Will you need to address a professional practice in your divorce or dissolution? If the answer is yes, we can help.
Our firm has successfully handled numerous cases involving many types of professional practices. In the recent past, our firm has handled cases involving the following types of professional practices.
- Accounting practices
- Chiropractic practices
- Dental practices
- Law practices
- Medical practices
- Psychology practices
We educate our clients regarding their rights and duties concerning their professional practices. However, we also educate the community.Attorney Doug Dougherty has authored articles and given presentations on various topics involving professional practices. He is the author of "Protecting Your Business in a Divorce," an article published in Columbus CEO magazine.Attorney Dougherty has also written a paper, and given a presentation, on "Valuation of Businesses in Divorce and Dissolution Cases." The paper and presentation were for the National Association of Certified Valuation Analysts (NACVA). The NACVA is a group of professional business appraisers.
A professional practice may be the most valuable asset owned by the parties. Some successful professional practices are worth thousands of dollars or millions of dollars.All professional practices present numerous complex legal issues. A client looking for a good result should avoid attorneys who do not have knowledge and experience regarding these issues.
A professional practice is a business that renders professional services. Professional services include services rendered by doctors, dentists, psychologists, accountants, lawyers, and other professionals. Typically, professional occupations require extensive education and special licensure.
An individual's license to practice his or her profession is not considered to be property. Thus, a professional license cannot be divided by a court. However, as discussed above, the value of an individual's professional practice can be divided.
A professional practice will generally be treated like any other asset. That is, a professional practice must be analyzed, valued and divided.
In a divorce or dissolution, if a professional practice exists five primary issues must be addressed.
- Who owns the practice?
- What interest is owned?
- What part of the interest is marital property?
- What is the value of the marital property?
- How should the marital property be divided?
It must first be determined who owns the interest in the practice. The interest may be owned by the husband individually, by the wife individually, or by the spouses jointly. Other ownership structures are also possible. For example, a spouse may own the business with his or her parent.
It must then be determined what interest is owned in the practice. That is, a spouse may own a 100% interest in the practice (the entire business) or may only own a 1% interest in the practice (a very small interest).
If the interest is marital property, then each spouse is presumptively entitled to receive 50% of the value of the interest. However, if the interest is one spouse's separate property, then that spouse is presumptively entitled to receive 100% of the value of the interest.
- Separate Property
A spouse's interest in a business may be separate property if it was:
- Acquired before the marriage
- Acquired as a gift
- Acquired as an inheritance
- Exempted in a prenuptial agreement
- Obtained with other separate property
If the business interest is one spouse's separate property, then that spouse is presumptively entitled to receive 100% of the value of the interest.
- Mixed Property
An interest in a business may be part marital property and part separate property. For example, if one spouse owned an interest in a business before marriage, and the value of the interest increased after marriage, then the value of the interest owned at the time of the marriage may be the spouse's separate property and the increased value created after the marriage may be marital property.
If an interest in a practice is marital property, the value of the interest must be determined. "Value" generally means fair market value. "Fair market value" generally means the price that a buyer would pay to purchase the interest.
- Using Appraisers
- Valuation Methods
- Net asset value method. Some interests can be valued by subtracting the value of the practice's liabilities from the value of the practice's assets, which is the "net asset value method." This method is frequently used for a small practice, a practice with limited profits, a practice about to close, or a closed practice.
- Stream of income method. However, if a practice is earning a significant profit, the value of the interest is frequently determined by considering: first, the stream of income generated by the practice; and second, the price a buyer would be willing to pay to a seller for this stream of income, which is the "stream of income method."
- Adjustments to Value
- Personal Goodwill
Various options exist regarding how the value of a practice can be divided. If the parties cannot agree on how to divide the value, then a court must decide the issue. A court's three primary options are discussed below.
- One spouse can receive 100% of the practice. This approach is typically used when one spouse is highly involved with the practice and the other spouse has little involvement. With this approach, the other spouse is usually compensated by receiving greater marital assets or fewer marital liabilities. When only one spouse has the necessary occupational license to provide professional services that spouse will almost always receive 100% of the interest in the practice. The other spouse will typically receive greater marital assets or fewer marital liabilities.
- Each spouse can receive 50% of the practice. In essence, this approach makes the spouses "partners" regarding the practice. The problems with this approach are obvious. Many former spouses will not be able to work together. However, in some situations, this is a workable option.
- A court can order the practice to be sold. With this approach, each spouse is generally ordered to pay 50% of the costs of the sale (for advertising, brokers' fees, etc.). Then, after all costs are paid, each spouse receives 50% of the net profit from the sale.
Contact DHP for a free confidential consultation with one of our attorneys. We can give you information about your specific rights and options. Our firm has 4 attorneys who are Certified Specialists in Family Relations Law. No other law firm in Central Ohio has more Certified Specialists. Fewer than 1% of all attorneys in Ohio have earned the Certified Specialist designation.
DHP is located in a safe and convenient suburban location with free on-site parking. We are located within minutes of Upper Arlington, Hilliard, Dublin, Worthington, and Northwest Columbus.
- 3010 Hayden Road
- Next to Bravo restaurant
From Hayden Road, turn onto Donnylane Boulevard. Turn right at the first driveway. The main entrance to our building is adjacent to the parking lot.