The Dental CEO Podcast 48: Avoiding the Legal Landmines in Dentistry

So are non competes in a contract enforceable or how do we deal with a partnership agreement? And now the partners, they want to break up. You know, how do we even value the business in that situation? Or what about the thought of like I'm going to sign a lease, but if I ever sell my practice, how do I make sure that I'm not still on the hook personally forever for this lease when I don't even own the practice anymore? Or could I set up my legal structure, my practice today so that if I ever, if I ever passed away, for example, could my family still own the practice even though they're not licensed? Can they still benefit financially from this asset I've built? You know, these are the types of things, operating agreements, earnouts, non competes, deal fatigue, negotiations, you know, lawsuits. There's a lot of incredibly important things under the topic of dental legal stuff, right? The sometimes the most important moments of our careers have this massive legal strategy that we need to be aware of and that we need to, we need to responsibly understand that is what this episode is about. The important legal moments of our career, what's it like to go through those? What do we need to do and what do we need to know? What are some tips, what are some take home messages? Let's not go into those uninformed and let's not fail going through that process. We need to have the right strategy and the right representation. And to help me talk about this is an attorney that I personally have used for quite a while that has helped me and protected me many, many times. His name is Eric Masson, he's from Eskow Law Group and that is who we're talking to. And the topic we're diving into today on the dental CEO PODCast. Foreign. Eric, thank you again for joining us today. The legal side of running a dental practice or starting a practice or buying a practice is something that most dentists don't have a whole lot of exposure to or experience with. And what's interesting is sometimes the most important moments of their career need legal help and they don't know what to do or where to go. So what I'm hoping is in today's episode we, we dive into some of those components. Now before we do that, if you could in your own words, kind of tell everyone listening who you are and what you do, that'd be great. Yeah. Excellent Scott. Thanks for having me on today. I'm excited to share some input with your audience. My name is Eric Masson, I'm a partner at Eskow Law Group. We're a boutique healthcare transaction firm. So we help doctors, dentists, vets, surgeons work in their healthcare vertical to acquire seller practices, associate agreements, lease agreements, etc. Okay, so you started listing agreements I'm going to listen for. So there's a lot that we could do to help. Yeah, so but for this podcast, the dental side of things. So we got associate agreements, we have lease negotiations, we have practice purchase agreements. Right, purchase agreements. Are there other major agreements in dentistry that or should we focus on those? I think the two other areas would be DSO structuring. For those dentists that are ready to go to a multi practice, they want to bring in private equity or private non licensed owners. And we also need partnership buy ins and buy out. Okay, so let's start with the startup world. I'm a dentist, I've been an associate, I maybe I came to Scott's course and I learned it's the golden age of startups and I'm ready to do it. I dive in on my team, I'm going to need a lawyer. Right. And that attorney is going to, number one, help consult with my accountant to understand what kind of entity to set up for me. And with that entity comes the operating agreement as well. Right. And then two, my attorney is going to need to help me do the big final negotiations on the location, the like the lease. So if we could dive into those, I think that'd be great. So on the entity formation and the corporate documents and the operating agreement, could you kind of explain that process and what those things are? Yeah, absolutely. I think there's three things a dentist needs to do for a startup. They need to create and form their entity and determine what type of entity that will be in their given state. I have a preference for professional limited liability companies. They could also be a professional corporation. Those are the two primaries. They also need to obtain a tax ID number from irs. And then they need an operating. Even if they're the only owner, the banks, lenders, landlords, they're going to want to see an operating agreement even if it's just a one person. Yeah. And you know, the entity kind of has two main purposes. Right. One is to kind of understand how it's going to be taxed. Right. From the government standpoint, the tax perspective. And then the second is to offer a protection, a protective layer so that if something happens at the practice level, that the owner of the practice individually is kind of protected from that. Did I say that correctly? I think that's accurate. You're right. On an interesting thing with LLCs and you mentioned the taxes. Just a small tangent here. The IRS doesn't recognize LLCs as taxable entities. So they make you. When you're forming your entity as an llc, you have to pick whether you want to be taxed as an S Corp or sole proprietor, single member. So I hear a lot of times people talking about I'm an S corp and they're there is really a C corp tax and S Corp. But just know that LLCs are not a taxable entity from the IRS perspective and they'll have to make an election. The second aspect you talked about is liability and limiting that. And that's one of the main benefits of being a limited liability company or corporation is that if you comply with the statutes in that state and your operating agreement, your bylaws, theoretically if somebody who sues the business can't reach through that business and come to you personally to seek remedies for whatever they're they're claiming you did so there is an important aspect of protecting yourself personally through those. And that's where in part, the operating agreement could come into play. Because if, let's say you're sued as a practice by someone and they want to go after you personally, they have to do what's called pierce the veil, pierce the corporate veil. They have to prove that, yeah, you have this llc, this corporation, but you haven't actually been acting like that's a company and really it's just been