Oral Surgery Practice Buy-In: Becoming a Partner
An oral surgery practice buy-in allows an associate surgeon to purchase an ownership interest in an existing group. For many surgeons, it offers a path to ownership without starting from scratch or buying an entire practice, and it can give senior partners a way to plan for their own eventual retirement.
A buy-in is also a significant financial and legal commitment. This guide explains how buy-ins generally work, what to review before agreeing to terms and how buy-ins may be financed. Ownership rules vary by state, and nothing here is legal, tax or accounting advice.
How an Oral Surgery Practice Buy-In Works
Many oral surgery groups hire associates with the expectation that they may become partners after a period of employment. At the end of that period, the associate may be offered the opportunity to purchase a percentage of the practice.
Buy-ins can be structured in several ways:
- Stock or membership interest purchase: the associate buys an equity stake in the practice entity
- Asset-based structures: the associate acquires an interest in practice assets
- Phased buy-ins: ownership is acquired in stages over time
- Separate real estate ownership: the building may be owned by a separate entity with its own buy-in terms
Healthcare counsel and accountants can help determine which structure fits the practice and the parties.
Understanding the Associate-to-Partner Track
Before joining a group, associates should understand what the partner track actually looks like. Questions to ask include:
- When will a buy-in be offered, and is it a firm commitment or discretionary?
- How will the buy-in price be determined?
- What percentage of ownership is available?
- How will compensation change after becoming a partner?
- What governance and voting rights come with ownership?
Getting these answers in writing early can prevent misunderstandings later.
How the Buy-In Price Is Set
The buy-in price is often based on a valuation of the practice. That valuation may consider cash flow, the referral base, equipment, accounts receivable and goodwill. Some groups use an independent appraisal, while others use a formula in the partnership agreement.
Associates should understand what is included in the price and what is not. For example, accounts receivable and real estate may be treated separately. Our article on oral surgery practice valuation explains the factors that typically drive value.
Review the Partnership Agreement Carefully
The partnership or operating agreement governs the relationship among owners. Key provisions to review with counsel include:
- Compensation formulas and how income is divided
- Call coverage, scheduling and workload expectations
- Decision-making and voting rights
- Buy-sell provisions for retirement, disability, death or departure
- Restrictive covenants, which vary in enforceability by state
- Capital contribution requirements for future equipment or expansion
Buy-sell provisions matter both now and later. The same terms that govern your buy-in may govern how you eventually exit. Our article on the oral surgery partner buyout covers that side of the transaction.
Due Diligence for a Buy-In
Even when joining a practice you already know, due diligence is important. Associates should review financial statements, tax returns, debt obligations, leases, equipment lists and any pending claims or audits. Existing debt matters because, as an owner, you may share responsibility for it depending on the structure.
Billing and documentation practices should be reviewed by qualified billing or compliance professionals.
Financing an Oral Surgery Practice Buy-In
Many associates finance their buy-in rather than paying cash. Options may include:
- SBA 7(a) loans, which may be used for certain partner buy-ins depending on the structure, program rules and lender review
- Conventional practice loans from lenders familiar with healthcare practices
- Internal financing arranged by the practice, such as payroll deductions or seller notes, which are typically subordinate to any senior lender
Lenders generally review the practice’s cash flow, the associate’s income history and credit, student loan obligations, liquidity and the terms of the partnership agreement. Every loan is subject to approval, and nothing here is a commitment to lend.
Real Estate and Other Entities
In many groups, the office building, an imaging center or an ambulatory surgery center is held in a separate entity. Buying into the practice may not automatically include an interest in those entities, and each may have its own price, agreement and financing needs.
Associates should ask whether separate buy-ins are expected, when they would occur and how rent or other payments between entities are set. Healthcare counsel can help evaluate how these arrangements fit together. If a real estate interest is part of the plan, our article on oral surgery office real estate explains the main ownership options.
Questions Lenders May Ask
Lenders reviewing a buy-in request will often want to understand the full picture. Be prepared to explain how the price was determined, what percentage you are acquiring, how your compensation will change after closing and what the partnership agreement says about future capital calls. Having the valuation report, agreement drafts and recent practice financials ready can make the review smoother.
Planning Your Personal Finances
A buy-in may affect your income for a period, especially if payments are deducted from distributions. Associates should model how loan payments, taxes and changes in compensation will affect their household budget. An accountant can help evaluate tax implications of different structures.
Final Thoughts
An oral surgery practice buy-in can be a rewarding step toward ownership, but it requires careful review of valuation, partnership terms and financing. Understanding the deal before you sign can help you build a stable, long-term partnership.
US Medical Funding helps oral and maxillofacial surgeons finance buy-ins and practice acquisitions. Learn more about our maxillofacial surgery practice acquisition financing.
