Legally, a partnership is simply defined as an agreement between two or more individuals. It does not mean that you are rich, and it does not always mean that you are in control; everything depends on the profitability of the GP practice and the relationship with the other partners, as set out in the Partnership Agreement (formally called Deed of Partnership).
Advantages of GP partnerships
- You part-own the business, which means that you can have a say on how it is run. How much your voice counts largely depends on the percentage of the overall business you represent as an individual.
- You share the profits of the practice with the other partners. If profits go up, so does your share. Partners working in a successful practice can therefore hope to gain a substantial income.
- You have stability of employment. Essentially, the business is partially yours, so unless you really mess things up and get ejected by the other partners, the chance is that you will have a job for life. This means that you can get your teeth into long term projects and can also enjoy more continuity of care with patients. Staying in a business for a long time can give you a real sense of achievement. It also makes things a lot easier when it comes to plannng your life such as schooling, house purchase, etc.
- You can go an play golf as much as you want (provided the other partners agree) and use salaried staff to build the profits that will fund your lifestyle (don't think we're joking! Some partners do think this way!)
Disadvantages of GP partnerships
- If your income can go up with profits, you are also personally liable for any losses. So, if the practice is going down the drain you may well find that your savings or even your house are on the line. In fact any partner in isolation can be made responsible for the debts of the entire business. So for example, if the practice owes a lot of money to an external party and that all the partners apart from you have fled to Bolivia, then you could be sued individually for everyone else's debts.
- You get taxed on profits and not on your income. If you do not draw all the profits out of the practice (for example because you want to save it to develop a new service a few years later on or purchase some equipment) then you you still have to pay tax on any undrawn profits.
- A lot of time is taken up by management, accounting and other non-clinical considerations. Indeed many GP partners see very few patients. For some, the managerial side can be a real distraction and frustration. In some cases, this can also lead to clinical deskilling.
- Unless you join a GP Partnership in its infancy (i.e. when it isn't worth very much financially), joininig a partnership can be a costly business. If the partnership has decided to buy the building hosting the GP practice, you will also have to own part of the building and this may force you to make a property investment which could lead to losses. GP Partnerships are a huge financial commitment through which you are joined at the hips with others, and this makes it very difficult to leave it.
- You are responsible for hiring, firing and monitoring staff. In normal circumstances this is not an issue for most people. But being personally legally and financially responsible for the actions of others can be a daunting prospect.
- You have no employment rights. No sick pay, no holiday pay, no paid maternity. Being ill, pregnant or going on holiday simply means that less work gets down and therefore less income is taken. This in turns reduces profits and therefore your share (and that of the other partners since you are all sharing the same pot).
How much does a GP Partner earn?
Earnings for GP partners vary per practice. Profitability, and therefore partner earnings often depends on the make up of the local population and its needs, as well as how active and astute the partners are at developing their "business". On average, a GP partner takes home approximately £110,000. The lowest figure is in the South West (approx.£100,000) and the highest is in the East of England (£120,000).
Released figures also show that partners in practices where there are 6 partners or more earn approximately £20,000 less than partners in small practices.
How much does a Partnership cost?
The answer is: "It depends on a lot of factors".
One of the largest costs is the building itself. If the practice leases it premises then there are no capital costs associated with the building. However if the practice owns the building there will be most likely be a loan to finance the purchase and you will be ask to contribute towards it. If this is the case, you must make sure that the building has been properly valued and you might in fact need to commission your own valuation to ensure that you are not investing into a property that will make you lose money from the outset. Because loans are typically over a period of 25 years, you must make sure that you fully aware of the way interest is being charged and particularly whether the rate is fixed or variable.
Another sizeable portion of the cost is your contribution to the working capital of the practice. Essentially the current partnership has money in the bank account, money was spent to buy stock, furniture and other fixtures, and since you will be sharing everything, you need to buy your share of it. Typically this represents a sum of approximately £6,000, but a dispensing practice could have a much higher working capital. Enquire also as to whether you will be required to provide the full amount upfront or whether you will be allowed to build up to it. This could make a significant difference to your cashflow.
Different partnerships treat their newly recruited partner in different ways. Some consider the new partner a full partner from day one, whilst others consider that the new partner is likely to contribute less in his/her early years and therefore allocate them a lower share of the profits at the start. Over a period which can last up to 3 years, the new partner then slowly increases his share of the business to reach parity i.e. to be treated as a full partner. For example, a partnership may only offer you 80%of your normally expected full share in year 1, 85% in year 2 and 90% in year 3 and 100 % thereafter. This is an important issue to consider when you apply for a partnership, because this will dictate your income for the first 3 years.