Manage Your Practice

Are Some Partners Less Equal but Just as Liable?

May 15, 2013

Many medical groups operate as partnerships, generally partnerships of professional corporations. The reason for that structure is simple: it allows maximum flexibility in terms of each owner’s management of his or her related business and tax attributes, while preserving a high degree of protection from liability.

Note that I said “a high degree” because there is never a situation in which there can be total protection from liability.

At the same time, many groups have compensation plans that reward different partners, or different classes of partners, differently, such that there is a spread, sometimes a wide spread, in compensation.

One complication of this type structure is that while all partners are jointly and severally liable for the debts of the partnership, some partners are reaping a much greater financial reward. And, in some instances, that reward is not tied to the fact that they are devoting more time, or harder effort, or even smarter effort to the venture.

In some cases, this situation is intended and understood by all. But in others, it is a situation arrived at blindly.

When did you last look at your partnership agreement? Does it create the liability result that was intended?

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