In 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.

A business in a divorce is at the same time a marital property and a complex entity. It is a major source of income for at least one spouse and has great value as an asset. While it is possible to divide business ownership, it is more common for one spouse to have complete ownership after the divorce. In return, the other spouse is compensated with properties of equal value. However, one spouse may use his or her knowledge of the business to prevent the other spouse from receiving equitable compensation in the division of property. You must be wary of how your spouse may try to deceive you about his or her business during your divorce.

Business Valuation

Your spouse likely has a better understanding than you of the value of his or her business if you are not involved in its operation. During your divorce negotiations, your spouse has an incentive to undervalue his or her business to prevent you from receiving full compensation. He or she may underreport the business’s profits or give a conservative estimate of the business’s future value. There are also ways that your spouse can artificially lower the value of the business, such as: