Made partner but no contract after 2 months, what should I do?

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financial.freedom
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Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

I made partner at my group about two months ago and have yet to receive a contract. When I inquired with the head of the group, I was told that someone is working on it (family friend of one of the partners) before submitting it to a lawyer to minimize the cost/lawyer fees.

Since then, I've inquired several times but keep getting the same answer that the person is working on it. When I brought it up to another partner, he was surprised that I still do not have a contract.

After the first month of partnership, I received equal pay to the partners but did not contribute to the buy-in. Now for the second month, paychecks are coming out and the head of the group asked me about deducting my buy-in but I told him that I'd like to have a contract in-hand first. He understood and delayed the buy-in for another month.

Since the buy-in will be monthly payments over the course of about three years, I'd like to be buying-in sooner than later in the case of a sale. I asked the head of the group about putting language into the contract that I would have the opportunity to lump sum any remaining payments in the case of a sale of the practice to receive an equal split with the other partners and he verbally agreed but said that he'd also have to run it by the other partners.

I don't suspect any bad intentions, but at the same time feel a little uneasy about not having a contract or anything in writing. The group has talked about selling the practice in the near future, but hard to know the time frame (guessing maybe within 3-5 years but could be sooner).

Should I ask for something in writing that is less formal than a contract while the complete document is still being drafted? Should I just relax and keep waiting?

Thank you in advance!
jacoavlu
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Re: Made partner but no contract after 2 months, what should I do?

Post by jacoavlu »

"made partner"

do you have a partnership agreement?
Unladen_Swallow
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Re: Made partner but no contract after 2 months, what should I do?

Post by Unladen_Swallow »

If I trust them I would wait for some period of time I found reasonable.

If I don't have a good feeling, I would quit.

You know the practice and people better than us.


Having them write another less formal letter does nothing.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

jacoavlu wrote: Wed Jan 29, 2020 1:40 pm "made partner"

do you have a partnership agreement?
Just a verbal agreement. And they've been splitting the partner profits the first two paychecks (which I did not receive as an associate).
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Re: Made partner but no contract after 2 months, what should I do?

Post by Jack FFR1846 »

Offer to pay for the lawyer to draw up the contract.

Seems they're cheaping out over this and are letting retired Uncle Fred do it for $160 when he gets around to it rather than paying someone a reasonable hourly rate to do it right.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

Unladen_Swallow wrote: Wed Jan 29, 2020 1:42 pm If I trust them I would wait for some period of time I found reasonable.

If I don't have a good feeling, I would quit.

You know the practice and people better than us.


Having them write another less formal letter does nothing.
I do trust them. But would also feel more comfortable having an agreement. I feel that waiting two months is a reasonable time, maybe I should wait longer?

Quitting isn't really a good option. I like the group overall and it took time to work up to making partner and being voted in.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

Jack FFR1846 wrote: Wed Jan 29, 2020 1:46 pm Offer to pay for the lawyer to draw up the contract.

Seems they're cheaping out over this and are letting retired Uncle Fred do it for $160 when he gets around to it rather than paying someone a reasonable hourly rate to do it right.
That's a good idea. How much is a reasonable price for the lawyer 1k? Would you recommend paying the lawyer a standard set fee for the contract or paying them an hourly rate?
Unladen_Swallow
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Re: Made partner but no contract after 2 months, what should I do?

Post by Unladen_Swallow »

financial.freedom wrote: Wed Jan 29, 2020 1:46 pm
Unladen_Swallow wrote: Wed Jan 29, 2020 1:42 pm If I trust them I would wait for some period of time I found reasonable.

If I don't have a good feeling, I would quit.

You know the practice and people better than us.


Having them write another less formal letter does nothing.
I do trust them. But would also feel more comfortable having an agreement. I feel that waiting two months is a reasonable time, maybe I should wait longer?

Quitting isn't really a good option. I like the group overall and it took time to work up to making partner and being voted in.
Then it looks like you have no option but to wait and hope for the best. To be honest, you are not holding any cards in this relationship.

