Some private practice employment agreements allow for the possibility of acquiring an ownership stake in the practice. You should think carefully about whether you really want to be an owner. Does being an owner provide a meaningful difference in compensation, including prospects for sharing in the profits of the business? How much say will you have in running the practice? Do you want to have a say? How much will it cost you to buy into the practice? Is the cost reasonable given what you believe are the compensation prospects down the road as an owner? Do you have to take on some liabilities or obligations as a partner or owner and do you want those liabilities? What exactly will your role be as co-owner? Is there a small clique in place with ultimate control? Will you be able to influence decisions? How important is that to you?
You want to avoid a situation in which you work hard under the assumption that an ownership opportunity will be made available, only to have that taken away from you. Look at the group’s current ownership structure. Are all the owners near retirement age? An absence of middle-aged owners may signal that the existing owners don’t like to share. They may create certain expectations to get you to join, and then change the requirements later on, denying you an ownership path. I.e., they will move the goalposts on you. Any information exchanges regarding ownership should be put in writing to avoid misunderstandings.
The practice likely won’t guarantee you an ownership path. Instead, it will allow you to be considered for ownership if you meet certain requirements and triggers. The contractual trigger to ownership may be based on time (seniority) and or revenue raised (for example, you may have to prove you can bring in a million dollars of revenue a year). Another trigger may be a specified increase in the entire practice’s revenues.
If you do become an owner is there an exit mechanism? Is there a process in place dictating how your equity stake is to be returned to the remaining owners? How much do you get for your share? Will you still be responsible for certain liabilities or obligations? Will you have to agree to a non-compete in the event you leave and how onerous will that be? Can you be ousted and forced to leave, and if so, what severance would you be entitled to?
As a junior employee you may not care about the answers to these questions, but several years later you may regret accepting the terms in the original contract. This is why it can be very helpful to run the original contract by a competent attorney before you sign it!