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.
Call us, and we can arrange an introduction with one of our trusted legal professionals.
Contact Jim Yurman:
8500 Station Street – Suite 300G
Mentor, OH 44060
Office Phone: (440) 358 – 0605
MYREPCHAT Text: (216) 232 – 3416
E-mail: jyurman@grandriverllc.com
Other contact information:
VALMARK SECURITIES, INC.
130 Springside Drive, Suite 300
Akron, OH 44333-2431
(800) 765 – 5201