You can't quit, and getting the agreement resolved quickly is not in your hands. That is what I gather.

Time will solve everything. Either you will have an agreement in a few weeks, or waiting that long with nothing to show for will make you quit.

Or.

The increased pay will be enough of an upside to not care about agreement.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman
fabdog
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Re: Made partner but no contract after 2 months, what should I do?

Post by fabdog »

I'm confused why this is taking so long, even with the retired guy working on it. The group already has partners... and sounds like you are getting a partnership split, and have been asked about starting the buy in. Why can't they just use one of the existing partners contracts as a template? Are you getting a significantly different deal?

Maybe you can ask why is it so complicated, and how has it worked in the past for new partners?

Mike
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

fabdog wrote: Wed Jan 29, 2020 1:52 pm I'm confused why this is taking so long, even with the retired guy working on it. The group already has partners... and sounds like you are getting a partnership split, and have been asked about starting the buy in. Why can't they just use one of the existing partners contracts as a template? Are you getting a significantly different deal?

Maybe you can ask why is it so complicated, and how has it worked in the past for new partners?

Mike
Good questions. I asked the same, and was told that the old contracts are outdated. The group has grown since then and the new contract will involve two entities (hospital contract and outpatient imaging centers). The previous contract was just an equal split for the hospital service agreement.
EHEngineer
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Re: Made partner but no contract after 2 months, what should I do?

Post by EHEngineer »

financial.freedom wrote: Wed Jan 29, 2020 1:33 pm
Should I ask for something in writing that is less formal than a contract while the complete document is still being drafted? Should I just relax and keep waiting?

Thank you in advance!
Ask to see a copy of the other partners' contracts. That can be done quickly and cheaply. Tell them you want to have your lawyer review it.

They are paying you like a partner, it seems that you can give them a little time. but wow, that's a big detail to let slide. At some point a heart-to-heart is needed (partner's meeting?) to explain how the indefinite delay makes you uncomfortable.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius
fabdog
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Re: Made partner but no contract after 2 months, what should I do?

Post by fabdog »

Good questions. I asked the same, and was told that the old contracts are outdated. The group has grown since then and the new contract will involve two entities (hospital contract and outpatient imaging centers). The previous contract was just an equal split for the hospital service agreement.
Interesting. so all of the existing partners have no formal stake in the second entity? Wonder how that gets reflected in your contract when it finally shows up. I'd think the existing partners would want the partnership agreement updated? Maybe it is already?

Mike
3Fund4Life
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Re: Made partner but no contract after 2 months, what should I do?

Post by 3Fund4Life »

Trust your gut - get a contract. You describe a disorganized practice. Is this how other processes / contracts are dealt with by the group?

Also, you should engage an employment attorney now. Your group does not have to know this - it is for your own benefit. The attorney can help guide you through the process without engaging the practice directly. This may resolve the situation.

Do not start buy in without clear language in a contract executed by all parties. Until that time, you are not truly a partner and should not be taking partners share of profits or paying partners buy in. The contract should specify buy in and buy out terms.

I have been in your shoes. Trusting someone doesn’t have bad intentions is not a plan.

If the practice doesn’t understand your viewpoint, you need to ask yourself if it’s worth it. Only you know the answer.

Good luck.
Rudedog
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Re: Made partner but no contract after 2 months, what should I do?

Post by Rudedog »

I was a partner in a CPA firm for over 20 years. I had a written contract. You better believe, when I was getting ready for my retirement "buy-out" they held me to the exact terms of the contract, even to the extent of interpreting a couple of paragraphs differently than I did to the tune of about $ 5,000 less than I thought I was entitled to. Of course, I did not start legal action against them for only $ 5,000. But, it really chapped my a$$. When $ are on the line, get it in writing.
Unladen_Swallow
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Re: Made partner but no contract after 2 months, what should I do?

Post by Unladen_Swallow »

OP,

I always ask myself

"What is actionable about the information I am seeking".

