While oral agreements can be legally binding, they are generally not advisable for dental partnerships – or any business partnership. The absence of a written record makes them difficult to enforce, especially when disagreements arise.
Lanre J. Abiola, Marquette 2022, is founder of
Prestige Law Office, LLC, Milwaukee, where he focuses on business law, dental transitions law, estate planning, and probate. He is currently on the State Bar of Wisconsin Business Law Section board of directors.
A well-drafted written agreement:
provides clarity on each partner’s rights and responsibilities;
ensures legal protection; and
enhances enforceability in the event of conflict.
The Hidden Risks of Oral Agreements for Dental Partnerships
Additionally, dental business attorneys often witness the costly consequences of oral agreements.
Common examples include statements like “We’re friends – nothing will go wrong,” or “A handshake is enough – involving lawyers just complicates things.” While these informal arrangements may seem convenient at first, they often lead to serious disputes over time.
Memories fade, and people often recall conversations differently. Without clearly documented terms, disagreements can easily arise around critical issues such as profit sharing, decision-making authority, and day-to-day responsibilities within the practice.
These misunderstandings don’t just threaten the business – they can also irreparably damage personal relationships between partners. A handshake may feel like a sign of trust, but in the long run, it’s a risky and fragile foundation for any dental partnership.
Protect Your Dental Practice with a Written Partnership Agreement
A dental partnership agreement is a legally binding contract in which two or more dentists agree to operate a practice together.
A proper written partnership agreement protects everyone involved by providing clear answers before problems arise. It clearly outlines each partner’s roles, responsibilities, and ownership interests.
Dental attorneys regularly draft agreements that address complex and sensitive issues. These agreements are used to:
avoid 50/50 partnerships to prevent legal risks and decision-making deadlocks;
establish clear decision-making procedures;
define partner rights and responsibilities;
clarify profit and loss sharing;
plan for partner exits;
create a clear buyout structure;
prepare for disability or death; and
include a dispute resolution process.
By addressing these key areas, partners can safeguard their practice, their investment, and their relationships. It clearly outlines each partner’s roles, responsibilities, and ownership interests. The agreement protects all parties, minimizes misunderstandings, and supports the smooth, long-term success of the practice.
Avoid 50/50 Partnerships to Prevent Legal Risks and Decision-Making Deadlocks
Avoiding a 50/50 partnership agreement is crucial to preventing legal risks and decision-making deadlocks. In one case I handled, two medical business partners – each owning 50% of the company – threatened to sue each other because they couldn’t reach consensus on key business decisions. Their equal ownership created a power struggle with no built-in mechanism to break the tie, stalling operations and damaging their working relationship.
In the dental industry, standard partnership agreements often overlook the specific needs of dental professionals. Whether you're buying into a dental practice or forming one with a trusted colleague, it's essential to avoid a 50/50 ownership split. Instead, work with a qualified attorney to draft a written, enforceable, and comprehensive partnership agreement that clearly defines roles and decision-making authority.
Establish Clear Decision-Making Procedures
Every dental practice faces key decisions – such as hiring staff, purchasing equipment, or expanding services. A strong partnership agreement distinguishes between operational and strategic decisions and outlines how each should be made.
The agreement should define:
the decisions a partner can make individually;
those decisions that require a majority vote; and
which decisions require unanimous agreement.
By providing a clear framework, partners can avoid gridlock and ensure the practice adapts and grows smoothly over time.
Clearly Define Partner Rights and Responsibilities
One of the most common sources of conflict in dental partnerships is uncertainty about each partner’s role. Without a written agreement, partners often make assumptions about who will manage clinical duties, oversee business operations, or handle administrative tasks. These assumptions quickly lead to misunderstandings, resentment, and internal strife.
A well-drafted partnership agreement eliminates ambiguity by clearly outlining each partner’s rights and responsibilities. It defines work schedules, clinical obligations, and management roles. It also designates who is responsible for hiring and firing staff, managing vendor relationships, and supervising daily operations.
By setting expectations early and in writing, a partnership agreement reduces the risk of conflict and supports a more effective, professional collaboration – allowing dentists to focus on patient care and practice growth instead of internal disputes.
Clarify Profit and Loss Sharing in Dental Partnerships
When it comes to money, clarity is nonnegotiable. A well-crafted partnership agreement precisely defines how profits are calculated and distributed, ensuring each partner understands their share. It also outlines procedures for handling routine expenses, major purchases like equipment or technology, and unexpected costs such as emergency repairs or legal fees.
Importantly, the agreement must address how partners will share losses – whether during slower months or while investing in the practice’s growth. Financial misunderstandings are a leading cause of partnership breakdowns, many of which can be avoided with clear, written terms from the outset.
Dental partners can avoid confusion, safeguard their investments, and maintain trust by establishing clear and transparent financial rules.
Plan for Partner Exits
Even the most successful partnerships eventually change. A well-drafted agreement should include exit provisions that clarify procedures if a partner chooses to leave or must exit unexpectedly.
Important elements include:
notice requirements for voluntary withdrawal;
responsibilities during transition (e.g., patient handoff, staff notifications);
buyout terms and valuation methods;
noncompete clauses; and
confidentiality obligations post-departure.
Documenting these provisions protects the business and helps all parties navigate transitions more smoothly.
Create a Clear Buyout Structure
Every partnership agreement must include clear buyout provisions that define how the practice’s value is calculated, outline payment terms, and specify funding methods. These provisions cover both voluntary and involuntary buyouts, including retirement, disability, and death.
Transparent buyout terms allow partners to plan confidently for the future and minimize disputes over practice valuation and payment obligations.
Prepare for Disability and Death
Although difficult to consider, planning for a partner’s disability or death is essential for the continuity of the practice.
Your partnership agreement should include:
clear definitions of temporary versus permanent disability;
compensation terms for a disabled partner during absence;
guidelines for continued operations, including who assumes clinical or managerial duties;
buyout provisions or succession terms in the event of permanent disability or death;
protections for the deceased partner’s family, including payment timelines; and valuation methods.
Addressing these scenarios in writing reduces uncertainty, avoids disputes, and ensures continuity of care during transitions.
Include a Dispute Resolution Process
Even with careful planning, disputes may arise in any dental partnership. To manage conflicts efficiently and professionally – and to avoid costly litigation – your partnership agreement should include a clear, structured dispute resolution process.
This process should require partners to first engage in good-faith negotiations to resolve disagreements amicably. If negotiation does not lead to a resolution, the agreement should specify mediation and arbitration as the primary methods for dispute resolution. These alternatives save time and expense while preserving working relationships.
By documenting a well-defined dispute resolution process, partners gain a roadmap for handling conflicts constructively and efficiently. This preserves trust and cooperation, helping the partnership thrive despite inevitable challenges.
Conclusion
The strongest dental partnerships are built on clear expectations, mutual protection, and proactive legal planning. As an attorney, you can provide your clients who are entering or revising a dental partnerships with a comprehensive agreement. This protects your clients' professional relationships and business interests – ensuring their practice thrives today and in the future.
This article was originally published on the State Bar of Wisconsin’s
Business Law Blog. Visit the State Bar
sections or the
Business Law Section webpages to learn more about the benefits of section membership.
