Governance The Business of Healthcare

Why Document the Value of a Group Member’s Interest?

November 20, 2013

They say that beauty is in the eyes of the beholder.

But the value of a physician’s interest in a medical group is in the eyes of the holder — the holder of the pen, so to speak: those in control of the terms of the buy-in and buy-out provisions of your group’s shareholders or partnership agreement.

So what’s a membership interest worth?

No time to think about this now? Fine with me.

But it’s not going to be fine for you because sooner rather than later someone is going to leave the group and they are going to demand “their share.”

They’ll claim that the group really doesn’t exist – it was just a pass through and they want their accounts receivable. Or worse, they’ll claim the group and you, yes, you, personally, owe them a fiduciary duty to schedule them and to collect “their” accounts receivable. “So where’s my money!”

What is the formula for determining value? Does that formula trigger or destroy other rights and privileges that the group wants to assert in its organizational documents?

Think about it. Now.

It’s better than worrying about it, or being sued, later.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

www.weisspc.com

Leave a Reply