I would encourage you to do the same.

You have asked and received information (dubious as it may be, or perhaps they have always run the practice so informally). What can/will you do about it?

The only card you hold is to quit. And you have to decide when it is time to do that. Until then, I would not put in any money to buy-in without a contract. Or take on any partner like responsibilities.

About hiring your own lawyer to do the paperwork - I see no point. If they can't justify spending money on a lawyer for a business decision as important as adding a partner, what would they spend on? This is not a practice I would want to be a part of, but that's me.


financial.freedom wrote: Wed Jan 29, 2020 1:56 pm
fabdog wrote: Wed Jan 29, 2020 1:52 pm I'm confused why this is taking so long, even with the retired guy working on it. The group already has partners... and sounds like you are getting a partnership split, and have been asked about starting the buy in. Why can't they just use one of the existing partners contracts as a template? Are you getting a significantly different deal?

Maybe you can ask why is it so complicated, and how has it worked in the past for new partners?

Mike
Good questions. I asked the same, and was told that the old contracts are outdated. The group has grown since then and the new contract will involve two entities (hospital contract and outpatient imaging centers). The previous contract was just an equal split for the hospital service agreement.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman
Seasonal
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Re: Made partner but no contract after 2 months, what should I do?

Post by Seasonal »

Is this a general partnership or a limited partnership?

Absent an agreement and appropriate filings, it's likely a general partnership, which would mean all profits would be shared equally and all partners would have unlimited liability for the partnership's liabilities. Is there anything that shows what type of partnership it is? Does the formal name include LP or LLC or the like?

Does the partnership have insurance that covers you?

Is there anything in writing, or even any communication with third parties, that you are a partner?

Have you seen the existing partnership agreement? It may be outdated, but if it has not been superseded, it's binding on the existing partners who signed it.

You should consider consulting with a lawyer, especially if you might be considered a general partner and there isn't adequate insurance. As others have said, don't buy-in absent a contract.
3Fund4Life
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Re: Made partner but no contract after 2 months, what should I do?

Post by 3Fund4Life »

OP,

Earlier you wrote:

“The group has talked about selling the practice in the near future, but hard to know the time frame (guessing maybe within 3-5 years but could be sooner).”

Think about this in the context of your situation.

Trust your gut.
Mako
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Re: Made partner but no contract after 2 months, what should I do?

Post by Mako »

As someone else said, if you enjoy the job and trust them, wait. Like you said, it took some time and effort to get here, you don't really want to start over somewhere else.

If nothing had changed, I would be very skeptical and think you were getting the run around. But you are now getting paid more, and the head is asking you about deducting your buy in...I think it is safe to say that their intent is pure here, they are just executing poorly. That may reflect poorly on the partnership, but at the same time you've worked with them for some time so you have a lot of data to decide how much this matters in the grand scheme.

Maybe it is taking longer because they've decided they need to update all of the contracts and are taking this opportunity. Even if not, if your contract is different everyone needs to be on board with this new language.

As someone said, I would not do any buy in without a formal contract. When you do get the contract I would make sure I understood the entire thing completely before signing, including review by a lawyer.

My 2 cents.
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Watty
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Re: Made partner but no contract after 2 months, what should I do?

Post by Watty »

One thing to keep in mind is that two months likely includes Thanksgiving, Christmas, and New Years holidays where people may have also taken additional vacation time off. Many people are also very busy right before and after year end with closing out the books for the year.

I don't know what is reasonable with things like this but having things take longer than expected may be understandable.
123
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Re: Made partner but no contract after 2 months, what should I do?

Post by 123 »

How many partner in the firm? How many recent "new" partners besides yourself? Have the other "new" partner gotten their contracts?

