Practice buy-in

Definition

Buying a share of an existing practice from its owners to become a partner.

Why It Matters

The price is a share of the practice's value and the formula lives in the partnership or operating agreement, which usually prices the buyout when a partner leaves by the same arithmetic, so the exit clause is read before the entry price is argued. It is paid from a practice loan, out of future draw (a reduced salary standing in for cash, which the trade calls sweat equity), or a mix. What the stake carries matters as much as what it costs: a share of profit, a vote, and a claim on the receivables and the goodwill, or only some of those, and the agreement is the only place that says which.

In numbers: A three-dentist group valued at $4.5M sells a one-third stake to its associate for $1.5M, financed with a practice loan the associate repays from their partner draw; the agreement's buyout clause prices a departing partner's stake by the same formula.