The Earn-In Model: A New Path to Dental Practice Ownership

For a long time, the path to owning a dental practice followed a familiar script. You graduate, associate for a few years, save up capital, and eventually buy in or start your own practice. The financial barrier could be a hurdle, but the model was straightforward. But now, more and more often, we’re seeing a new pathway. 

In a recent episode of Office Hours for Practice Owners, Bill Neumann, co-founder and CEO of Group Dentistry Now, described a shift he is seeing across emerging dental groups. For young dentists, a buy-in might feel out of reach. To address associate turnover and attract younger clinicians, some groups are offering what amounts to an earn-in model, where associates can build meaningful ownership stakes without writing a check at the outset.

In this article, we break down how the earn-in model works.

Watch the full episode below to hear Bill’s commentary on the earn-in model and other DSO trends.

https://www.youtube.com/watch?v=ETMXHi0SWvU

What Is the Earn-In Model?

An earn-in is an ownership structure where an associate accumulates equity over time. As opposed to a buy-in, an earn-in is based on defined performance or tenure milestones (rather than purchasing an ownership stake outright at the start.)

The mechanics vary by agreement, but the core idea is consistent: the associate contributes value to the practice, and that contribution is recognized through a growing ownership interest. At the end of the earn-in period, the associate holds a defined equity stake in the entity.

This is an attractive option for associates. The capital requirement to buy into a practice can be significant, particularly for doctors carrying student debt or early in their career. The earn-in removes that barrier and replaces it with a performance-based path.

There are clear benefits for group owners and DSOs as well. Associate turnover is one of the most persistent and costly challenges in group practice. Offering a credible pathway to ownership creates alignment and gives clinicians a reason to stay, perform, and invest in the practice's long-term success.

The Legal Framework Underneath an Earn-In

Because an earn-in arrangement addresses multiple factors: equity, structure, ownership and its transfer, and more. All of these need to be addressed in writing before the arrangement begins. 

Work with legal counsel to create an earn-in arrangement that clearly defines: 

The Operating Agreement 

Equity ownership in a dental practice or group practice entity is governed by an operating agreement (or “shareholder agreement”, depending upon entity type). Before any earn-in arrangement is put in place, the operating agreement needs to reflect how equity will be issued, at what intervals, based on what triggers, and what happens if the relationship ends before the earn-in is complete. A handshake or a vague promise is not a substitute for documented terms.

Vesting Schedules and Triggers

How does the associate actually earn the equity? Common structures include:

• Time-based vesting, where a percentage of the promised stake vests annually over a defined period

• Performance-based vesting, where equity is tied to production targets, collections, or other measurable metrics.

• Hybrid models combining both are also common.

  
  

Whatever the structure, the triggers need to be specific, measurable, and agreed upon in advance.

Valuation at the Time of Earn-In 

When structuring an earn-in model for an associate, choosing between a valuation locked at the outset versus one that increases over time requires balancing the owner's desire to capture growth against the associate's motivation to build it.

While locking the valuation early heavily incentivizes the associate to drive revenue without fear of a "success penalty," the exact legal mechanics of how those shares transfer must be handled with extreme care. If not structured properly, a shifting or deferred valuation can inadvertently trigger a severe tax trap, resulting in substantial "phantom income" where the associate owes immediate taxes on equity value they cannot yet cash out. This is something that should be carefully considered with both parties’ tax advisors.

What happens if the relationship ends early?

This is where earn-in arrangements most commonly result in disputes. If an associate leaves before completing the earn-in, what happens to the equity they have already accumulated? Is it forfeited? Bought out? Retained? The agreement needs to address voluntary departures, terminations with and without cause, disability, and death. Leaving these scenarios undefined is an invitation to litigation.

Restrictions on the Equity 

Minority ownership in a private dental or medical entity typically comes with restrictions. The associate may not be able to sell their interest freely, may be subject to a right of first refusal, or may have limited voting rights. These restrictions are not necessarily unreasonable, but the associate needs to understand them clearly before they begin working toward ownership.

What Associates Should Ask Before Agreeing

If you are an associate being offered an earn-in arrangement, the structure deserves the same level of scrutiny you would apply to any ownership transaction. A few questions worth asking:

• What entity am I earning into, and how is it structured? A stake in a single-practice location and a stake in a multi-location group holding company are very different things. Understanding what you are actually earning, and what rights that ownership carries, is foundational.

• How is the practice valued, and when? Keep in mind the above considerations about valuing the earn-in today or over time.  The last thing you want is a surprise tax bill.

• What are the buyout terms if I leave? Before you commit years of your career to earning into a practice, you should understand exactly what you would walk away with if the relationship does not work out.

• Is this documented in a binding agreement? Verbal commitments and informal understandings are not enforceable. If the earn-in terms are not reflected in a signed operating agreement or equity grant agreement, they are not real.

What Group Owners and DSOs Should Think Through Before Offering an Earn-In

If you are a group practice owner or emerging DSO considering an earn-in model to attract or retain associates, the legal infrastructure needs to be in place before you make the offer.

Issuing equity, even “contingent” equity, has tax implications for both the practice entity and the recipient. It affects your cap table, your existing operating agreement, and potentially your ability to bring in outside capital down the road. A well-structured earn-in program can be a powerful retention tool. A poorly documented one can create minority ownership disputes, tax complications, and friction in a future sale.

As Bill Neumann noted on the podcast, the availability of proven models and experienced advisors in the DSO space today is dramatically better than it was even a decade ago. You do not have to figure this out from scratch, but you need to work with a legal team who can get it right on paper.

Work with Marti Law Group to Navigate An Evolving Field

The earn-in model reflects something important happening in dentistry right now. The days of the solo practitioner are giving way to group practice, and the next generation of clinicians is being asked to think like owners earlier in their careers. For that to work on both sides of the relationship, the legal structure underneath the arrangement needs to match the promise being made.

Whether you are an associate weighing a pathway to ownership or a group owner building a program to offer one, the terms of an earn-in deserve careful attention before anyone signs anything.

To learn more about structuring associate equity arrangements or preparing your practice for partnership, reach out to our team.