you. And therefore I can sue you individually. Right. And one way just to prove, oh, no, no, no, we do act as a company is to have what's called an operating agreement with bylaws and to follow that and to have kind of recorded meetings, you know, from time to time in the year. Did I, did I say that exactly? Exactly right. So many people have an operating agreement or if you're a corporation, they have the bylaws, but they don't follow them. And that's where people get tripped up. So you do have to follow those. If you stay in your operating agreement, you're going to have an annual meeting, then have that meeting, have your minutes, keep it with all of your corporate records. If you start deviating from those procedural requirements, that's where that limited liability company you spend the time, effort and money to set up won't be there to protect you. You're exactly right. And this is why sometimes dentists will just like go form an entity on their own, get a tax ID number on their own. They may use ChatGPT to put some junkie operating agreement together and they call it like, okay, I did what I'm supposed to do. But no, unfortunately you won't find out there's a problem until you get sued, or at least the threat of a lawsuit. And then it's going to be a huge wake up call. So the proper way to do this is with your accountants also at the table. Your attorney will register you to get the proper entity set up to understand how it should be elected as being taxed. And then to get, of course, the tax ID number and to get the operating agreement put in place. And then, you know, that man, the meeting you got to have has to have recorded notes. And sometimes people will invite their attorney to attend the meeting and that the attorney could even be a custodian of records for those types of notes. That's a role that, you know, that smart entrepreneurs have their team play for them as a way to protect 100%. Yeah, and I like the fact, and you're holding in the team concept, we like working with financial advisors and accountants so that we have a whole of unity approach towards doing what's best for the entrepreneur. The dentist that owns. Excellent. Now that was, that was the initial kind of formation side of being a startup dentist. The next piece of this is where a startup dentist is looking for location. They've been negotiating with multiple landlords by, you know, eventually signing what's called a letter of intent or an LOI. And now the terms in that LOI are going to be expanded on into like a 20 or 30 page lease document. And the landlord's attorney and the startup dentist attorney are going to go back and forth and back and forth and negotiate the nuances of that lease agreement. And so that is something that you guys also help with. Can you kind of explain a little bit about that process? Absolutely. And I wish they were all 30 pages. I did one two weeks ago. There's 90 pages. Oh my God. Some of these landlords just, they really overkill. But I think the important transition from LOI to lease is understanding that the business terms are generally mapped out in the loi. How much you're paying per square foot. What's the status of the. Are you getting a plain shelf space already? Somebody in there. Those business terms are laid out. But then there are lots of legal protections designed to protect normally the landlord. When we get these leases, they're drafted heavily in favor of the landlord. We don't expect to get everything that we ask for and to make it a hundred percent. 180 degrees in favor of the tenant. Right. That's just not practical. But what we do try to focus on are some of the high risk areas for dentists that they need to be aware of. For example, if they're going to planning to sell their practice in five or 10 years, maybe they're not planning to now, but they should plan for in future. We want to look at the assignability that lease. Is it assignable? Do you need the landlord's consent? What about the guarantor that's on there? You mentioned the limited liability. Companies and landlords know there's no liability for the company. And maybe you're a startup, you don't have a lot of cash. So they're most likely going to require an individual or personal guarantee on that. What happens to that if you sign the lease? So those are some of the provisions that we look at very closely on leases. But they are, it's a back and forth. Our firm, when we get the initial lease, we do a Review or red line. We send our proposed changes to the client. We set a call to review, make sure they understand what's in the document. And we don't expect them to understand and read every line, but they need to understand the major provisions where the trip wires are. Then we send that back to the landlord and we go back and forth two or three times. Right. And at that point, you need to get on the phone and talk through any remaining. And you know, this is also a kind of a trap that some entrepreneurial dentists fall into that, that may have an attorney represent them, but it's an attorney that doesn't necessarily have a lot of experience on the real estate side of dentistry. The trap that I've seen is that this lease, which is of course heavily in favor of the owner of the property, the landlord, there's provisions in there. And attorneys in general, they want to watch out for their clients. They want to suggest all kinds of changes that benefit the client. But there comes a point where the changes might be viewed as unusual or unreasonable by the landlord because this attorney may not have a lot of experience in real estate or in leases or in dental. Right. And so the changes, they're pushing for, the pushing too hard and the landlord may say, okay, this is too much. They're asking for wages. Unreasonable. I'm just going to move away from this tenant because I got two other people, two other dentists that want this place as well. I'm going to go to the next one and. And we can lose the deal. Zealous. I guess efforts in changing it into the favor of the dentist can also go too far and it could cause us to lose the deal. And that is the benefit where when you work with someone with experience, that attorney understands the limits of what's reasonable and what's not reasonable and will then play with inside of those limits to try to get the best deal possible. Have you seen that happen as well? Yeah. I think there's a point of being too aggressive when you're marking up a lease and you also have to know who the landlord is. This a big real estate