Here's how my partnership agreement works.
My partner and I basically look at the income generation of the practice as three independent sources, mine, his, and our hygenists. Our practice is what is termed a Limited Liability Corporation (LLC), and myself, my partners, and all of our staff are employees of this corporation. Being a LLC as it name implies limits out own personal financial liability in specific instances, plus it affords us certain other tax advanatges. My partner and I are equal partners(and the only members) in our LLC's board of directors.
What we do is receive a weekly paycheck from our corporation. Quarterly we take a look at our 3 profit sources. We determine who pays what percentage of the overhead based on our own personal productions over that quarter, so basically put, if i took a 2 week vacation last quarter and my partner took no time off and between our doctors total production he did 60% of the work and I did 40% of the work, then he pays 60% of the overhead(hygenists salaries excluded) and I pay 40%. We then divide out the quarterly profits from collections between us on the same percentage as overhead from that quarter.
We then look at the hygiene collections from that quarter, subtract their overhead (salaries, benefits, supplies, etc), and then split the remaining profit 50/50. We do have wording in our agreement, that if one partner produces much more than the other partner in that quarter(more than 2/3rds of the production), that the hygiene split will be based on the same percentage as the dentist production split.
My buy-in is financed via my hygiene income, so what happens is that after we split the hygiene profits, I then defer a portion of my hygiene income to my partner until I have completely paid off our negotiated buy in price. In doing this version of internal finacing, I am able to buy my percentage of the practice without a bank loan, since my partner is basically asking as the bank(and yes my buy in price does included interest).
I could have also gone down to the bank and taken out a business loan and paid my partner 1 lump sum and then paid the bank back over the same amount of time that I'm paying back my partner, but after looking at the deal from all angles and talking with not only tax attorneys, but accountants and practice transition attorneys, it made the most amount of financial sense for my partner and I do finance the deal internally.
What you'll find is that there are literally hundreds of ways to do a buy-in, and what is often the largest part of the buy-in agreement isn't the buy-in portion, but what happens down the road in a buy-out situation. I.E. a partner dies, or a "dental divorce"(partners split) happens, or a partner retires, etc.
