Pharmacy Partnerships: The Basics
For many young pharmacists, the most common form of entry into business ownership is through a partnership. Among the pharmacy industry this is a common progression path and can even be used as a tool to establish a successor for pharmacy owners who are looking to retire soon. We cover off the basics of pharmacy partnerships and what exactly it means to enter into one.
Basically, a partnership allows two individuals, trusts, or companies to go into business together. Through the use of a partnership agreement, the two parties agree on terms including:
- Shares of profits and losses
- Duties and responsibilities
- Decision making and dispute resolution
- The terms surrounding either party’s decision to exit the partnership
There are a lot of benefits to this business structure, entering into this agreement is low cost compared to other models as there is no fee to establish the partnership. The partnership agreement can be flexible in meeting the needs of each partner and can simplify the sharing of revenue and expenses.
Also, it allows two pharmacists with different areas of expertise to come together to run a successful business. Not all partners have to be equal in their contribution of time, money, and skills – meaning that each partner can focus on their strengths. It is important to make sure that these roles and contributes are clearly defined, otherwise a perception of unequal contribution could lead to tension.
Despite all of the benefits, there are some things to be aware of, including the level of liability each partner is exposed to. In a partnership there is no separate legal entity resulting in unlimited liability, meaning that those involved are personally liable for any debts incurred within the agreement. This can put personal assets such as houses and vehicles at risk if things were to go wrong.
Before entering into a partnership, it is important to understand each other’s goals and long-term plans. Making joint decisions can be difficult so it is best that both partners vision for the pharmacy are aligned to avoid conflict down the line. Discussing philosophies on various topics can help ensure this, including:
- What does each party want to achieve through the partnership?
- What does each partner expect of the other?
- Where do you see the business in 5 years’ time?
- How do you feel about risk taking?
- How do you handle conflict?
- What is your employee management style (if you have other employees)?
If you are considering entering into a pharmacy partnership or inviting a new partner into your existing sole trader business, the first step is to get professional guidance on structuring a partnership agreement. From there, discuss the terms listed above and see if the arrangement will be a good fit for both parties before proceeding.