investment trust and they manage, you know, a thousand malls and big complexes across the U.S. you're. It's going to be much more difficult to get headway with those types of things. They're going to be much slower. Or is this a small mom and pop and this is their only small strip mall. So you have to understand who the landlord is. But we at Eskow Law Group, we really focus on practical solutions. What's Important to our client. What are the tripwires and let's find practical solutions there. And I'm not a fan of wasting a whole bunch of time on 10, 11, 12 revisions just passing things back and forth. After two or three, narrow down the issues, then you get on the phone, you talk through, hey, this is the concern my client has. What's the landlord's position? Let's find something. I think every problem is not but you can't kill the deal coming out of the gates being too aggressive and marking up too aggressive. Right. And another use for an attorney in the startup process. But this really goes for any dentist. Any owner is. Sometimes we have to send a demand letter to someone. For example, the landlord isn't following something in the lease. They were going to give us 10 improvement allowance by a certain date. We still haven't gotten it. Or they were going to, you know, build a demising wall and they're taking too long and they have not doing it or may a patient is doing something that is very threatening and maybe illegal and we've got to send them a letter saying stop or else I'm elevating this to the next legal level. Right? Yeah. So an attorney is always that person as well. Where we, we send. It's called a demand letter but it's basically an official letter from the attorney saying guys, here's the issue we have and if we don't resolve it, then here's the next step we're taking. Right? Yeah. Okay, so let's move away from the startup side and now let's talk about, you know, I want to purchase a practice. I'm a dentist, I there's a practice apparent purchase. What are some of the things we need to think about, legally speaking when it comes to that practice purchase. Great question. I think first off the earlier you can involve an attorney on your team. You may have a broker involved already, you may have an accountant or financial advisor. If you can bring your attorney in free loi, that's a little bit our preference honestly is to get involved at that stage. And the reason being is that once that loi is signed, it's really hard to walk back from any of those business terms that you agreed to. So brokers do a great job with the Lois, but we're always happy to put eyes on it and just ask a few additional questions. What if. Did you think about this? Do you want to put in a provision for this? Yeah. I think the other thing to realize with the purchase agreement is that whether you're buying or Selling the process will likely be much more complex than you anticipated, take more time than you anticipated and be more frustrating than you anticipate. So we try really to communicate very effectively and openly with our clients to help minimize that anxiety, help them understand complex legal issues in the documents and then just be there as a sounding board through the, through the process. Disclosure schedules, providing all the stuff that the buyer is going to ask you for can be very frustrating. It's not as simple as just doing the loi and being done. Okay, so there's several layers here that we need to dive into. So first of all, again, for those of you all that, that don't know, loi stands for letter of intent and what that really is is a non binding document, something that, that doesn't have to be in place. We're not like signing away our life. It's just a document, it's on paper. We're saying, okay, we think we're going to agree to these main things. And in that loi for lease, you know, it's like, okay, what's the rent? How much ti monies are we getting back? You know, are we getting any free rent? How big is the space in a practice purchase? There's other things that fall in that loi. And Eric, you said we prefer to be involved before that loi is signed. Because once that loi is signed, it's really hard after the fact to go back to those things we agreed to and to change them because it can permanently damage and destroy the relationship of the parties and kill the entire deal because someone's going to feel like someone else is trying to screw them over because you agreed to this and now you're, now you're going back back and, and, and you know, you lied to me, right? So on that loi, what are some things that you as an attorney advising a buyer or advising a seller are thinking about having on that loi that if you weren't involved you'd be worried, maybe wouldn't be there, wouldn't be handled properly. Yeah, I like seeing obviously your purchase price and your structure has to be in there and very clear if you're contemplating an earnout, that should be in there. And it's not always restrictive covenants are a very sensitive issue. So I prefer dealing with those in the loi initially if it's not in there. Typically what you get is the buyer putting into the asset purchase agreement a very aggressive restrictive covenant. 25 miles, 100 miles, when maybe that's not market for that geographic area. I'm down here in South Florida in Miami, if you put in a 25 mile non compete that's a 4 hour commute sometimes. So it's just not practical. So best to deal with that in so there's no surprises. And then I think ongoing or transitional services. Is the seller going to stay on as an employee long term, five years maybe. If they're selling into a DSO it may be as short of six months. If it's just a private doctor to Dr. Sale or is it just a simple transition services agreement and the doctor's not expected to stay on and they'll be available for help. So that kind of post close assistance and transition is something very important. You mentioned the phrase earn out and just for our listeners that don't understand what that is, that is where a portion of the purchase price the seller is going to get after the fact that if the practice is able to become a certain size or stay a certain size. Did I say that correctly? Yeah, I think that's exactly right. Yeah. And I had something, you know, very early on in my career when I, when I sold to a dso I had what's what I called an earn up. So I got a fair price on day one. But because my prices were growing so fast I said well look, I don't just deserve a fair price for the practice as it is right now, it's growing so fast it, I deserve more because it's going to be so much bigger next year. And so they said okay, we agree, we'll give you an earn up if it goes beyond this number, we're going to give you extra money. Right. And it did. And I earned up, I earned more money on that. You know these, these issues, does the seller stay on or not or you know, restrictive covenant or not compete or even does the seller carry part of the note or not like all these things have a proper way of doing it to reduce the risk of both part. And there's also like you had mentioned you could have trip wires in this thing that as a dentist never have done it before. We may not see the wire, see that thin little wire that can really cause this whole thing to fall down after the fact. So I, what I'm hearing you say is those trip wires can start happening on the LOI stage or we may forget to put incredibly important things at the LOI stage. You also mentioned, you know, the dentist may already have a practice broker. Both the seller and the buyer. Right. May may be represented in some way, hopefully not by the same person. But the problem with the broker is that the broker's incentivized to make the deal happen, whether it's good or bad for a particular party. They typically benefit as a broker when the sale happens. So a broker might sugarcoat things, they might move things forward, maybe make it seem better than it is, turned a blind eye to this or that or the other. In other words, they're not always aligned with what's in the best interest interests of particularly the buyer. Right. Whereas I feel like an attorney kind of earns their keep by protecting the person that they represent. They're not getting paid because a deal happens. They're getting paid by inserting protections. Is that how you see it? Yeah, I agree. And I think the relationship with brokers, it runs the gamut. First off, our duties and our obligations run only to the client. I have a fiduciary duty to look out for my client's best interest, advocate the way that they want me to advocate and do what's best for them. And I often, you know, when there's a broker involved, they are incentivized to get the deals closed. And some of them are very active. What's the status of the deal document? Where are you? And I'm careful where that relationship ended. I won't always include them with conversations with the client because I have to have that true, unvarnished communication with the client. What do they want? What's my legal advice to them? And then I'll communicate after the fact to the broker to say, hey, we push documents back over. This is the status, this is where we are. But I am very careful to protect that attorney client relationship. And hopefully all lawyers are. I think the brokers though, and I, I work with some great brokers in my area and some of them are very helpful. When you do get a sticking point on a business term that was negotiated maybe before and it's an loi. Whatever reason there needs to be a retrade or there's a hot button topic for the client. The broker is a great tool to use to go to the, to the other party, say, hey, this is the business issue. And they can, they can be an extra advocate for the client. So they, they are great. They can be helpful, but they do have a different relationship with the, with the clients than, than the attorney. Yeah. And you said this process can be more frustrating than expected, take longer than planned for. Right. And there's something called deal fatigue, isn't there? Where, you know, the back and forth and the back of it, you only have the expectations to sell this or to buy it, and we're excited and, and then we get into the details and we're, we're financials and oh my gosh, the financials weren't accurate. And then we're talking about, you know, oh, no, we can't assign the lease to the buyer. And we got to now negotiate a personal guarantee that has to stay. And like, you know, oh, the, the seller wants to carry part of the note at this interest rate, suddenly, oh, my Lord, there's a lot we're juggling here. And then sometimes, right, Sometimes when one party is exhausted from the process and they just want it to go through, sometimes the other party pushes hard on something that may not even be fair, and they win because the first party is just exhausted from the process. And that is, in essence, deal fatigue. Right? Do you see that? I saw it two weeks ago in a deal. And the deal fatigue doesn't necessarily have to come over. It can just be an inundation of requests for information and documents. And the seller is trying to run a practice and treat his patients. He's got a family when he comes home, and he's got a list of 240 items that the buyer has asked to produce. And a lot of times those are items that don't even exist. Maybe technically they should. But a small dentist who's been in operation for 5, 10 years doesn't know where their minute book is. It hasn't been great at keeping it up, and now he's sweating it that he has to go. You don't get it. So time kills deals and then inundation of. Just provide us all this information, whether it's valuable and material and important or not. The buyer wants it and you have to provide it. And that just wears people down. So, yeah, it's a very real issue and you need to balance that. I don't like to see deals. I think for a private deal, our target goal line is 45 to 60 days. And we communicate that, manage that expectation with the client upfront. A DSO deal, 60 to 90 days. If you're going beyond that, then you have to really be cognizant of deal fatigue and try to manage that. So where I see deal fatigue happening bigger and bigger and bigger is the higher up you go. So when a private dentist sells to another private dentist, there may not be a lot of deal fatigue, or what you said is called retrading, in other words, changing the terms at the last minute to something new. Then when you sell to a dso, they're Requesting more information than normal. And you can start getting really worn out in the process of finding your 218 documents and, and their deal fatigue sets in and they can ask to retrade things at the very last minute and sometimes that's their strategy. But you go above dso, selling to a DSO and into the world of selling to investors and private equity groups. Not only do they want all those documents, they want a completely audited set of financials from an accounting firm. They choo going to cost $20,000 to get at the, the cost of the seller, you know, and I mean