Consider Pros and Cons Before Executing a Dental Practice Partnership Dissolution

Consider Pros and Cons Before Executing a Dental Practice Partnership Dissolution: © HBS - STOCK.ADOBE.COM

When a dental partnership has been together for over 30 years and experienced all the ins of outs of a business partnership, one would think that almost everything has been seen and done. Once a small matter has been overcome, the idea that the partnership would become very stable and not worry about something minor after so many years seems to be a normal situation.

Unfortunately, the dental partnership is just like a marriage partnership in that there can be times that a repeat of what has occurred previously happens 1 more time and things become boring or so repetitive that the practice becomes unexciting. Issues that should not cause problems, suddenly do. Of course, almost everything is about money, and this is when bickering begins. The small matter that causes one of the partners to become upset brings up the cost of what just happened.

It may be a matter of a small amount of money but can be the boiling point emotionally. When so many other things have occurred and added to the cost of the practice one of the partners looks at this small amount and forgets the 30 years of being together and overcoming difficulties. The big picture of how much he or she has been taking home over the years does not enter the minds of either partner while the spat over the small item is ongoing. It is just about now when each partner says that the end is near and it is time to see an attorney.

What happens next after the fall out of the relationship?

Hopefully one of the partners is brought down to earth and starts thinking about what has happened and the financial consequences of breaking up the dental partnership. The minor item that the partners were arguing about may be a $100 charge or some amount not significant based on their history of earnings. The partners have each been taking home hundreds of thousands of dollars and now at last they realize what they are jeopardizing. Let’s look at some of the charges that occur when a partnership is in the process of dissolving. First there is the retainer paid to the attorney. Hopefully, the retainer is enough to satisfy all the time that will be involved with the dissolution. The dental CPA comes next, and what he or she must do to affect the end of the partnership is determined. This includes filing final tax returns and probably assisting with the formation of a new business entity for the partner that he or she may still be representing. There may be administrative personnel to be hired such as a bookkeeper, insurance person and an office manager. The charge from the dental CPA will be significant as he or she may have more to do than the attorney who was retained. These are some of the direct costs that are on the horizon.

Indirect and hidden costs coming to the dentist who is going to continue to operate:

Winding down the partnership until the dissolution occurs causes the dentist to have to resolve arrangements with the patients and to let them know where he or she is going to be continuing the practice. With the effort needed to be involved with the attorney and the dental CPA and the time needed to gather information for those people, a lot of production will be lost. Unless the dentist changes his or her hours of operation and without working at night and possibly on weekends as well, the revenue of the practice will most likely drop significantly. This may be when each of the dentists in the partnership decides that starting over again is not such a good idea. This is a good “back to reality check” on the costs incurred when dissolving a partnership. It also is a time to think about the costs of creating a new dental practice.

Starting over and creating a new dental practice:

If the partnership described above is dissolved and a new dental office is created, there is at least somewhat of a patient base joining the new dental practice. The patients who come to the practice because of the dentist gives a decent starting point for him or her. The marketing money spent and the cost of the move are items that will hopefully be recovered as time passes and the new location becomes known to the public.

The revenue from the new location is what brings hope that the move and dissolution of the old partnership were worth it. The peace of mind coming from the lack of “harassment” also has a lot to do with the success now that the move has occurred. This change in ownership structure and becoming a solo practitioner may be like fresh air blown into the life of the dentist. It may be that his or her income will grow past what it had been in the partnership. Weighing the costs and the freedom of being an individual owner may be the best thing that has happened to each dentist after all the years of being together. Let’s look at the pros and cons of the start-up of the new practice.

Starting a new dental practice:

Starting this dental practice compared to a truly new dental practice without recognition of the name, reputation, and base of patients available to this practice is a different set of circumstances. This existing dental practice has a running start because of these items that are part of the “already going concern,” available to it. A new dental practice without these items will most likely take a while and a lot of money to get the recognition and revenue to make it a successful dental practice.

Building a network of referral sources and a patient base takes time and money. Marketing, joining local study clubs for introductions to the community of dentists and other organizations where people and leaders in the banking, legal and other professional groups are met is a must. All these things are time sensitive and exhaustive procedures. Is it the right thing to dissolve the partnership and go out as a solo practitioner? The answer is that only time and money will tell.