When business assets such as a professional practice are subject to division as part of a divorce case, it is essential to retain an experienced family lawyer who is also trained in business and finance. Mark S. Guralnick is a board certified family lawyer with more than 30 years of experience. He holds two Master of Business Administration (MBA) degrees and is experienced with the business valuation process.
Professional practices to be divided during a divorce case may include medical practices or physician groups, dental practices, chiropractic practices, accounting practices, law practices, architectural practices, and other professional associations or partnerships in the personal services and financial services industries.
The first question that will be asked in any case involving the division of a professional practice is what method of valuation should be applied to the business. Understanding the different valuation methods and which one is appropriate is critical to achieving a proper distribution of assets between the parties.
Splitting up a professional practice as part of a divorce also generally requires the assistance of an expert witness. The law firm may be required to engage the services of an expert accountant and/or business valuation specialist to determine the financial value of the business. In some cases, forensic specialists, business appraisers, auditors and tax professionals may need to be consulted in order to establish the fair market value of a business subject to division in a divorce case. There may also be tax consequences to the proposed property division. Determining the value of a professional practice may entail many levels of analysis. What is the value of the real estate in which the business is located? What is the value of the physical assets of the business? If there are goods or inventory under the control of the professional practice, what is the value of those assets? What are the debts and liabilities of the professional practice? It may also be important to determine whether the spouse who owns a professional practice is in partnership with another professional or multiple professionals. If so, it will be necessary to determine what share of ownership the professional spouse holds in order to assess the value of the share to be divided between the parties.
Perhaps the most important measure of the valuation of a professional practice is its goodwill. Goodwill refers to the skill and reputation of the individual professional practitioners, as well as the reputation and experience of the professional practice itself. It is in an intangible asset that relates to the institutional reputation of the professional practice, based on its location, experience, track record, and operating procedures. Some people think of goodwill as the ability of a professional practice to attract new customers, to create new business, or to acquire or merge with other businesses – based on its long standing reputation and experience in the marketplace. Goodwill has also been characterized as the value of a company’s brand name, its solid customer base, its good customer relations and its proprietary techniques, processes and procedures. Placing a value on goodwill is one of the most important steps in the division of a professional practice. Doing this properly will protect each of the party’s interest in the divorce case.
If you are a member of a professional practice facing a divorce from your spouse, or if you are the spouse of a professional practitioner and you are considering divorce, please do not hesitate to contact the Law Offices of Mark S. Guralnick.