they're trading deal points that, that are really impactful to people's lives and to the day to day and it, it can get a little brutal. The reason why I'm bringing this up, I've personally experienced this. The reason why I'm bringing it up is because the people that are properly represented, they have a lot of this bullshit thrown out. So like when your client gets a request for 218 documents, you get to be there and filter through this and communicate back and say this is unreasonable, these things don't apply. We're, we're redlining this off. No, absolutely not. And you get that way down before the client kind of has to carry the burden of this request on their shoulders and do something about that, right? Yeah. And we try to get out ahead of it, ask for and have a meeting with our client. What documents are we going to need to get this deal done? And we have a meeting with them before so hopefully we can keep that all off of their plate. Like we know we're going to need their driver's license. We know we need to ask what kind of entity do they have their operating agreement, what about their associate agreements? Are they assignable? We try to gather as much of that upfront as possible so that they're not inundated and we can, we can help alleviate those unnecessary and unruly requests when we can. Yeah. I also sometimes, like you mentioned, is the lease or is an associate agreement, are those things assignable? What that means for our listeners is let's say I own a practice and you know, I've been renting it from a shopping mall and I want to sell it, but my lease says the new owner of my practice, they don't have to approve them as the tenant. So in other words, they could keep me and my name and my ass personally on the hook for rent even though I've sold the practice to someone else and I don't own the practice anymore. Anymore. Right. And so sometimes that is one of the tripwires. And if it can't be solved with the initial negotiations of the lease, which is where it should have happened, sometimes we've got to create some very creative. If this, then that, like little side letters of things like, you know, okay, I'm still personally guaranteeing the rent for a practice I no longer own. But if you don't pay the rent, then I get to do this or have that. That. Right. Have you seen that kind of creativity in play before? Yeah, very much so. And I've even seen the lease assignment provisions in agreements actually cause a tripwire in the lease that the lease can. The landlord has a right to terminate the lease if you try to assign the lease or if you sell your practice. So they don't want to even keep going, but they have the leverage to just terminate the lease. So you need to catch that up front in early. But where it is assignable and the landlord agrees to move the lease to the buyer, they usually will always want to keep the initial tenant and the personal guarantor on the lease. And that can go on for infinity because they could just keep adding extensions and then the lease is assigned again and they just keep adding and stacking all these tenants. It's really important to try to get off of that if you can. If your attorney put the provisions in right the first time or negotiates at the assignment. If not, though, what you can build into your asset purchase agreement is an indemnity clause to say, listen, in the event the tenant or the seller is not let off of that lease, then the buyer will indemnify him from any harm through that guarantee that he doesn't come off of. Or you could do the same thing in a separate side letter, but you have to get some verbiage in there for that indemnity to where the buyer or the assignee, the person who's taking over the lease, actually comes back and makes the person. Yeah. So another way of saying that is if I sold my practice to someone who quit paying rent, but the landlord's now coming after me, the old owner, for rent, I have to be made whole again from the guy that bought my practice, and I now have the legal right to be made whole. And of course, if they don't make me whole, I get to sue them. To try to collect that. Is that what you meant? Yeah, that's right. And collectibility is a whole another issue. Right. Obviously, that's the concept. And that indemnity paperwork you go through the trial Process. And the judge said, yeah, this is a default and you're owed the money to whatever you had to pay out to the landlord. You get that back. Okay, let's shift gears a little bit to an associate agreement. I opened my startup, I'm now a few years in and we've been booming and growing and I want to bring on an associate and I, I need to find someone and ultimately I need to hire them and I'm going to have them sign an agreement. Can you walk me through what that's like for people and some of the things you've seen? Yeah, we like to, to get again the business points. What are you planning to pay somebody from a compensation standpoint? Are they paid on collections or production? What's the percentage? Is there a base salary? Maybe a draw if they're new and starting out. There's lots of complicated structures, but we want to talk through that with the client. How do you want to pay this associate you want to hire? What's going to be enough to incentivize them? We want to talk about the benefits. So vacation, continuing education, is there a stipend? Who's paying for the associate's malpractice insurance? Then we also want to talk about termination rights. So is this a, if it's a five year contract, can the associate terminate without cause? Maybe they can terminate without cause. After the initial term, what are the triggers for the employer to terminate those you want to get all ironed out. And then again, I mentioned this before in the other documents and they're just about, in every document, dentist science. But the restrictive covenants, how do you, as the owner of the practice, protect your patient base and the goodwill that you've built over the first couple of years? If that associate agreement doesn't work out and the associate leaves, you don't want him setting up, you know, treating your patients for a year, getting that personal relationship and then he sets up process. So knowing what the geographic and time restrictions that are applicable in your state or where is an important thing. Because you want to have those restrictive covenants in place. And I think the last area that I typically see is sometimes a liquidated damages provision. So what happens if the associate violates