This all seems a little shaky. As for a partner's contract it should be boilerplate, fill in the blanks, since partners are partners. I'd speculate that there is a deal in development to sell and someone wants to limit splitting up the profits if it goes through. Depending on how long it's been since you "made partner" it might be time to think about moving elsewhere soon since "made partner" doesn't count for much by itself. A couple is not married when one accepts a proposal, there are legitimizing acts that are required.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

EHEngineer wrote: Wed Jan 29, 2020 1:58 pm
financial.freedom wrote: Wed Jan 29, 2020 1:33 pm
Should I ask for something in writing that is less formal than a contract while the complete document is still being drafted? Should I just relax and keep waiting?

Thank you in advance!
Ask to see a copy of the other partners' contracts. That can be done quickly and cheaply. Tell them you want to have your lawyer review it.

They are paying you like a partner, it seems that you can give them a little time. but wow, that's a big detail to let slide. At some point a heart-to-heart is needed (partner's meeting?) to explain how the indefinite delay makes you uncomfortable.
Thank you for the reply. I'm told the current partners have different contracts because they were grandfathered in to the imaging centers. I can ask about a partner's meeting, good idea.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

fabdog wrote: Wed Jan 29, 2020 2:01 pm
Good questions. I asked the same, and was told that the old contracts are outdated. The group has grown since then and the new contract will involve two entities (hospital contract and outpatient imaging centers). The previous contract was just an equal split for the hospital service agreement.
Interesting. so all of the existing partners have no formal stake in the second entity? Wonder how that gets reflected in your contract when it finally shows up. I'd think the existing partners would want the partnership agreement updated? Maybe it is already?

Mike
Good thought, I'll ask the partner I'm closest with if his agreement was updated.
3Fund4Life
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Re: Made partner but no contract after 2 months, what should I do?

Post by 3Fund4Life »

“I'm told the current partners have different contracts because they were grandfathered in to the imaging centers.”

+ rumors of a sale

+ no contract

= be careful
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

Seasonal wrote: Wed Jan 29, 2020 2:31 pm Is this a general partnership or a limited partnership?

Absent an agreement and appropriate filings, it's likely a general partnership, which would mean all profits would be shared equally and all partners would have unlimited liability for the partnership's liabilities. Is there anything that shows what type of partnership it is? Does the formal name include LP or LLC or the like?

Does the partnership have insurance that covers you?

Is there anything in writing, or even any communication with third parties, that you are a partner?

Have you seen the existing partnership agreement? It may be outdated, but if it has not been superseded, it's binding on the existing partners who signed it.

You should consider consulting with a lawyer, especially if you might be considered a general partner and there isn't adequate insurance. As others have said, don't buy-in absent a contract.
There has been communication about it. For instance, I was added to the group thread for texts regarding partnership decisions. At our winter holiday party they announced that I made partner. That put me at ease, but was about two months ago now and nothing in writing so starting to feel a little uncomfortable.

The entity is a C corp, and partners have equal share. The contract is for professional service agreement with imaging centers and one hospital. The only insurance I'm aware that's needed is professional liability which I pay for and group reimburses.

I have not seen an existing partnership agreement.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

Mako wrote: Wed Jan 29, 2020 2:41 pm As someone else said, if you enjoy the job and trust them, wait. Like you said, it took some time and effort to get here, you don't really want to start over somewhere else.

If nothing had changed, I would be very skeptical and think you were getting the run around. But you are now getting paid more, and the head is asking you about deducting your buy in...I think it is safe to say that their intent is pure here, they are just executing poorly. That may reflect poorly on the partnership, but at the same time you've worked with them for some time so you have a lot of data to decide how much this matters in the grand scheme.

Maybe it is taking longer because they've decided they need to update all of the contracts and are taking this opportunity. Even if not, if your contract is different everyone needs to be on board with this new language.

As someone said, I would not do any buy in without a formal contract. When you do get the contract I would make sure I understood the entire thing completely before signing, including review by a lawyer.

My 2 cents.
Thank you for the reply. Yes, I feel that if they did not have good intentions then the partners would not have already started sharing the profits with me. They have also mentioned updating the current partner contracts as you mentioned. Maybe I should give it a couple more weeks and then inquire again with the head of the group.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

123 wrote: Wed Jan 29, 2020 2:49 pm How many partner in the firm? How many recent "new" partners besides yourself? Have the other "new" partner gotten their contracts?

