Best way to structure a partnership

[Nonphysiologic]

Hey guys,

If I wanted to scrap my idea of starting a practice and join forces with an existing solo provider, whats the best way to structure this so that its most fair? What if I want to take some insurances that he doesn't want to? Any insights into how to structure a partnership like this in which its eat what you kill, split costs, coverage for eachother, have greater negotiating power as a group but still retain autonomy?

Thanks

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[Ligament]

Hey guys,

If I wanted to scrap my idea of starting a practice and join forces with an existing solo provider, whats the best way to structure this so that its most fair? What if I want to take some insurances that he doesn't want to? Any insights into how to structure a partnership like this in which its eat what you kill, split costs, coverage for eachother, have greater negotiating power as a group but still retain autonomy?

Thanks

Partnership costs a lot to set up and incorporate; the divorce costs a lot too. The gain of partnership needs to outweigh the costs by a large margin. Are you bringing a LOT of patients? Unique skills? What advantage is there to the physician you wish to join?

Why do you refer to your fellow physician (and presumably yourself) as a "provider"?

 

[kstarm]

I am hospital employed and can't give any personal experience. You can get some good info from others here I am sure. I do think for more financial considerations that a lot of questions can be answered at Home | White Coat Investor either through previous blog posts or the forum. Generally these types of questions depend on a lot of different factors specific to your situation.

 

[drusso]

Hey guys,

If I wanted to scrap my idea of starting a practice and join forces with an existing solo provider, whats the best way to structure this so that its most fair? What if I want to take some insurances that he doesn't want to? Any insights into how to structure a partnership like this in which its eat what you kill, split costs, coverage for eachother, have greater negotiating power as a group but still retain autonomy?

Thanks

S-Corp. Each partner brings equal assets to start-up so each as equal basis.

Revenue attributed by personal effort and pro-rata by ancillary or excess revenue from mid-levels.

Costs allocated three ways: Directly (CME, benefits, draws, etc), Fixed pro-rata, and Variable by % revenue generated.

Then, all you have to argue over is whether certain staff are fixed or variable costs because the "breadwinner" in the partnership is taxed paying extra for them.

Add up all the direct revenue for each partner, add in the pro-rata revenue from ancillaries, subtract all the costs. If there's anything left over, you win.

 

[Nonphysiologic]

Hey Drusso,

Thanks for the response. So do you mean just one S-Corp or each person is their own S corp under one operating agreement?

Also, can you explain "variable by % revenue"? I assume this means if you want to add a new scribe, marketing service, tool, etc you have to pay a tax for it because it will presumably increase your revenue and productivity asymmetrically. What if, however, all the partners agree to the additional service? The structure I am working on with another physician here is either just joining his entity and have a eat what you kill set up OR structure our own entities together in an operating agreement and share fixed costs.

Just to give some context, I did start a practice but its part time, slowly developing but getting steadier. I am bootstrapping it hard. I am working locums jobs to provide some cash flow in the mean time. This other dude in the area, well call him Practice A, is a couple years older than me but is established, has the staff manpower facilities and contracts with vendors established. He is successful but he wants to grow and cover more cities and has basically got to the point where he is too busy. He wants to partner up with another pain doc, and maybe a surgeon down the road and eventually grow a group practice. He has been helping me out a lot but he also mentions that we should just join forces and split fixed costs and cover different areas and have a eat what you kill structure so that we can retain some of our independence and grow bigger together than we can as individuals.

I am intrigued by this idea because it will remove a lot of the headache, especially HR headache, in starting a practice while still allowing me to retain some independence.