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Division of Professional Practices in Divorce

Posted by J. Benjamin Stevens | Oct 26, 2015 | 0 Comments

If you or your spouse are going through a separation or divorce and one of you is a doctor, dentist, accountant, attorney, or someone else who owns a professional practice, the equitable division process can become quite complicated. Determining who owns what with regard to the practice and how much it's worth can take a lot of time and energy to sort out. Once you've decided that the practice is in fact marital rather than separate property, the next step is deciding how to divide the value between the husband and wife. To find out more about the division of professional practices in divorce, keep reading.

Option 1 – Sell It.

The first thing you can consider doing to split a potentially valuable professional practice is simply to sell it and divide the proceeds. An advantage to this is that it's easy – just market the business and divide the money received according to the ownership interest. This is a good way to provide a profit for both people upfront, allowing both to take their money and do with it as they please. It's also a good way to ensure the parties cut ties with one another, limiting their ongoing contact and allowing both to truly turn the page on that chapter of their lives. One downside is that the sale could take time, as it may take months to sell some practices. Another problem is that the price may be lower than you anticipated. By selling quickly, you may end up walking away with less money than if you had held out and sold the business down the road.

Option 2 – Buy Out the Other Spouse.

A second approach would be to buy out your spouse's interest in the practice. This can also be fast, assuming the spouse keeping the business has enough money to simply cut a check. This also allows the spouse with the most interest in the business to continue working at something he or she may love and removing the potential for interference posed by the other spouse. The downside to this option is obvious and it's financial. Buying out one person's interest in a business can be very expensive, especially in the case of a successful professional practice. The spouse buying the shares may not have enough liquid assets to make the payment right away, putting him or her in a precarious financial situation. Also, the person purchasing the practice must be able to operate it going forward. In other word, if one spouse is not an attorney, that spouse cannot purchase his/her spouse's law practice.

Option 3 – Co-own and Co-operate

The third option when dividing certain practices is to continue owning and operating the business together. This approach can work if the two parties are able to get along and communicate. It can avoid the cash crunch that comes with a buyout and allows you to keep a business that might be very profitable. The downside is that this can be a very bad plan for spouses who are unable to work together. Your anger and hurt feelings can spill over into the business and make every business decision an emotional battle. If there is lingering animosity between the parties, it is almost always better to consider option 1 or 2 rather than attempt to run a business together. It is also important to note that this option is not available in every type of professional practices.

About the Author

J. Benjamin Stevens

Senior Partner


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