An Intro to Dental Partnership Organizations

If you’ve been in the dental community for any amount of time, you’ve likely heard about dental partnership organizations. There’s no shortage of visibility of DPOs within the dental industry, as they are a key part of business partnerships in the dental field.

You’ve likely seen them at dental conferences, received collateral from these organizations, or heard about colleagues partnering with a DPO. These organizations are a key part of the dental industry – however, you may have never done a deep dive into the concept of a DPO. If you want to learn about dental partnership organizations, you’re in the right place! These are essential questions to ask yourself when selling your dental practice. Read on to learn more about dental partnership organizations.

What is a Dental Partnership?

A dental partnership is a business arrangement where two or more dentists co-own and operate a dental practice together. This partnership can take various forms, including general partnerships, limited partnerships, professional corporations, and limited liability partnerships. Dental partnerships offer numerous benefits, such as shared financial responsibilities, increased productivity, and improved work-life balance. However, they also require careful planning, clear communication, and a well-drafted partnership agreement to ensure the success and longevity of the partnership. By pooling resources and expertise, dental professionals can create a more robust and resilient practice, capable of delivering high-quality care while managing the complexities of business operations.

Types of Dental Partnerships

There are several types of dental partnerships, each with its unique characteristics and advantages:

1. General Partnerships: In a general partnership, each partner has an equal or proportional ownership of the dental practice. This type of partnership involves shared responsibility, meaning that if one partner makes a decision, it’s as if all partners made that decision. This collaborative approach can foster a strong sense of teamwork and mutual support among the partners involved.
2. Limited Partnerships: A limited partnership includes both general and limited partners. General partners handle the day-to-day operations and make significant decisions for the dental practice, while limited partners invest money in the practice but do not participate in daily management or decision-making. This structure allows for financial contributions without the need for all partners to be actively involved in business operations.
3. Professional Corporations: In a professional corporation, the dental practice becomes its own legal entity. This setup can offer benefits like protecting personal assets and providing tax advantages. Professional corporations can also facilitate smoother transitions in ownership and succession planning, making them an attractive option for many dental professionals.
4. Limited Liability Partnerships (LLPs): An LLP offers protection from the actions of partners. In an LLP, dentists are not personally responsible for their partners’ professional mistakes or negligence. This structure provides a layer of security, allowing partners to focus on their clinical work without worrying about potential liabilities from their colleagues’ actions.
5. Dental Service Organizations (DSOs): A DSO manages the business aspects of a dental practice, offering services like marketing, billing, and staffing. Partnering with a DSO allows dentists to remain in control of the clinical aspects of their practice while benefiting from professional management of the business side. This can lead to increased efficiency and profitability.

Benefits

A DPO or Dental Partnership Organization is merely an organization that partners with dentists to create more efficient and impactful dental practices. This partnership can take various forms, including general partnerships, limited partnerships, professional corporations, and limited liability partnerships. A limited liability partnership offers protection from the actions of partners, safeguarding personal assets from business liabilities. The how of each DPO will vary, but all DPOs work by partnering small dental practices with a broader network for more support and operational efficiency. DPOs provide a plethora of benefits for many dentists. The list below isn’t exhaustive, but it is a good overview of why many dentists partner with dental partnership organizations.

Time-Savings

By some estimates, dentists are one of, if not the most overworked professions. Small dental practice owners might be the most overworked. That’s one of the principal reasons many dentists are interested in partnering with a dental partnership organization. The opportunity to get their nights and weekends back is incredibly tantalizing to many dentists. All the administrative tasks involved in running a dental practice can be subsumed by the Dental Partnership Organization, allowing the dentist in question to focus on patient care. 