This all seems a little shaky. As for a partner's contract it should be boilerplate, fill in the blanks, since partners are partners. I'd speculate that there is a deal in development to sell and someone wants to limit splitting up the profits if it goes through. Depending on how long it's been since you "made partner" it might be time to think about moving elsewhere soon since "made partner" doesn't count for much by itself. A couple is not married when one accepts a proposal, there are legitimizing acts that are required.
Thank you for the reply. There are 4 partners. No recent partner besides myself.
psychoslowmatic
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Re: Made partner but no contract after 2 months, what should I do?

Post by psychoslowmatic »

It sounds like they added you as partner at the same time as they’re revising the partnership agreement for everyone.

In your shoes I would approach the other partners saying that you really would like to start the buy-in clock and could you sign a copy of the old partnership agreement with the understanding that the new one will be coming soon. It would put you in the exact same place as the other partners and the partnership starts getting your money sooner.

You can sell it that you’re concerned about the unfairness that you’re receiving the pay of a partner without paying the buy in and you want everyone covered.
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hand
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Re: Made partner but no contract after 2 months, what should I do?

Post by hand »

Devil's advocate here:

Isn't getting partnership distributions without a buy-in (for free) better than paying for them with a buy-in?

Not sure I understand the buy-out risk, but otherwise seems like you are getting all of the benefits of partnership without any of the costs, so perhaps no reason to rush the process?
Seasonal
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Re: Made partner but no contract after 2 months, what should I do?

Post by Seasonal »

financial.freedom wrote: Wed Jan 29, 2020 3:06 pm There has been communication about it. For instance, I was added to the group thread for texts regarding partnership decisions. At our winter holiday party they announced that I made partner. That put me at ease, but was about two months ago now and nothing in writing so starting to feel a little uncomfortable.

The entity is a C corp, and partners have equal share. The contract is for professional service agreement with imaging centers and one hospital. The only insurance I'm aware that's needed is professional liability which I pay for and group reimburses.

I have not seen an existing partnership agreement.
It's good to hear it's a C corp with insurance in place, at least regarding personal liability.

If you're getting paid the right amount and don't have to buy in, that's not terrible. As noted, the main issue is if they sell before you have an ownership stake.

C corps are usually not best from a tax point of view, but electing to be treated as an S corp is the typical solution.

It would be good to know the terms people anticipate, even if not drafted as a formal agreement. A simple email outlining the terms would be nice.

Obviously it would be good to get this settled. On the other hand don't attribute to malice that would can be attributed to inertia. Ideally you can nudge them enough to get them to act without overly annoying them.

I'm guessing the main value in the business is the people and the clients. Presumably a buyer would want to talk to all of the partners before buying, but I clearly don't know enough to tell if this is the case.
GrowthSeeker
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Re: Made partner but no contract after 2 months, what should I do?

Post by GrowthSeeker »

Didn't read everything, but...
Maybe there is no contract yet, but is there at least an understanding of what is going to be in the contract?
Maybe the delay is the lawyer friend just being lazy.
But maybe the delay is the other partners figuring out how best to screw you.

It is often unclear what the value of partnership is.
It's all about how the income is split. Yes you're getting (we assume) an equal paycheck, but how are the bonuses figured? Usually some function of productivity. But whatever the formula, are you going to get that?
Generally the value of a medical practice is just the value of what the corp or partnership owns (real estate, equipment etc), plus the actual value of the accounts receivable. And the A/R is often vastly over valued. In the old days, there was often a huge dollar amount added for "good will". Because presumably patients are flocking to this practice in droves because of the great name and reputation of the existing partners. In reality, patients end up going wherever their insurance covers. Maybe these days, with larger and larger groups, goodwill could be making a comeback - the idea that a very large group maybe has some clout with insurers and/or hospitals - but I doubt it.
Just because you're paranoid doesn't mean they're NOT out to get you.
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Re: Made partner but no contract after 2 months, what should I do?