those restrictive covenants? He hires one of your employees or solicits a patient. What's the liquidated damages provision? And we can get into that and how those work if you want. Yeah, and so I think there's been some changes on non competes. Right. And there's this kind of thought out there that says, are Non competes, even enforceable. But when you add a liquidated damages provision, that changes the aspect of the non compete, so, so what that means for our listeners is look, you're not allowed, if you're my associate and you leave for any reason for the next whatever, two years, you can't practice within whatever, three miles from my location. Right, that might be what it says. But if you do violate that, if you decide to practice, because I'm not actually preventing you from having a living like making a living is, if you do violate that, then you're going to owe me money in exchange for violating that right, the liquidated damages, you're going to owe me money. So do those damages help make the non compete more enforceable? I think it makes them more easily enforceable. And by that I mean if you're going to sue somebody or violating a non compete or restrictive covenant, solicitation, you're going to have to prove in front of a judge what your actual damages are. Yeah, and that's a very hard thing to do. But if you have it tied to a liquidated damages provision to say let's use non solicitation, for example, you solicit a patient and the liquidated damages to that is $1,000 for every patient. I'm not saying that you can't take them and patients have free choice of where they get their dental treatment. But if you solicit my patient when you leave, you owe me a thousand dollars. That's very easy. You don't have to prove your damages in a court of law. And there's some very specific language to make liquidated damages enforceable. So your attorney should be smart with that. With regards to non competes, there was a point last year, maybe a year and a half ago where people thought that the sec, the Federal Communications Commission was going to put in ftc, sorry, Federal Trade Commission was going to put in place a rule banning non competes. That did not succeed and it was so that that's not an issue. And then, so non competes are a state by state, they're not allowed in some states. Most states do that. So on back on the liquidated damages provision. So what we're really saying here is, Judge, look, I don't have to prove my damages to the dollar because they went and hired my treatment coordinator because that would be really hard. Like they hired my treatment coordinator. So how much money did I lose? That would be very difficult to prove. This provision says we're not going to have to prove in the future. We both the associate and the owner Dentist. We both agree that if this were to occur in the future, we both agree that the damages are that much $15,000 for soliciting an employee. We both agree that. So now that doesn't have to be proven. So it's not a matter of law now. We don't have to, you know, or fact, like that's what it is. So this is, you know, and I don't. I don't know. Of course, we've got listeners of all levels of, you know, experience. Well, the legal side, but these are the things that most of us will never be faced having to deal with. But some of us will win or lose because of this, right? So it's like most of us won't end up in front of a judge, but some of us will. Most of us won't end up with a threat, but some of us will. Most of us won't have an associate dentist completely try to screw us over by setting up shop across the street, but some of us will. And we just don't know. We don't. It's Russian roulette. We don't know if we're going to get the bullet or not. So we better be protected up front. Otherwise it would be almost reckless of us to not to do it. Right. And you don't want to lose your leverage because it's not in the document. Sometimes just having it in the documents is your leverage to avoid having to go to court or having to go to mediation. It's black and white. Yeah. And on the flip side, Eric, you might be representing an associate dentist who wants to join a practice. And the associate agreement they're being given is really rough and hard to the favor of the owner and is very risky for the associate dentist. Right. So you have had to play both sides of this coin, is that correct? We do. We represent both sides. Obviously, after conflicts checks, we make sure there's no. No conflicts. But being able to do that, I think makes us a better firm and better attorneys because we know the arguments that we're going to see on both sides because we've made them on both sides. Sides, yeah. And when you know both sides, when you're in a tricky spot, a difficult spot where maybe people are emotional about an issue or something is just a really hurdle you've got. You've seen it from both sides, and it makes you more apt to be able to find an amical solution in the middle. Well, I'll tell you when things really get emotional is when you've got a partnership. Right. You've got these two dentists who went to school together, and they've always dreamed of having a practice together and, you know, and so forth so early in their career. They were a real perfect fit it and they just end up as partners. But, you know, all it takes is marrying the wrong spouse and suddenly, you know, that partnership may not even work anymore or, you know, who knows what, you know, life changes, people over time and situations change. And without any ill intent, sometimes the partnership doesn't work out. What are some strategies around kind of creating an agreement that will, you know, last and do what it's supposed to do and give us some outs if that's ever needed. What, what is that like? Like 50, 50 partnerships are really tough, and I'm not necessarily a fan of them. I'd prefer to see a 51, 49, something to that effect. When you have two partners that are equal, owners that have equal voice, that's where you get in a situation. Just you just described, what do we do? Are we going to buy a new practice? We're going to hire a new associate? And they just can't disagree that deadlock can distinguish business. One, the business isn't progressing and growing and moving forward. But two, you've got two owners now who are probably working in the practice. They can't stand each other. And it can be answers throughout. All the associates see it, front desk people see it. Nobody's happy to go to work. So you really, really need to try