Practice makes perfect: 10 tips for taking on new GP Partners

Nigel Beckwith, 22nd February, 2013

If you’re planning on taking on a new GP partner, you’ll need to know the legal pitfalls that can crop up as a result. Being prepared now can make all the difference when it comes to keeping your practice in order. These 10 tips will walk you through everything you need to know.

1: Review your Partnership Agreement

First things first, make sure your existing Partnership Agreement is updated and signed by every partner, including the new partner. If you don’t, you could compromise your PCT Contract, and the conditions set out in your Partnership Agreement will most likely be voided.

2: If the new partner needs bank finance, be prepared

It’s common for banks to ask to see a signed copy of the Partnership Agreement before they agree to lend money to new partners. Make sure you’ve a copy of the signed agreement at the ready.

3: Agree on a probationary period

A probationary period will give your existing partners chance to review the new partner’s performance and suitability. And if it doesn’t work out, you’ll have a plan of action ready for ending the arrangement.

4: Decide on their profit share

You can set a new partner’s profit share to rise over a period of time – say three years – until it comes up to par with the other partners’. Without an agreement like this, the partners will share profits equally.

5: Agree on a plan for investing extra capital

If you need it, arrangements for extra capital can be made in the Partnership Agreement –you can set this up in instalments over a period of time.

6: State the arrangements for the partnership premises

Do the premises form part of the practice assets or are they held by all or some of the partners? Do all the partners hold the premises in the same shares as they share profits or do they hold the premises in different shares? If the premises aren’t owned by the practice, what rights do the partners and the practice have?

To avoid disputes, the Partnership Agreement will need to be clear on the arrangements made for the premises in regards to the partners and the practice.

7: Review the conditions for expulsion and retirement

It’s worth reviewing the conditions for expulsion/compulsory retirement/retirement to see if they’re still workable and up to best practice. Traditional expulsion clauses are difficult to raise, and it’s now common for certain partnerships to include terms whereby they can compulsory retire off a non-performing or uncooperative partner – having these in place can help you dodge the risk, stress and expense of a drawn-out legal battle.

8: Don’t put yourself under financial strain if a partner leaves

In the event of an expulsion/compulsory retirement/retirement, the Partnership Agreement should outline how and when the partner’s capital or current accounts will be repaid.

9: Make sure any restrictions on leaving partners are enforced

A well-drafted Partnership Agreement will often impose restrictions on a partner who leaves the practice. Make sure you take the time to enforce these when drawing up the agreement.

10: Have your new partner take tax advice

As well as tax relief, your new partner will need to know the impact on their financial position as a result of being self-employed rather than employed, and also the effect on their leaving arrangements.

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