Partnership Agreements for Medical Practices: Getting It Right
A well-structured partnership agreement prevents disputes and protects all parties. Learn the essential elements every medical practice partnership should address.
Lukasz Wyszynski
Principal Solicitor
The Foundation of Successful Partnerships
Partnership disputes are among the most damaging events a medical practice can experience. A comprehensive partnership agreement establishes clear rules and expectations from the outset.
Essential Partnership Terms
1. Ownership Structure
- Percentage interests of each partner
- Capital contributions required
- How additional capital will be raised
- Process for admitting new partners
2. Profit Sharing
- How profits (and losses) are divided
- Drawings and distribution timing
- Treatment of work-in-progress
- Individual billing arrangements
3. Decision Making
- Day-to-day management authority
- Major decisions requiring unanimous consent
- Meeting and voting procedures
- Deadlock resolution mechanisms
4. Partner Obligations
- Minimum time/billing commitments
- Outside activities restrictions
- Non-compete during partnership
- Insurance requirements
5. Exit Provisions
- Notice periods for withdrawal
- Valuation methodology
- Payment terms for departing partners
- Restrictive covenants on exit
6. Death and Incapacity
- Insurance arrangements
- Succession planning
- Treatment of incapacitated partners
- Estate entitlements
Valuation Methods
Common approaches include:
- Multiple of earnings: Typically 0.5-2x annual profits
- Asset-based: Net assets plus goodwill factor
- Revenue-based: Percentage of gross revenue
- Independent valuation: Third-party assessment
Dispute Resolution
Build in mechanisms before disputes arise:
- Internal negotiation requirements
- Mediation with nominated mediator
- Expert determination for valuation disputes
- Arbitration as final resort
Common Partnership Issues
Workload Imbalances
Address scenarios where partners contribute unequally:
- Define minimum requirements
- Allow flexible arrangements
- Adjust profit shares accordingly
Personal Circumstances
Plan for:
- Parental leave
- Extended illness
- Study or sabbatical
- Gradual retirement
Practice Growth
Agree on:
- Expansion decisions
- Capital requirements
- New partner admission process
Our Approach
We draft partnership agreements that:
- Reflect your practice's specific circumstances
- Anticipate common issues
- Provide clear dispute resolution paths
- Balance flexibility with certainty
Contact us to review or prepare your partnership agreement.
This article is general information about Australian law and is not legal advice. It does not take account of your circumstances, and you should not act on it without obtaining advice about your own situation. Liability limited by a scheme approved under Professional Standards Legislation.
Lukasz Wyszynski
Principal Solicitor
Principal Solicitor of Hamilton Bailey, a sole-practitioner law practice in Adelaide focused on healthcare and medical practice law.