Good partnerships revolve around mutual goals


Many of the comments I received about my recent series on non-competition agreements related to non-competes and partnerships.

Many of the comments I received about my recent series on non-competition agreements related to non-competes and partnerships.

One generally thinks of non-competition protection as being something sought by a practice buyer or a doctor hiring an associate. Nonetheless, it is obvious that many professionals involved in or anticipating joining partnerships have serious concerns regarding protection against competition.

This article will address the general subject of partnerships.

Later this year, I will delve more deeply into important legal questions involved in the formation and development of professional partnerships.

Pinnacle of synergy

In my years in professional practice, I have seen partnerships that amounted to the pinnacle of synergy.

These were situations where two partners worked together tirelessly, each never doubting the other's commitment. The objectives in such partnerships were clear from the outset and the personalities never allowed ego or stubbornness to interfere with what was best for mutual goals.

And I've run across a few that weren't like that.

There are partnerships that are relaxing and pleasurable for the partners, but don't make much money. There are extremely lucrative partnerships, but where the partners refuse to speak to each other. There are partnerships that ran smoothly and effortlessly for years on a handshake, then dissolved under costly and bitter circumstances after exhaustive legal battles due to the lack of detail in the formation of the original partnership.

Then, there are partners who drafted every conceivable scenario into their expensive partnership agreements only to see the partnership collapse because they failed to recognize that no document in the world can keep one party from taking advantage of the other if he really puts his mind to it.

Partnership marriage

Where can lessons be learned on how and when to put together a partnership? Every state has a statute book covering partnership law, but I can tell you that you won't find what you need to know there. Rather, there are only two places you can go to really understand the things you need to know before going into a professional partnership; one is to talk to people who are married to partners, the other is to talk to people who are married, period.

Doctor Jones gets along phenomenally well with his two partners. He is an easy-going fellow who is happy to work extra Saturdays and holidays so that his partners can meet their personal and outside professional commitments. Jones has no resentment toward his professional association. At home is a different situation. His wife relentlessly reminds him of how many times they have had to bow out of social engagements or vacations "while your partners, Brown and Smith, are living it up."

Smith seems tense at the office lately. Business is good and she, Brown and Jones are getting along pretty well. But Smith's husband really wants to start a family and have her cut back on her schedule when their first baby is born.

"You really need to let those other two know that they are going to have to pick up the slack. You may not be working weekends, honey, but your average transaction is 40 percent higher than either of theirs. When are you going to talk to them about this?"

Brown started this practice. He's older than Smith and Jones, and the clients adore him. He's under a non-compete, but he's the reason half of the clients drive 20 miles out of their way to come to Brown and Partners, P.C. Brown loves veterinary medicine and hard work. He never plans to quit. Unfortunately, Brown's wife has had enough, and they separated three months ago. Since then, Jones and Smith have let a new problem slide. But now both feel they will have to bring up Brown's drinking at the next partner's meeting.

To themselves, they ruminate, "If I tell him I believe that his drinking is affecting the practice, do you think he'll be less open to agreeing to my working less?" The answer to that dilemma may actually be in the corporate bylaws, the shareholders' agreements, the mutual employment agreements, the cross purchase agreement or the non-competition agreement. But that doesn't mean anyone involved is going to like the answer.

Worse, if one of those high-priced documents doesn't solve the problem, the eventual solution may be very, very expensive in terms of time, money and emotional capital-for all six partners in this partnership of three.

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