Personal and professional relationships can fail. Before they do, you need to be prepared.
AS A RESULT OF THE ECONOMIC RECESSION AND THE DECLINES IN INSURANCE REIMBURSEMENT, many chiropractors are experiencing a drop in income.
This can create a ripple effect that flows through the office and into the home.
Confrontations, disagreements, and conflicts are on the rise in chiropractic. Most chiropractors are good natured and start relationships by looking at the upside, so as a result, they put little effort into an escape or exit plan to unwind a relationship. Nevertheless, it’s essential for you to plan for the best but prepare for the worst in any joint enterprise.
Typical scenario: Two partners want to dissolve their business relationship. Each partner has his or her own opinion as to why the other is not holding up their end of the relationship. They complain of not making the income they once had.
It would be safe to assume that if each partner’s income had not decreased, they would be able to continue to work together. But when the income goes down everyone starts to point fingers.
The shareholders’ agreement
Having an unwind statement written in advance within the shareholders’ agreement is the simplest and most cost-efficient way to decrease risk. A shareholders’ agreement is a document that defines each partner’s responsibilities and expectations.
The agreement is written, agreed upon, and signed at the beginning of the relationship. The terminology “if and when the parties agree to separate, the following procedure will follow,” is a legal clause that will allow the parties to execute a separation according to a predetermined, pre-dispute state of mind.
Like it or not, both parties have to abide by the course of action stated within the shareholders’ agreement. A separation directed by a shareholders’ agreement is typically the fairest, as it allows both parties to walk away on equal grounds.
When a partnership does not have a shareholders’ agreement defining the relationship, everything is up to negotiation. Each party will have its own opinion and perspective colored by heightened emotion.
As the relationship begins to suffer, the short-term goal should be to allow each party to successfully withdraw before the practice falls to pieces. The overall goal is to limit legal costs, shorten the time period needed to dissolve the partnership, and allow each party to leave with enough financial resources and self-respect to continue to practice.
Benefits and risks
Mediators will often ask both parties to state their primary goal. Ideally, if one partner wants money and the other wants the practice, then that establishes a path to a negotiation that can satisfy each partner. The ultimate objective is for each partner to be able to reestablish his or her professional life.
The stress of this can also affect your personal life. The divorce rate in the U.S. is about 50 percent for first timers and 70 percent for second timers. When you fall in love or start a business relationship it’s hard to imagine anything but love and success. You and your partner can only see the positive results of your efforts.
During a divorce, the best approach to avoid the dispute of practice equity and valuation is similar to the unwind clause in a shareholders’ agreement.
It’s called a business marital prenuptial agreement and it can be written to establish a pre-stated value, a percentage of gross or net income, or not be divisible if the practice was established prior to marriage.
It’s not recommend that you attempt to distort financial profitability. The opposition is almost always able to follow the money and discredit your integrity.
Keep your options open
Being ill-prepared when entering into a professional partnership or personal relationship exposes you to risk and loss. So enter all your relationships with both eyes open.
Look at the downside as well as the upside of each important relationship. Implement unwind documentation at the conception of the relationship to lessen your risk if the relationship fails. And if the relationship does fail, use an independent consultant or mediator who is motivated to seek a fair resolution on your behalf.