a practice-management agreement. Revisions to the employment agreement should also be submitted during this phase. During the commitment phase, the associate accepts the role as a future partner. If a dentist retires, a long-term plan to transfer records of patients as well as referrals should be developed.

The Buy-In Phase: If all steps have been completed correctly up until this point, this phase will go seamlessly. Committing to the actions after the honeymoon period and keeping a written record of everything can help to ensure both sides are able to evaluate how the relationship will function in an honest manner.

Working with a business lawyer in Los Angeles will ensure your associate buy-in process goes as smoothly as possible. The attorneys at Leiva Law Firm have decades of experience helping our clients with understanding and developing associate buy-ins that work for them. Contact our law firm today to see how we can help you.

What to Address in an Agreement

When it comes to drafting an associate buy-in, it is crucial that you address various issues that may arise in the future. In order to avoid dissention in the future, it is crucial to outline processes you will utilize to deal with various problems. By crafting an associate buy-in that reflects your practice, you and other parties involved will be able to move forward united in understanding.

Establish the purchase price: You will need to establish an agreed upon price for the practice. It is crucial that you obtain an appraisal to determine the fair market value of the practice to avoid any disappointment as you move forward. When determining the value of a practice, it is crucial to take the location, the ability to transfer goodwill to a future buyer, how many years the practice has been around, the revenue growth, and the quality of the staff that works there.

The purchase agreement: It is crucial that you address liabilities that may arise as a result of other dentists in the practice. These may include those that occurred before the actual buy-in occurred. You should consider whether you want to create an agreement that specifies whether a junior dentist, who is buying into your practice, will have to guarantee existing loans and leases.

Structuring the buy-in: It is imperative to include details surrounding how the buy-in will be financed. In many cases, incoming partners will pay between 10% and 20% of their costs upfront and pay the remaining balance over time. However, this is subject to your preference.

Establishing the partnership agreement: Partnership agreements will address how the practice will be managed. It should specify who will be responsible for the day-to-day operation tasks and how each person will provide input on major decisions with the practice. Partnership agreements will cover various topics, including how each party to the agreement is liable for the business and to what extent.

Earnings for associates: Creating an operating agreement that outlines, in detail, how each partner will be compensated will ensure there are no misunderstandings regarding earnings. Will earnings be based on a set percentage of each doctor’s weekly production?

The handling of profits: It is crucial to lay out how the profits will be divided. After the expenses for the practice are paid, how will leftover profits be handled? Will they be divided according to the percentage of equity invested by each partner? Will they be saved and spent on capital improvements?

Planning the dissolution: Although no one ever wants to think about their partnership coming to an end, it is crucial to plan out the dissolution process during the associate buy-in process. Deciding these critical details ahead of time, when everyone involved has a cool head, you will better be able to navigate the process should you be forced to deal with these unfortunate circumstances.

Plan for retirement: It is crucial to determine whether senior partners will have the first option to retire. Are senior partners afforded the ability to forbid retirement by junior partners before him? Is there going to be a mandatory buy-out for the partner who stays? What terms are the buy-out process guided by?

As you can see, there are a plethora of questions and issues that you will need to address when planning your associate buy-in. Working with a knowledgeable legal team will help to ensure you are able to address all the issues that could potentially arise throughout the operation of your practice.

Leiva Law Firm Can Help You

It is critically important that you take the steps toward protecting your legal rights and best interests as you engage in associate buy-ins in the state of California. Although the process may seem easy to complete on your own, it is imperative that you take various steps to ensure your legal rights and best interests are protected. Retaining the assistance of a skilled business lawyer in Los Angeles can help you avoid any hassle you may face moving forward.

The attorneys at Leiva Law Firm have extensive experience helping business owners throughout southern California with understanding associate buy-in models and completing the process. Our team strives to help our clients fully understand legal options available to them so they can decide what specific criteria they should include in their shareholder agreements to best suit their business needs. If you are interested in opening up a business with one or more shareholders, contact our team at Leiva Law Firm today. Call our legal team at (818) 703-1777 to schedule a consultation so we can discuss options available to help you move forward at your earliest convenience.