Making plans for your future as a partner

Contract Language. By Steven M. Harris, AMNews contributor. June 2/9, 2003.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

SEE ARCHIVES

If you're thinking about joining a practice as an associate physician, and you're planning on becoming an equity owner, you need to review your employment contract to ensure that it is the actual blueprint for the present and future relationship you will share with the practice.

While you don't have a right to know if you will be asked to join the partnership, you do have the right to know what an offer will look like when you sign your employment agreement.

Joining a practice and becoming eligible to own an equity interest often raises more questions than answers. Never assume that by becoming a partner you are entitled to an equal vote in governance or a compensation amount equal to your partners. You need to make sure your duties and responsibilities are explicitly set forth.

While some partners operate without a written agreement, this can expose them to unintended and potentially catastrophic results. You should set down your understanding in a well-drafted document that also addresses compensation planning, equity and governance.

While your future partners probably won't make any guarantees or lock themselves into an obligation of granting you an equity interest, you should make sure your agreement includes provisions on future partnership consideration.

These provisions must include the tax treatment of the transaction. Such provisions also may require you to work a certain consecutive length, be in full compliance with the agreement and achieve a successful and productive patient base.