Partnership Buy-Outs

Multi-owner practices have the potential to lose one or more owners to retirement, relocation, change of career direction or other life changes.  In a few cases, an owner must force another out of the veterinary practice due to legal, health or quality concerns.  Regardless of the circumstance, there is no substitute for a well-drafted ownership agreement that is signed by all parties and spells out what should happen in each situation.

Ideally, that agreement will set forth the steps each party must take, the procedure for determining the value of the departing owner’s interest, details regarding who will buy that interest, and the terms for financing the buy-out.  The buyer may be the veterinary practice itself, one or more of the existing partners, or an associate now working in the practice.

We are not attorneys; however, our extensive experience with ownership transitions is a tremendous asset when combined with the efforts of legal counsel. We can also work with a CPA, whether contracted by the practice or an individual owner, to design a more tax-favored strategy for ownership exit or partner buy-out.  Partner collaboration is extremely beneficial during this process, as adversarial relationships can be a detriment to all involved.

Unfortunately, sometimes there is no owners’ agreement, or the existing agreement doesn’t reflect the realities of today.  For example, the valuation clause may set forth a formula which significantly over- or undervalues an owner’s interest in the practice.  Or the terms of a buy-out may be so favorable to the departing owner that the practice cannot afford the payments.  Conversely, there may be no discussion of a buy-out price or terms, and each partner has a different practice value in mind.  Perhaps one partner is not willing to buy out the other in a two-owner practice and an outside buyer must be found.

If you face situations similar to any of these in your veterinary practice, we can help you explore options to find a solution that will serve the owners and ensure the continued success of the practice.

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