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How Is Ownership of a Professional Practice Handled During Divorce?

Posted on in Business and Divorce

Naperville IL divorce business assets attorneyIn most situations, the divorce process will involve multiple different financial issues that will need to be addressed. When determining how to divide marital property, spouses will need to consider their physical belongings, financial accounts, real estate property, retirement savings and benefits, and debts. Business interests owned by spouses, either together or separately, will be a major factor in these considerations, especially for those who own professional practices. For doctors, dentists, therapists, chiropractors, accountants, or other professionals, a business will not only represent a significant investment of time, money, and effort, but it may also be a primary source of income. Because of this, professionals will usually want to determine how they can continue owning and operating their practice after their divorce is complete.

Addressing Ownership of Professional Practices

Family-owned businesses are treated the same as other types of property, and a professional practice that was founded during a couple’s marriage will be considered a marital asset, while a practice that was owned by one spouse before getting married will usually be considered non-marital property. However, in situations where a spouse contributed money or work that helped a business owned by the other spouse grow or increase in value, the spouse who owns the business may be required to reimburse the other spouse for their contributions.

During the divorce process, a business valuation will need to be performed to determine the full monetary value of a professional practice. Different approaches may be taken during this valuation, including looking at the business’s assets and liabilities, the amount that could be received if the business was sold, or the business’s projected earnings over the next several years. Personal goodwill is another factor that may need to be considered when addressing professional practices. For example, a doctor may have built up a good reputation among their patients, and the value of their practice may be based on their ability to continue to provide medical care to clients.

An owner of a professional practice will usually want to continue to own and operate their business after getting divorced. To maintain ownership of business assets, marital property may be divided in a way that allows the other spouse to own assets of a similar value. However, if this is not feasible, or if both spouses are closely involved in the business, the spouses may choose to maintain co-ownership of the business after getting divorced. Those who choose this option will want to be sure to create a partnership agreement that defines each party’s roles and responsibilities in the business, and it can also be a good idea to provide the option for one partner to buy out the other partner’s share of the business at a later date.

Contact Our Naperville Business Valuation Attorneys

By understanding all of the issues related to a professional practice that will need to be addressed during your divorce, you can make sure you will be able to reach a fair and equitable divorce settlement. At Calabrese Associates, P.C., we can help you perform a business valuation, take the right steps to protect your professional practice, and prepare for financial success once your divorce has been finalized. Contact our DuPage County asset division lawyers today by calling 630-393-3111.

 

Sources:

https://www.forbes.com/sites/lawrencelight/2016/03/07/when-2-business-owners-divorce-what-to-do/?sh=1a952ebb343b

https://www.forbes.com/sites/catherineschnaubelt/2019/03/15/how-to-divide-the-family-business-in-a-divorce/?sh=38f8754d42fe

https://www.nfib.com/content/resources/legal/a-small-business-owners-guide-to-divorce/

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