Post by Unladen_Swallow »

financial.freedom wrote: Wed Jan 29, 2020 1:33 pm I made partner at my group about two months ago and have yet to receive a contract.
No you have not. You have been promised partnership, you haven't made partner yet. A statement below will prove this point.
When I inquired with the head of the group, I was told that someone is working on it (family friend of one of the partners) before submitting it to a lawyer to minimize the cost/lawyer fees.
First red flag. You said they have to redo all their agreements since they have expired. So:
- They are scrimping on cost for something this important? An agreement that is completely being redone needs investment.

Since then, I've inquired several times but keep getting the same answer that the person is working on it. When I brought it up to another partner, he was surprised that I still do not have a contract.
2nd red flag. The left hand doesn't know what the right hand is doing. If a partner doesn't know what is going on with the practice, who would?

I asked the head of the group about putting language into the contract that I would have the opportunity to lump sum any remaining payments in the case of a sale of the practice to receive an equal split with the other partners and he verbally agreed but said that he'd also have to run it by the other partners.
He has to run it by other partners. Please not that this does not include you. Goes to my very first point - you have been promised partnership but you are not a partner. If you were, you would be part of the decision making process.
The group has talked about selling the practice in the near future, but hard to know the time frame (guessing maybe within 3-5 years....
Why is this vagueness ok? Do you plan to sell in 3-5 yrs as well? If so, why are you buying into this practice at all?



You need to know everything about an entity you are buying into. This business decision is like marriage.
You haven't seen an existing contract agreement. That would be the first thing I would do.
You have no idea when this new agreement will be formalized.
Nobody seems to have a grasp on what is going on. Especially the partners.


This is at the very least incompetence and unprofessionalism. They might be the nicest people, but I would never do business with them. Incompetence has ways to ruin a business.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman
Leemiller
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Re: Made partner but no contract after 2 months, what should I do?

Post by Leemiller »

Get your own attorney. Ask for the current draft. Do a markup and send it back. Easy. Good attorneys are worth it.
Seasonal
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Re: Made partner but no contract after 2 months, what should I do?

Post by Seasonal »

GrowthSeeker wrote: Wed Jan 29, 2020 3:43 pm Didn't read everything, but...
Maybe there is no contract yet, but is there at least an understanding of what is going to be in the contract?
Maybe the delay is the lawyer friend just being lazy.
But maybe the delay is the other partners figuring out how best to screw you.
What's the point in making someone who used to be an employee a partner and raise that person's pay if the goal is to screw that person? Why not just have them continue as an employee? If I'm ready correctly, there was no intention to leave, so this wasn't done to prevent that.
GrowthSeeker wrote: Wed Jan 29, 2020 3:43 pmIt is often unclear what the value of partnership is.
It's all about how the income is split. Yes you're getting (we assume) an equal paycheck, but how are the bonuses figured? Usually some function of productivity. But whatever the formula, are you going to get that?
Generally the value of a medical practice is just the value of what the corp or partnership owns (real estate, equipment etc), plus the actual value of the accounts receivable. And the A/R is often vastly over valued. In the old days, there was often a huge dollar amount added for "good will". Because presumably patients are flocking to this practice in droves because of the great name and reputation of the existing partners. In reality, patients end up going wherever their insurance covers. Maybe these days, with larger and larger groups, goodwill could be making a comeback - the idea that a very large group maybe has some clout with insurers and/or hospitals - but I doubt it.
If there isn't much value to the business beyond a/r and real estate, equipment, etc., then buying in doesn't seem all that important. If there is substantial goodwill, that's another matter. A buyer who doesn't want OP could presumably just hire the other partners and pay for the A/R, etc., in which case a buy-in again doesn't seem all that important.