Financial Gain for Dental Practices

Working with a DPO can also help you grow your practice. The balancing act between being a healthcare provider and a business owner is one that many dentists struggle with. By bringing on an experienced DPO, you’re better poised to invest in marketing, find ways to increase profit margin, retain customers, and provide better service. Plus, you’ll likely keep a seat at the table regarding business operations. As a partner within your practice, you’ll be supported by the DPO’s expertise but will also retain some degree of ownership in the direction and profits of the practice. Clear profit-sharing arrangements can help ensure transparent and equitable financial management within the practice. That’s an excellent place for many dentists to be.

Upskilling for Dental Professionals

If you’re a dentist looking to further your education and career, a dental partnership organization can help better connect you with your peers and the industry. Access to these conferences provides many dentists with continuing education and a network of colleagues. Depending on the organization, you might have access to funding for certain continuing education pursuits. 

Economies of Scale & Access to Resources

Running a dental practice as a solo practitioner has its perks, but it also comes with drawbacks. One of those drawbacks is the cost-prohibitiveness of being a small business owner. On the other hand, dental partnership organizations have extensive experience supporting practices nationwide. This expertise proves invaluable when looking to support your dental practice better. By partnering with a DPO, you can access more capital to better staff and equip your practice and efficient economies of scale for procurement. This partnership also facilitates collaboration among dentists and other dental professionals, allowing for shared resources and knowledge.

Important Aspects of a Dental Partnership Agreement

A dental partnership agreement is a crucial document that outlines the terms and conditions of the partnership. Important aspects of a dental partnership agreement include:

1. Membership Interest: The value paid for the interest should not be the full amount paid for the practice. This ensures that the financial contributions of each partner are fairly represented and that the partnership remains equitable.
2. Purchase Price: The purchase price is generally split between a small amount for the interest upfront and the balance to be paid as deferred compensation to the seller. This structure helps manage cash flow and ensures that the seller remains invested in the success of the practice during the transition period.
3. Warranties and Hold-Harmless Provisions: These provisions protect the partners from potential liabilities. They ensure that each partner is safeguarded against unforeseen issues that may arise from the actions or omissions of other partners.
4. Employment Agreements: Each partner should have a new employment agreement that outlines their compensation, benefits, responsibilities, and hours of employment. Clear employment agreements help prevent misunderstandings and ensure that all partners are on the same page regarding their roles and expectations.
5. Asset Definition: The partnership agreement should clearly define what assets are considered to be assets of the partnership. This clarity helps avoid disputes and ensures that all partners understand what is included in the partnership’s assets.
6. Valuation of Assets: The valuation of assets should be tied to the individual production of each owner. This approach ensures that the value of the partnership reflects the contributions of each partner, promoting fairness and transparency.
7. Profit Splits: Profit splits are typically based on production, but profits are split by ownership. This method aligns the financial rewards with the contributions of each partner, incentivizing productivity and collaboration.
8. Expense Splits: Expenses may be split by production, but rent and other facility-related expenses are often split equally. This arrangement ensures that all partners share the costs of maintaining the practice, promoting a sense of shared responsibility.
9. Letter of Intent (LOI): An LOI should be established to outline the preliminary terms of a buy-in/buyout situation. This document serves as a roadmap for the transition process, providing a clear framework for negotiations and ensuring that all parties understand the terms of the agreement.

By understanding the different types of dental partnerships and the important aspects of a dental partnership agreement, dentists can make informed decisions and create a successful and sustainable partnership that benefits all parties involved.

Process and Business Operations

Do you love dentistry but find yourself spending most of your time tending to the non-dentistry elements of running a dental practice? Do procurement, marketing, HR, and general administrative tasks take up countless hours of your day? If so, a dental partnership organization might be an excellent fit for you! If you’re considering partnering with a DPO, they likely have extensive experience templating and coordinating all the humdrum elements of business ownership you don’t enjoy. The amount of process a DPO brings to your practice is quite freeing for dentists trying to wear multiple hats independently. 

Call Your Triumphant Transition Dental Partnerships Advisor Today!

Are you considering selling your dental practice? Do you need help understanding your practice’s value, potential options, and closing the deal? If so, call your friendly Triumphant Transition advisor for a courtesy consultation!