Posted by Mary E. Ramos | Business Owner, Divorce
One of the most challenging issues in getting a divorce as a doctor that owns their own medical practice is that their practice may be subject to division as a community asset. Accurate valuation, goodwill, and status of the practice are critical influencing factors on a judge presiding of the matter. Hiring a licensed family law attorney in Texas who can counsel, advocate, and ensure compliance every step of the way while protecting the doctor, the practice, and the family is an important first step in the divorce process.
Separate vs. Community Property and Its Impact
The first determining factor as to whether a spouse has any rights over a private practice is whether it was acquired before or during the marriage. This distinction is vital since Texas is a community property state. Community property is defined as jointly owned assets acquired during the marriage and can be divisible upon divorce. Separate property is obtained before the marriage and is not divisible between the spouses during a divorce.
Even if a practice was started prior to the date of marriage, there can still be a community property element. This can include shares if it is a partnership or issues stock, if an ownership interest from a partner is bought after the date of marriage, etc. The income is its own consideration since income was earned by the practice during the course of the marriage, any income earned from it will most likely be considered community property. Therefore, its value is subject to consideration as part of the doctor divorce settlement.
Since the nature and characterization of a practice can be very complicated, it is important to get a qualified attorney who can review the practice and determine its characterization.
The Value of the Business
In divorce cases and settlements involving doctors, the value of the practice is the most commonly used rubric in dividing the business. The structure of ownership and nature of the practice also plays a role in this determination as well. A business valuation is made by examining two types of assets: tangible and intangible property. Tangible assets are physical in nature, like the building, furniture, and equipment. Intangible assets include intellectual property, goodwill, and accounts receivable.
Goodwill
Goodwill is a medical practice’s ability to generate referral business, positive reputation, and a future legacy. It is more challenging to calculate goodwill since it is based upon the doctor and the practice itself. A divorce for doctors and the impact of goodwill centers on specific facts related to the practice. For instance, goodwill can be valued higher when the practice does not hinge upon the doctor’s reputation, name, and services as seen in a partnership.
Methods of Dividing a Practice During Divorce
Many divorce cases involving doctors result in settlement. This often takes the form of a buyout agreement for a portion of the value of the medical practice. This can be done by either a lump sum payment, a structured payment schedule or the other spouse could receive a larger portion of other assets, such as retirement or real property.
But every situation and practice is unique; only a family law attorney in Texas can counsel a medical professional on the various legal issues regarding the valuation and division of the medical practice
Call Ramos Law Group
At Ramos Law Group, PLLC, our firm is equipped and staffed with professionals who can help calculate your practice’s value, intellectual property, and goodwill. Our property division lawyers are prepared to argue for your rights in the courtroom and have a track record of obtaining excellent results for our clients
Contact us today to speak with an attorney about your case and start down the path to the best possible result.
Last Updated on February 7, 2023 by Mary E. Ramos
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