Again, based on this I don't see how their actions are designed to screw OP, but all this is just guessing.
zlandar
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Re: Made partner but no contract after 2 months, what should I do?

Post by zlandar »

Depends on whether you trust the people in your group.

The delay may not be malicious. I'm in a physician group and our last associate buy-ins took 5 months because it took the accounting firm that long to obtain the accounts receivable and calculate the value.
J295
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Re: Made partner but no contract after 2 months, what should I do?

Post by J295 »

I’m guessing you trust the people involved because you have joined the firm and stayed with it.

That being said, I’d take a chill pill and wait until you got the contract. Then, I’d likely have my own lawyer review it, and my accountant if necessary.

I am a retired lawyer, and my stock in trade was acting quickly. However, many lawyers and accountants and other professionals move rather slowly.
Jimsad
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Re: Made partner but no contract after 2 months, what should I do?

Post by Jimsad »

I was in a similar situation and it did not end well . I kept hoping for a happy ending and later realized I was taken for a ride .

I am on my own now and much happier.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

Jimsad wrote: Wed Jan 29, 2020 6:11 pm I was in a similar situation and it did not end well . I kept hoping for a happy ending and later realized I was taken for a ride .

I am on my own now and much happier.
Sorry to hear that. I think their intentions are good, but it's hard not having anything in writing.

Glad you're happier solo.
GrowthSeeker
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Re: Made partner but no contract after 2 months, what should I do?

Post by GrowthSeeker »

re goodwill:
the pertinent piece of information (which is impossible to know) is what will be the value placed on goodwill when the OP retires, moves, or otherwise sells his interest? i.e. is it a stock which is going to go up or down. The ultimate market timing decision.

I have known of two groups bought by hospitals who got a ridiculously large purchase prices, and others who got not much. At least, according to the grapevine rumor mill.

(ps the way OPs partners could be planning to screw him is with an inflated buy-in price)
Just because you're paranoid doesn't mean they're NOT out to get you.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

Seasonal wrote: Wed Jan 29, 2020 4:25 pm
GrowthSeeker wrote: Wed Jan 29, 2020 3:43 pm Didn't read everything, but...
Maybe there is no contract yet, but is there at least an understanding of what is going to be in the contract?
Maybe the delay is the lawyer friend just being lazy.
But maybe the delay is the other partners figuring out how best to screw you.
What's the point in making someone who used to be an employee a partner and raise that person's pay if the goal is to screw that person? Why not just have them continue as an employee? If I'm ready correctly, there was no intention to leave, so this wasn't done to prevent that.
GrowthSeeker wrote: Wed Jan 29, 2020 3:43 pmIt is often unclear what the value of partnership is.
It's all about how the income is split. Yes you're getting (we assume) an equal paycheck, but how are the bonuses figured? Usually some function of productivity. But whatever the formula, are you going to get that?
Generally the value of a medical practice is just the value of what the corp or partnership owns (real estate, equipment etc), plus the actual value of the accounts receivable. And the A/R is often vastly over valued. In the old days, there was often a huge dollar amount added for "good will". Because presumably patients are flocking to this practice in droves because of the great name and reputation of the existing partners. In reality, patients end up going wherever their insurance covers. Maybe these days, with larger and larger groups, goodwill could be making a comeback - the idea that a very large group maybe has some clout with insurers and/or hospitals - but I doubt it.
If there isn't much value to the business beyond a/r and real estate, equipment, etc., then buying in doesn't seem all that important. If there is substantial goodwill, that's another matter. A buyer who doesn't want OP could presumably just hire the other partners and pay for the A/R, etc., in which case a buy-in again doesn't seem all that important.

Again, based on this I don't see how their actions are designed to screw OP, but all this is just guessing.
This is my sense too, and also why I haven't nudged them too hard the past two months.

I think as long as they're splitting things with me, it shows their intent is there for equal partnership.

Someone mentioned bonus above -- there's no bonus. Just equal split of profits each month.
Last edited by financial.freedom on Wed Jan 29, 2020 6:26 pm, edited 1 time in total.
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whodidntante
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Re: Made partner but no contract after 2 months, what should I do?

