I would like to resolve my situation soon.
I have been an associate for 5 years in a practice, well-compensated (40 % collections minus 50% lab). I left another partnership to pursue this associateship full time last year, working to a future partnership buy-in. Last year production about $1 million, although it did drop off the last 4 months due to the recession. Also last year, the owner completed a rather large build out in a new office space, probably in the $700k range (via loans).
My question is: do I buy into the loan amount when I do buy in, and if so, does that reduce my buy-in amount?
Depending on the structure of the buy-in, yes, any debt reduces the asset value in terms of YOUR buy-in figure. That’s because after you buy-in a portion of your profits will be going towards reducing the debt.
Think of it like this, there’s a house you want to purchase that’s been appraised for $100,000. If there’s a mortgage on that house for $80,000 AND it’s assumable, you would pay the owner $20,000 for the house, NOT $100,000 because you’re also taking on the debt. If you bought a 50% interest in the house your payment would be $10,000 and each of you would be responsible for half the debt.
If not, is it a good idea to even consider buying in to a practice with a large liability?
Depends, might be a blessing! Might mean minimal upfront money from you! What about the large asset?
He is also talking about not including the equipment in the buy-in figures, that by the time I buy in, it will have depreciated to a point where I would be paying more than I should for it, that he’s doing me a favor to keep it out of the equation. That’s confusing to me.
Now for some reason, maybe because of the recession and/or the build out loan, he has yet to show me anything resembling an agreement, or any idea of how much he wants for a buy-in amount , keeps putting me off (it’s been about a year since we first talked about partnership). I can guesstimate, but I don’t want to work here and find out later that his figure is too high/not workable. My other option would be purchase a place of my own now, instead of waiting (my plan B). Looking for input?
Press the issue, PRESS THE ISSUE! Ask for a written proposal by the end of next week, or a timeframe you’re comfortable with that’s shorter rather than longer. Say that unless you begin to see the ball rolling you have to consider other opportunities.