Partnership Structures for DPC Practices¶

Quick Summary: Adding partners to a DPC practice is a major decision that affects your autonomy, income, and exit options. Most DPC practices start solo and many stay that way. If you do partner, get the agreements right from the start.

Do You Need a Partner?¶

Reasons to Stay Solo¶

Maximum autonomy - You decide everything
Simplest structure - No partnership drama
Highest income per patient - No profit sharing
Easiest exit - Sell or close on your terms
Most DPC practices are solo - It works

Reasons to Consider Partners¶

Coverage and backup - Vacations, illness
Complementary skills - One clinical-focused, one business-focused
Larger patient capacity - Serve more people
Reduced call burden - Share after-hours
Succession planning - Built-in transition
Shared risk - Especially at startup

Partnership Models¶

Model 1: True Partnership (Equal)¶

Structure: 50/50 ownership, equal decision-making

Best for: Two physicians starting together with equal investment

Pros: - Simple to understand - Equal commitment - Shared risk/reward

Cons: - Deadlock potential - Both must agree on everything - Exit complexity

Financial split: - Equal share of profits/losses - Equal capital contribution - Equal liability

Model 2: Senior/Junior Partnership¶

Structure: Unequal ownership with path to equality

Best for: Established practice adding new physician

Example progression: - Year 1-2: Junior at 20%, Senior at 80% - Year 3-4: Move to 35/65 - Year 5+: Move to 50/50

Buy-in typically based on: - Practice valuation at time of buy-in - Sweat equity (work to earn ownership) - Combination of cash and sweat equity

Model 3: Employment with Partnership Track¶

Structure: W-2 employee initially, partnership option later

Best for: Testing fit before committing to partnership

Typical structure: - 2-3 years as employee - Predetermined buy-in formula - Performance metrics for partnership offer

Pros: - Lower risk for both parties - Proves cultural fit - Clear expectations

Cons: - Longer timeline - Associate may leave - Valuation disputes at buy-in

Model 4: Independent Practices, Shared Space¶

Structure: Separate practices sharing overhead

Best for: Physicians who want autonomy but lower costs

What's shared: - Office space - Front desk/reception - Supplies - Equipment

What's separate: - Patient panels - Revenue/expenses (after shared costs) - Liability - Brand (potentially)

Pros: - Maximum independence - Simplest legally - Easy to separate

Cons: - No true partnership benefits - Coverage still challenging - Less integration

Legal Structure Options¶

LLC with Partnership Agreement¶

Most common for multi-physician DPC

Operating agreement defines everything
Each physician is a member
Pass-through taxation
Limited liability protection

Professional Corporation (PC/PLLC)¶

Required in some states

Shareholders are the physicians
Shareholder agreement governs
Corporate formalities required
May have tax advantages

Key Documents Needed¶

Operating/Shareholder Agreement - Core partnership terms
Employment Agreements - If using employment model
Buy-Sell Agreement - What happens when someone leaves
Non-Compete Agreement - Geographic/time restrictions
Insurance Requirements - Malpractice, disability, life

Critical Terms to Define¶

Decision-Making¶

Define clearly: - Day-to-day decisions (who can make them alone) - Major decisions (what requires unanimous consent) - Deadlock procedures (how to break ties) - Capital expenditures (approval thresholds)

Major decisions typically include: - Adding/removing partners - Selling the practice - Taking on debt - Significant contracts - Changing locations

Compensation Models¶

Eat-what-you-kill: - Each physician keeps their own revenue - Share only overhead expenses - Maximum alignment with effort - Can create competition vs. collaboration

Equal split: - All revenue pooled - Expenses paid - Remainder split equally - Simplest, but requires trust

Hybrid models: - Base salary (equal) - Bonus based on productivity - Share of overhead - Complex but balanced

Capital Contributions¶

Define: - Initial contribution required - Additional contributions (when/how called) - What happens if partner can't contribute - Return of capital on exit

Profit Distributions¶

Define: - Frequency (monthly, quarterly, annually) - Reserves to maintain before distribution - How distributions are calculated - Tax payment provisions

Buy-In and Buy-Out¶

Valuation Methods¶

Multiple of revenue: - Typical: 0.5x - 1.5x annual revenue - Simple to calculate - Common for DPC practices

Multiple of earnings: - EBITDA multiple (2-4x) - More complex - Better reflects profitability

Book value: - Assets minus liabilities - Usually lowest value - Simple but may undervalue

Discounted cash flow: - Future earnings projections - Most complex - Rarely used for small practices

Buy-Sell Triggers¶

What triggers a buy-out: - Voluntary departure - Death - Disability - Termination for cause - Retirement - Bankruptcy

Funding mechanisms: - Life insurance (for death) - Disability buy-out insurance - Installment payments - Practice loan

Non-Compete Provisions¶

Typical terms: - Geographic radius: 5-25 miles - Time period: 1-3 years - Enforceability varies by state - Must be reasonable

Red Flags in Partnerships¶

Watch for these warning signs:

Misaligned philosophy - Different views on DPC fundamentals
Different work ethics - One works harder than the other
Financial disagreements early - It only gets worse
Communication problems - Essential for partnership
Different life stages - Retirement timeline mismatches
Rushing the decision - Take time to really know them
Skipping legal documentation - Always get it in writing

Making Partnerships Work¶

Before You Partner¶

Work together first (locums, coverage)
Discuss finances openly
Share your values and goals
Agree on practice philosophy
Get to know their family/life situation
Talk about exit scenarios upfront

During the Partnership¶

Regular partner meetings (weekly/monthly)
Annual strategic planning
Transparent finances
Clear communication channels
Address issues promptly
Written processes for decisions

Protecting the Partnership¶

Annual review of agreements
Update valuations periodically
Maintain required insurance
Document major decisions
Keep personal and business separate

When to Get Help¶

Always involve: - Healthcare attorney (partnership agreement) - CPA (tax structure, valuation) - Insurance advisor (coverage requirements)

Cost of doing it right: $5,000-15,000 in professional fees

Cost of doing it wrong: Potentially everything

[!CAUTION] Partnership agreements are complex legal documents. Always work with an experienced healthcare attorney. This guide provides concepts only, not legal advice.

A good partnership can be wonderful. A bad partnership can destroy both the practice and the friendship. Choose carefully, document thoroughly, and communicate constantly.