Post by whodidntante »

I wouldn't quit in this situation.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

GrowthSeeker wrote: Wed Jan 29, 2020 6:19 pm re goodwill:
the pertinent piece of information (which is impossible to know) is what will be the value placed on goodwill when the OP retires, moves, or otherwise sells his interest? i.e. is it a stock which is going to go up or down. The ultimate market timing decision.

I have known of two groups bought by hospitals who got a ridiculously large purchase prices, and others who got not much. At least, according to the grapevine rumor mill.

(ps the way OPs partners could be planning to screw him is with an inflated buy-in price)
Good point. My buy-in is over 3x what the most recent partner paid a few years back. But the profits have also gone up, so I get higher pay for my buy in than they did.

Head of the group has talked about selling down the road. If that happens (say in 5 years), it would be well worth it. For my specialty, they usually retain the same physicians after buy out for x number of years (but lower their salaries).

If I leave the group and sell my shares before the partners, then inflating the buy-in price does not help the partners right? Say 300k to buy-in then they pay me out the same amount. But depends on the details of buy-sell agreement.
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financial.freedom
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Re: Made partner but no contract after 2 months, what should I do?

Post by financial.freedom »

zlandar wrote: Wed Jan 29, 2020 4:35 pm Depends on whether you trust the people in your group.

The delay may not be malicious. I'm in a physician group and our last associate buy-ins took 5 months because it took the accounting firm that long to obtain the accounts receivable and calculate the value.
The AR and my buy-in calculation was made in the first week or two after making partner. The delay seems to be getting the contract in writing (I'm told most recently the family friend working on it is out of town).

Honestly, the buy-in amount is not the main component that I'm focused on. Mainly, I'd like to have verbiage that in case of sale my split is equal to the other partners. And would like to know the details of buy-sell agreement (in case other partners leave, in case one entity is dissolved, in case I leave the group, etc.).
Jimsad
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Re: Made partner but no contract after 2 months, what should I do?

Post by Jimsad »

I would suggest you ask for a Meeting and let them know your concerns .
The speed with which they agree to the meeting and address your concerns will tell you where they stand
jacoavlu
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Re: Made partner but no contract after 2 months, what should I do?

Post by jacoavlu »

This is one of those cases where use of the term “partner” confuses things.

OP you will be a “shareholder” ie owner of a portion of the C Corp. C corps do not have partners.

There should probably be separate shareholder agreements and employment agreements
Radman
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Re: Made partner but no contract after 2 months, what should I do?

Post by Radman »

This all depends on if you trust them.

If they are a good group and just have been running as a small “mom and pop” corporation and it’s “been done this way for years” your probably fine. My guess is they this is more your case. I would work to improve the business processes with your votes. If the worst of it is your get partner pay and bonuses without a buy in for a few months... it’s probably to your benefit.

If they have had radpartners out to discuss a sale... another matter.

Your absolutely right to want to know the details of a shareholders agreement and the “what if’s” you mentioned. I would still carefully review the legal paperwork when they get it to you.
Jimsad
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Re: Made partner but no contract after 2 months, what should I do?

Post by Jimsad »

Radman wrote: Wed Jan 29, 2020 10:43 pm This all depends on if you trust them.

If they are a good group and just have been running as a small “mom and pop” corporation and it’s “been done this way for years” your probably fine. My guess is they this is more your case. I would work to improve the business processes with your votes. If the worst of it is your get partner pay and bonuses without a buy in for a few months... it’s probably to your benefit.

If they have had radpartners out to discuss a sale... another matter.

Your absolutely right to want to know the details of a shareholders agreement and the “what if’s” you mentioned. I would still carefully review the legal paperwork when they get it to you.
One reason may be that they are actively negotiating sale of the practice and may not feel there is a need to include you in the proceeds as you have not completed the buy in.
Best is to have a meeting to clarify
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