to think that people don't like this. Right? Because in the honeymoon phase, everything's great and nothing. We're not going to have problem. We won't be that couple. But you need your attorney to think catastrophic. What are we going to do to get out of this marriage, this partnership, if things do go bad? Yes, we love each other now maybe in 10 years, we don't like each other so much. What's the exit step? And you need to think critically about that in the beginning. And there's a few solutions. One is, you know, have that different percentage. So somebody always has a trump card. And in the vote, you could split up duties and responsibilities to where maybe on the business decisions, Person A has the deference and they make all the calls if there's a disagreement. And then the other person's on clinical in the protocols and what labs and vendors we use. So it's a divide and conquer and you don't have a conflict. There are also buy sell provisions that you can put into place to say, listen, we agree this isn't Working out, I'm going to offer to buy you at this price and then the other person can say no, I'm going to flip it and I'm going to buy you at that price or high hire. There are some creative, creative solutions, but I think the key is think about those when you're doing your partnership agreement because you don't want to deal with it. When the relationship goes bad and you need an exit and the agreement doesn't consider. You know, I've, I tell people I get asked frequently about partnerships and should, should they do one and you know, this is coming from someone that's done them myself. I'm currently, I currently have partners but what I tell people is there's, the way I look at it is at least is there's two reasons that might make a partnership worth the risk. One is that I absolutely need their money or their credit to do this business right. So it's almost like they're an investor, right? They're a partner as the investor, they bring the access to money. Like that's one reason to do it. If I can't own a practice without someone co signing the note, like I might be willing to have a partner because that's the only way I can buy it, right? So there's one reason reason. The other reason is if they bring expertise that I can't afford to hire. So something about their expertise in the business is something that I can't afford to actually pay for. Might be another reason to have a partner. Both of those are basically financial reasons. What I don't agree with is we work well together or you know, my best friend or you know that that is not probably going to work out financially and it's just too much risk. Now you mentioned this buy sell provision. I think this is just a very genius way of dealing with, you know, the breakup. And I'm going to say to my words and please correct me if I got something wrong, but this is where a situation happens where partners, they got to break up. It's not going to work out. One person is like, I'm done, I've had it. And so now how do they break up? How do we put a value on that? Like how much do they buy someone out? What if the person doesn't want to sell? You know, there's a lot of things that could happen and this is what that buy sell provision says. It says one party will offer to buy out the other party, but the other party can use the same valuation and flip it and buy them out. Right. So if me and Eric are partners and we've got a business that's worth, I'm just going to make something up. A million dollars. It's worth a million dollars. If I go to Eric and say I want to buy you out for 500 grand, Eric would be like, well, that's a really low value. You know what, I'll buy you for 500 grand. Done. And then I just sold for 500 grand. So I'm not going to go to Eric with, with a low ball offer because I know that he could buy me for price. If I go to Eric and say I'm going to buy you out for 1.1 million, Eric is like, that's only worth one. I think I'm going to take that offer and now I get the practice. So it's a way to kind of keep the offer honest and to have a situation where, you know, the person that's going to in essence overpay potentially is going to be the one to win the buy. Right. Or actually, you know, own in the end. And that's a very simple but I think innovative way at dealing with the valuation issue when it comes to this kind of breakup. Did I say that correctly? I think it's an excellent summary. It forces a fair valuation that. To who aren't necessarily playing nicely forced to reckon with. So yeah, I think it's a great. So if we, if we kind of move forward from partnerships now to kind of. This thought of something you mentioned, DSO structure real quick for our listeners. Gosh, without. We don't have enough time to teach this whole thing. But basically in a DSO structure, you have an entity or a business that owns and runs all the business assets. This could be the equipment, the lease, the name and the marketing and the accounting and things like that. And then you've got another entity that's clinically based, that in essence owns the patient charts. And that clinical entity, always by law, on almost every state, that clinical entity has to be owned by a licensed dentist. In that state, we normal dentists think it's all the same. I own a PLLC and it owns my equipment and owns the charts and I'm the dentist and it's fine. But if we take a dental practice and split it into these two categories, clinical assets and patients, and then business assets and services, we end up forming the clinical entity, the PLLC that has to be owned by a dentist and then the business entity, what we call a DSO or dental support organization, the dso. And that is a strategy that multi location Groups need to use. There's a lot of reasons why. Has to do with valuation, it has to do with ease of funding and ease of expansion. Has to do with protections. It has to do with non dentist investors coming in and having financial participation in the business of dentistry even though they're not a licensed dentist. There's a lot of reasons why. Why. All right, but. And we don't have time to go over that in these last few minutes of this podcast episode. But now Eric, to you. When's the right time for an owner dentist or I guess not, but when's the right time for an owner dentist to say I think I need to speak to an attorney group about forming a DSO structure because I'm about to do this or that. When does that happen? I think there are two primary One is if you ever back to your comment earlier where