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The dental sector is quite unique in its regulatory constraints, making it most unlike other industries. This is especially so in regard to the structure and ownership of a dental business which, up until 2006, was restricted to either individual ownership, or dental partnerships. From 2006 it became possible for dental practices to set up as or convert to limited companies, although this in itself brought with it a raft of legal intricacies.
The importance of specialist advice from niche sector dentist partnerships lawyers cannot be stressed enough, because the issue of unlawful structures is a common one. Often dental partnerships are set up by non-specialist lawyers or accountants who lack an in-depth understanding of how the industry’s regulatory processes work. For a partnership to be legal, all partners must be dental professionals registered with the General Dental Council (GDC) although exceptions may apply. You will find more detail later on in this page.
What are the advantages of dental partnerships?
Whilst the legalities of forming dental partnerships are intricate and require expert attention, there are various advantages.
As the owner of a dental practice, entering into a partnership will allow you to balance the administrative obligations across fellow partners. You will feel more supported in your decision making and will be able to share expertise to make better informed choices. If you wish to take time off, then the business can still operate under the control of your partner or partners. There is also the benefit of having the opportunity to ensure retention of well-regarded associates by offering them a partnership, as well as sharing financial risk.
What are the common legal issues when forming dental partnerships?
As mentioned earlier, for dentist partnerships to be legal, they must be formed of registered dental professionals only. A dental partnership that does not meet this requirement is considered unlawful and is committing a criminal offence. Dentists that trade unlawfully will usually find themselves being held to account by the GDC and could be prosecuted.
Confusion often arises when forming dental partnerships due to the differences between them and limited company structures.
It is possible for shares in incorporated (limited company) dental practices to be owned by non-dentists. However, at least 50 per cent of the company’s directors must be GDC registered. If an incorporated dental practice has a minority of dental professional directors then this will be unlawful and a criminal offence.
Can I form a partnership with someone who isn’t a dentist?
The National Association of Specialist Dental Accountants & Lawyers (NASDAL) issued a press release in which legal and illegal dental partnerships were discussed. NASDAL talked about the temptation for dentists to form partnerships with family members, for example a spouse, who may then become the practice manager. However, if the spouse is not GDC registered then these will usually be illegal dentist partnerships.
There is one exception to this rule however. If a General Dental Services contract (GDS) is held, then the National Health Service Act 2006 allows certain non-registered individuals, including practice employees, to enter into a GDS contract. According to the Dentists Act 1984, receiving income under such a contract is not deemed, for the purposes of the Act, to be carrying on dentistry business.
Further complexity arises however when such a structure is adopted, as it is imperative that dental partnerships formed as part of the GDS contract are operated separately from any of the practice’s private work. This is because it is only the receipt of income under a GDS contract that comes under the exception.
What is the process of forming a dental partnership?
Once you have agreed in principle with your prospective partner or partners how the joint venture will operate, you will need to reach an agreement as to the amount that the partners will invest in order to buy their way in and how this investment will be spent, for example on new equipment. An independent market appraisal of the practice will need to be arranged so that the value is clear to all parties.
Once this stage is complete it is time to take legal advice on forming a partnership agreement and on the best type of structure for the business.
This advice should be sought from niche dental partnerships legal specialists because, as discussed earlier, there are major intricacies involved in dental law that make it unique and very different to general commercial law. Inadvertently structuring the business illegally could have serious financial and professional connotations.
Our specialist dental lawyers will take care of setting out your partnership agreement and forming the partnership or incorporating the company whilst all the time ensuring regulatory provisions are adhered to and setting up all the necessary employment contracts and agreements. Once all the paperwork is signed and filed with the relevant authorities you will officially become a dentist partnership.
What is a dental partnership agreement and why do I need one?
No business should operate without a written agreement in place, not least one in the dental industry. Partnerships of any kind can be subject to disputes at any time, and difficulties can arise unless strict agreements are in place setting out how the business should operate.
A dental partnership agreement provides written guidelines as to how any conflict will be dealt with, allowing issues to be settled far more swiftly. Agreements bring clarity to all parties involved in the practice.
It is important to realise that even if there is no formal legal structure in place around any business, if two or more individuals conduct business together with a view to making a profit, then a partnership will exist in law. This means that the liabilities and duties of the partners will be governed by the Partnership Act 1890, unless there is a formal written agreement in place to supersede it. The preference is of course to have your own agreement in place to ensure that the provisions are specifically tailored to your own practice, rather than a general set of provisions.
A dental partnership agreement will cover such issues as what would happen in the event of a partner retiring, passing away or wishing to take extended leave; the process for dealing with disputes; how partners’ shares should be valued and the specific duties and obligations of the individual partners.
In dentist partnerships, each partner is considered an ‘agent’ of the others. This means that each partner is able, without the consent of the other partners, to enter into contracts or dispose of property owned by the partnership and in doing so bind all the other partners. It is clear to see that without a dental partnership agreement in place, the practice could easily run into difficulties.
What considerations should I make when bringing a new partner into my dental practice?
There are numerous things to consider when bringing a new partner on board to form dentist partnerships. Some of the most important include:
Personality and values
Probably the most important consideration is whether you can comfortably work with the new partner for the long term. Do you get on well? Do they share your values, both personal and business wise? It is vital for partners to be like-minded, otherwise disputes are certain to arise.
Suitability for the role
It is also important to be sure that your prospective partner is genuinely keen on taking on such a role. An associate who has worked for the practice for many years and who you know you can trust and get along with may seem the ideal candidate for partnership, however it may be that such a position simply does not suit them. They may be risk averse for example, or prefer a role that does not involve that particular level of responsibility. The partnership must be right for everyone, otherwise it will not stand the test of time.
As mentioned earlier, one of the key considerations to be made early on in forming dental partnerships is the value of the practice so that all parties are clear from the outset as to the level of investment required. This can be a fairly complex task, as there is no industry standard process for valuations, and due to the fact that not all practice values are equal. An independent valuer should be consulted and due diligence undertaken to ensure their integrity.
The structure of the buy-in is something that should be discussed in-depth with your lawyers, as there are various options. The way the buy-in is financed is going to be very important to the new partner, as it will have an impact on their cash flow, and overall success. Generally a down payment will be made, followed by interim payments over time. Tax issues will need to be taken care of at the same time and again the need for specialist expert advice cannot be over-emphasised.
Dental partnerships have their advantages as we have discussed, but great emphasis must be put on following a structured process in the approach to forming one. Expert legal advice is key and is the most important investment when making such far-reaching changes to a dental business.