by William P. Prescott, EMBA, JD
Practices consisting of two or more owners are becoming more common as a practice exit and
entry option1 as the number of practices that grow and then expand or relocate increase. As a result, the
reader, be it the doctor, spouse, or advisor(s), should be aware of little known, but very
important, tax risks that may be implicated under the basic business and tax structures relative to co-ownership.
Each of these business and tax structures consists of three categories. They are the associate buy-in,
the owner buy-out, and operations. All categories need to be considered when co-ownership is
contemplated, hopefully prior to an associate picking up a handpiece. Why? Because if the practice
owner's succession or exit strategy is definitive and a new doctor is to be admitted as a future partner, the
identity of the candidate will not matter.
Dealing with these complex issues a year or two after the associateship begins often leads to disagreements over the purchase price, valuation date, and business and tax structure.
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