Dentistry is a profession and a business. As a new dentist, prepare yourself for imminent business and legal matters that will arise in the first few years.
Associate Agreements
The terms and conditions of Associate Agreements are not “standard” and they can vary widely. Key terms and conditions might include:
1. Are you an employee or independent contractor?
2. Which party pays for what (i. e. supplies, continuing education, membership fees etc.)?
3. When and for how long can you be away?
4. How long is the Agreement? Does it renew automatically unless terminated?
5. Termination rights — Do you have a right to terminate without cause on prescribed notice? Does the Principal Dentist have that right? Can you or the Principal terminate immediately for cause?
6. Are you paid a percentage of billings or of collected billings? What about hygiene examination fees? Are lab fees deducted? What are the payment intervals? Are any amounts held back?
7. Are you restricted from practicing at another location during the term or within a certain radius after the term of the Agreement? Are you restricted from soliciting patients? The law relating to restrictive covenants has and continues to evolve. Consult with your solicitor.
8. Who owns the charts for patients that you treat? What about patients that you introduce? What about friends and family?
Incorporation
You may have heard that incorporation is not worth your while until later in your career, for the reason that “there is no benefit if you cannot leave money in the corporation (to defer taxes).” However, there are scenarios that could still justify early incorporation. For example, as family members of dentists are now eligible (in many provinces) to hold shares in the dentist’s professional corporation, payment of dividends to lower income family members can be a very effective strategy in moving taxable income over to their lower tax brackets for sizable tax savings. It is also possible in certain cases to incorporate while an associate. Consult with your accountant.
Practice Ownership?
If practice ownership is your aim, give yourself at least two years of lead time to fully explore your options and to make the transition. In addition to your lawyer and accountant, get acquainted with lenders, practice consultants and practice brokers, as they are a wealth of information and market intelligence.
Start-ups
If you are considering starting your own practice, there are a number of legal matters that will need to be addressed, including commercial leases, equipment leases, loan agreements, design and construction contracts, employment and associate agreements.
Practice Purchase
If you are considering a practice purchase, there are aspects beyond price that must be carefully reviewed and considered, with the assistance of your accountant and lawyer:
1. Whether you are purchasing assets of the practice or shares of a professional corporation. Significant tax implications can arise from this question.
2. Due diligence (books and charts)
3. The current premises lease
4. Equipment leases
5. Existing associate and employment arrangements
Group Practice Arrangements
While considerable savings can arise from entering into a group practice arrangement with other dentists, there are significant tax, liability and other legal implications that can come with these types of arrangements. For example, there is an enourmous difference between a “cost-sharing” arrangement and a “partnership” from both a tax and liability perspective. Also be mindful of this if a “buy-in” is proposed by your principal. Carefully review all of your options with your accountant and lawyer.
Call Before You Sign
It is critical that you consult with your lawyer and accountant before you sign any document and preferably before you enter into any form of negotiation.
John McMillan, LL. B. of McMillan Law Professional Corporation is a Toronto corporate / commercial lawyer serving dental professionals. He can be reached at 416 364 4771 or johnmcmillan@bellnet.ca.