you need a, if that partner is not a licensed dentist, so they're a non dentist, you want them to have an ownership stake in your, in your practice, you have to form a DSO structure and that would be one trigger. The other I think big one would be if you're looking to do some sort of, I'm going to say estate planning, but it's not really estate planning, but you have a dental practice or multi practice and you want to know that that practice can survive and provide for your family and your dependents. Maybe you have a family member who's running and managing it and you don't want them just to be sold out in estate sale. You could set up a DSO structure to provide for the continuity of the family. As you said, there's lots of other reasons, but I'd say in those two reasons. So another way of saying is, and this is going to sound a little morbid I guess, but let's say I'm a practicing dentist and my, my son is running the office, he's not a dentist and I get diagnosed with prostate cancer and you know, I'm worried about that and I've got multiple associates and this is a thriving business and I, if I pass away, I want my son to be able to continue and this is the livelihood of him and his family. I could set, I could transition my practice to a DSO structure and if I were to pass away, my son can continue managing and growing and profiting from the business side of this practice. In essence, most draw the profit from it and not be forced to just fire it on the cheap in a fire sale. But after I pass away. Right, Exactly. And there's also this component that says I have one or more locations. And let's say I've got four locations and I'm wanting to grow more. And I got a bank loan with this one and then I, I funded that one myself and I got a partner with that one over here. And now I want to get this one funded. The bank wants to like refinance all the debt. And like, it's getting complicated. I'm cross collateralized entities and I'm personally guaranteed on half of this stuff. And man, can this be easier. And I think with a DSO structure, all the value of the entire organization rests in kind of what you might call the holding company, the assets, the, the business company. And so if we were to get loans on the dso, the big, the company at the top, it's much easier to get funding to keep expanding to additional locations. Right. As opposed to what could be a spider web of, of a situation with lending across regular entities like clinical pllc, entities that have no business structure. Did I say that correctly, Eric? Yeah, I think that's right. And I think you're getting into an area where a lot of people don't necessarily look at their loan documents very closely because again, you get these form loans from the banks and they're heavy, long, and there's six point fonts. But understanding those loan documents now, don't expect the bank to change them because they won't. There's form and they won't. But you have to understand how when they give you a loan, are they going to collateralize your other practice? If you're buying the building, are they now going to collateralize the practice and you're hooked. So you really have to understand all linked together. And if you can plan a bit and organize that debt in a reasonable fashion through maybe a DSO or some other structure, do that because you don't want to do it. Your fifth practice and now you're stuck. So I think to sum this up, and of course some people may, like, you know, they may be daydreaming right now because the legalese to them isn't familiar. And you know, this is not as exciting as talking about, I don't know, teeth or money. But this is sometimes the difference between a million and 10 million between selling the practice and not. This could be the difference between having a lawsuit, not having a lawsuit, or being able to get funding to add more locations or not. Like this is where a big part of the business game lies in preparing for and structuring our risks and our entities, the legal component of our career in a healthy way. And you know, we weren't taught this stuff in dental school. We weren't this. Taught this stuff outside. There's no CE place we go to to get a mastery of dental legal ease. Like. Like it doesn't exist. So we rely on just this random attorney here or there that we've been kind of referred to by some colleague of ours. It's not even. And qualified to even refer anyone to us. Right. And that's who we end up going with. And they may or may not understand any of this either. And it's just. It's just piecemeal across dentistry. So what I'm hoping to do with this episode is to kind of bring first a foundational level of knowledge about legal and the different situations we find ourselves in and what to think about. But more so, I really want you, the listeners, to kind of walk away from this episode knowing that there's a big strategic play that we have to make from the legal standpoint in every one of these pivotal moments of our career. It's not just a financial play, it's not just a clinical play or a lifestyle play. There's a legal strategy to this as well. So having an attorney on our team in these important moments as early as possible is kind of required. Otherwise we are just being reckless about our career or reckless about our situation. Eric, I'm going to pass it to you for one last little thoughts or anything else you'd like to say. But before I do that, I just want to thank you for kind of opening up about this topic and letting me ask anything I want to ask and exposing the listeners to what this entails and what it's like and what to think about. Now, do you have any last little bit you want to say? No. Thanks for having me. Happy to be a resource for any of your listeners. We can get my contact information out there. Happy to take a phone call. Okay. So Eric Masson from Eskow Law Group. By the way, sky is Eskow. I've known Eric for quite a while. Eric's been my own personal attorney as well, dealt with plenty of business dealings and I've had wonderful experience with him and I brought him on because I. I know the expertise he's got and the experiences he's got and. And I've been through some crazy moments and he's been there to help and protect me. So, Eric, thank you so much for joining us listeners. I hope this was valuable to you. I hope this kind of opened your eye up to another part, a component of being a dental CEO and I look forward to my next episode with you guys. Please subscribe. Thank you so much. This is the Dental CEO Podcast.