Is your Practice Considering Taking on New Partners?
01.07.2021 , BY Kate Perry
01.07.2021 , BY Kate Perry
We are pleased to see that our clients are now starting to take on new partners again. We are also getting enquiries from potential new partners asking us to review partnership accounts. This is all good news but this process should be carried out at a steady pace and giving good consideration to a whole range of different aspects which are reviewed below.
Ethos of the Practice
It is important that a new partner has the same ethos as the current partners. This means considering their view of the NHS in general, their clinical methods and most importantly, their financial objectives and vision of the future of the practice.
This goes without saying but it is helpful to have worked with the individual being offered the position, either as a locum or as is commonly the case, as a salaried GP. Some practices offer a salaried position first with a view to partnership. This opportunity can, of course, be offered to your GP Registrar if you have one, if you think that they would be an asset to the partnership.
Initial and ongoing profit-sharing arrangements
Profit-sharing arrangements must be made very clear from the start and in particular, ensuring that new partners understand that they will be required to pay both their tax, national insurance and their pension from their profit share. Profits are often not paid out in full initially and so a salaried GP may find that their monthly income is less than it was as a salaried GP but it will improve in the long run.
There are numerous ways to arrange this but ultimately, it may be down to negotiation with the GP.
Buying-in and New to Partnership Payment Scheme
All partners in practice need to invest in the business and put in some capital to assist with the running of the practice. We call this working capital. For a new partner, this is still sometimes called ‘buying in’. This can be done either by putting a lump sum into the practice as soon as parity is reached but more often is done by the new partner under-drawing their profits over the first two years to build up that capital. However, there is now a further option with the introduction of the New to Partnership Payment Scheme.
When new partners join a practice, the previous partnership agreement becomes void and a new partnership agreement must be drawn up. This is one of the most important elements of taking on a new partner and ideally should be in place before they start. This should be drawn up by a medical specialist solicitor and include a clear description of the profit-sharing arrangements. A new agreement should now include a clause to encompass the arrangements for repaying the New to Partnership Payment should this be required.
It is always wise to ask us to review it for you too, in case incorrect assumptions have been made about how profits are shared.
A potential issue can relate to the impact that outside work can have on the partnership. You need to be clear from the start what is and what isn’t allowed and whether you will have the right to force limits on outside work if you feel that the outside work is having a detrimental affect on the partner’s work at the practice.
Here at RBP, the partners have wide experience of dealing with incoming partners and can advise practices on the best way to take on a new partner taking into consideration your practice’s profit sharing arrangements. We are also able to produce drawings projections so that the new partner knows what drawings they can expect together with how much needs to be put aside for tax.