Issues for Physicians

The valuation of the professional practice — such as that of a lawyer, physician, or professional engineer — is one of the most time-consuming and potentially expensive tasks in a divorce case. This valuation can be complex and expensive, but it is critical in a divorce.

Factors Affecting Valuation

The spouse who is in a professional practice will often complain about “double dipping,” in the sense that the same earnings which are used to calculate spousal and child support are used to find a value for the practice. The professional may also argue that the methodology used to prove a value is flawed because a willing buyer for a practice might not even exist.

To further complicate matters, if a professional is part of a partnership, it may raise concerns about an inequitable valuation.

There are a myriad of ways to attempt to establish the value of a professional practice. And there are almost as many ways to establish the “goodwill” of the practice. Some of those factors may include:

  1. Price sensitivity, or how cost conscious the clients of the practice are
  2. Professional reputation and skill, which emphasizes the practice’s goodwill over its tangible assets
  3. Strength of referral network, or how many of the practice’s clients refer their friends and family to the practice
  4. High intangible asset base, which can account for the most valuable assets the practice has (even more so than tangible assets)
  5. Licenses and protected market, which can affect the practice’s competition and number of potential clients
  6. Client relationships and practice sale, or how easily the clients can continue using the service after the practice is sold
  7. The practice’s life expectancy and value, which is particularly important since many professional practices have shorter lifespans than other businesses

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A Proactive Approach: Prenuptials

A successful professional will often have considered business valuation very unfair. Nevertheless, if there is a value to the practice based on marital efforts, it has to be divided during the property division step of a divorce case.

If you are an owner of a professional practice, one important step you can take to protect it is to sign a prenuptial agreement with your fiancé or fiancée. This step can spare you from the many complexities involved in the valuation of your practice. Remember that a well-drafted prenuptial agreement:

  • Is in writing (not oral), and ideally notarized
  • Is executed voluntarily by both parties
  • Provides a full disclosure of the assets
  • Cannot be unconscionable (or unreasonably excessive)

Whether you have an ownership interest in professional practice or are married to a person who does, you need to ensure that you retain counsel that can efficiently and professionally guide you. You need help from an experienced attorney to obtain a fair division of this marital asset.

Valuation Attorney in Los Angeles, CA

I have practiced law in Southern California for more than 25 years, and my highest priority has always been to put my clients’ needs first. I am willing to negotiate early, settle your case, and take your case all the way to court when needed. My unique approach has helped me receive top ratings from both Avvo and Martindale. If you have a valuation matter that you’d like to discuss with an attorney, reach out to me today. I will analyze the facts and apply my strong understanding of the law to obtain the best result possible for your case.