Legal Agreements with Co-Owners / LEGAL EASE
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the owners, whereas the other wanted to share part of the profits with the staff and keep a portion in a money market account for future equipment purchases and to provide a cushion for expenses during the slow months of the year. Finally, they decided they would each
be happier if they practiced separately, but they had no agreement about how they would divide the practice and go their separate ways. Their relationship deteriorated to the point that the staff found it too awkward and uncomfort- able to work with them, and staff turn- over increased. By the time they hired outside consul-
tants and attorneys to resolve the situa- tion, the practice’s revenue had fallen, the clients were caught in the middle whenever they tried to schedule an appointment, and the legal and account- ing fees had skyrocketed.
Start at the very beginning Co-owners and those thinking about
buying into a practice need to look at the basics, suggests Anke Langenbach, DMV, DACVS, DECVS, owner and chief surgeon for Veterinary Surgical Centers in Virginia. Although she operates as the sole owner of a business now, she had been a partner earlier in her career. Make sure you share the same per-
spectives as potential partners, she says. She investigated that through a mission/ vision/core values exercise offered by James F. Wilson, DVM, JD, of Priority Veterinary Management Consultants, Yardley, Pa. “You find out if you are looking at a
partnership the same way, with the same idea about commitment of time, finances and hard work, and if you have the same core values,” she says. “I couldn’t pos- sibly be in business with someone, for example, who did not have the same commitment to animals that I do.” Wilson, an author, lecturer and con-
sultant, says that when you explore the strengths, weaknesses and probable prob- lem areas associated with a co-ownership
Trends magazine, November 2012
venture, it can become apparent if the chemistry is lacking. If it is, money does not have to be spent unnecessarily on other documents. “The exercise allows you to crystallize
your ideas. It’s very ‘targeted dating,’” says Langenbach, to figure out where you are and what you want. “Without it, the partnership can become so frustrating and disappointing. It can’t be said often enough: Look first, and see if you match. It’s hard to undo later.”
Address the issues If philosophies and values are similar,
there are many legal, tax, organizational and compensation issues to address, says Wilson. In particular, he targets five fur- ther areas of concern. They are: Choice of business entity: From a limited liability company (LLC) to an S Corporation, co-owners will have to decide on the business entity that will work best for them.
Real estate: From who will own or lease the property to who pays for leasehold improvements, matters must be documented.
Demographic issues: From evaluating the presence and impact of competing practices to examining projected growth of the community, co-owners need to consider whether the present and future population of the trade area will support and allow the business to grow.
Owner compensation issues: For this area, Wilson takes information from his textbook Contracts, Benefits, and Practice Management for the Veterinary Profession, advising that these five issues be documented: Veterinary compensation Management Perquisite issues Return on investment Equitable redistribution of profits based on factors other than just ownership
Shareholder, partnership or LLC
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