When approaching the opportunity for ownership, physicians need to pay keen attention to the relevant documents. Two documents (the Purchase Agreement and the Buy-Sell Agreement) are typically involved. Usually, the purchasing physician will have no training, background or experience with this type of transaction. Therefore, a review of these documents with skilled specialists is highly advisable.
The Purchase Agreement
This is the document that details the terms of purchase, including a description of what is being purchased, the cost and the terms of payment. Essentially, the physician is being asked to buy an ownership interest at a price, which may or may not include an inflated value of the estimated goodwill of the practice. Further, the price may or may not include the accounts receivable. Decisions on these variables could markedly affect the tax consequences to the purchaser. The Purchase Agreement may also dictate how the purchasing physician’s compensation package will be determined over the next several years. Whether the terms of compensation are equitable depends greatly on what decisions are made relating to accounts receivable and goodwill issues. Obviously, the document cannot be drafted until agreement has been reached by all parties relative to the many purchase variables.
The Buy-Sell Agreement
This document sets the terms for the transfer of an ownership interest upon the death, disability, retirement or termination of employment of the owner. All owners benefit from having such a document, since it is always easier to arrive at reasonable and fair decisions before the death, disability, retirement or termination of employment of the owner.
Other issues which may be dealt with in a third type of agreement involve benefits that are available upon termination of employment by an owner. This benefit may consist of some of the unvested retirement plan benefits and/or some portion of the accounts receivable of the terminated physician.
Let one of the trained experts at James D. Yurman & Associates, Inc. review your ownership documents and educate you about the issues that need to be clarified or otherwise altered. When combined with an Employment Contract Review, the fee for an Ownership Arrangement Review is just an additional $250. Once again, this service includes a final review after you’ve negotiated based on our recommendations. The entire transaction can be handled by phone.
If you would prefer that our experienced team negotiates, as well as reviews, both the Employment Contract and Ownership Arrangement on your behalf, the total fee is $1,500.
In both cases, your satisfaction is guaranteed or you pay nothing!
Note: For some physicians, your Ownership Arrangement offer may occur 2-3 years after your Employment Contract has been signed. In that case, we treat each of the two reviews separately. That is, $500 for each of the two reviews, with the option to negotiate on your behalf for an additional $1,000 per review ($1,500 total).