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Dividing a Professional Practice in a Divorce

By Dec 6, 2021 Posted in Articles

Dividing a Professional Practice in a Divorce

Couples in Iowa who divorce often experience significant stress. Divorce can be complicated on its own, but when a professional practice is involved, it becomes more legally complicated and challenging. There are several factors that may determine the outcome in what can be a lengthy and costly divorce when a business is involved. Dividing a professional practice in a divorce can create the necessity for complex decisions, but it is important to understand what can be done to resolve some of the issues you may face. Those desiring more information on this topic may want to consider scheduling a consultation with the experienced divorce attorneys at Simpson Legal Group, LLC at 712-256-9899 to learn more about their legal options and rights.

Division of Property in Iowa

Unlike many other states in which the assets of a couple are considered community property, Iowa is considered an equitable distribution state. The court divides marital property in a way that is deemed to be equitable and fair. According to Iowa Code Section 598.21, there are certain factors taken into consideration when dividing property within a divorce including the following:

  • Longevity of the marriage
  • Property brought by each spouse into the marriage
  • Each spouse’s contribution to the marriage
  • Physical and emotional health and age of each spouse
  • Contribution of one spouse to the other’s education, training, or expanded earning power
  • Capability of each spouse to earn a living
  • Other economic situations affecting each spouse such as pension benefits

There are several other factors the court may use in determining how property and assets will be divided in a divorce. According to an Iowa Commission on the Status of Women report, equitable distribution does not always mean equal distribution.

Professional Practices

Unlike many other businesses, professional practices are those that the creator had a vision for and spent a considerable amount of time and money on in terms of college, training, and continuing education. Many professions require four, six, eight, or even more years of college or education and include:

  • Doctors
  • Dentists
  • Lawyers
  • Architects
  • Engineers
  • Psychologists
  • Accountants
  • Financial advisors
  • Consultants
  • Veterinarians

Those who practice a profession are generally passionate about what they do, which is why it is important for spouses to learn all they can about dividing a professional practice in a divorce. The experienced legal team at Simpson Legal Group, LLC is available for those seeking legal guidance on what can become a difficult and complex topic within a divorce.

Valuation of a Professional Practice

When getting divorced, it is important to establish the value of a professional practice. When a business is created prior to marriage it is considered the property of the spouse who started it. That said, any appreciation in value or increase in profits during the marriage may be divided in a divorce although this is not always the case. There are sever factors to be considered when determining the value of a professional practice including:

  • Real estate
  • Inventory and equipment
  • Supplies
  • Trademarks, copyrights, brand recognition
  • Goodwill
  • Debts or other liabilities
  • Projected growth and future earnings
  • Accounts payable and receivable reports
  • Fixed asset registry

Business accountants and other financial experts are extremely helpful when determining the value of a professional practice as there may be factors other than those mentioned above depending on circumstances and type of business.

Other Considerations in Valuing a Professional Practice

Divorce becomes more complicated when a value must be placed on a professional practice. When a judge determines that a business is marital property, it is required by law that the court valuates the asset so that the value (or debt) can be divided by the judge between spouses.

When spouses cannot come to an agreement on the value of the professional practice, or one spouse considers buying out the other spouse’s interest in the practice following divorce, both spouses should consider seeking the assistance of an independent business valuation professional.

Ways To Value a Professional Practice

Spouses should be ready to work with forensic accountants, business lawyers, real estate agencies and other experienced professionals when trying to value and divide a professional practice. When spouses cooperate, the costs to decide the value of the business can be reduced.

Perhaps the biggest difference between business and professional practice valuations is that many professional practices have created goodwill and have patients or clients on an ongoing basis. This may require that a valuation professional, lawyer, and the practice owner incorporate goodwill, works in progress, and client lists to establish the final value of the professional practice.

What Is Goodwill in a Professional Practice?

Goodwill is an intangible asset, which means it is harder to value. Goodwill is vital to the eventual success and bottom line of a professional practice. Community participation, customer relations, and how existing or potential customers view the practice are essential to the concept of goodwill. While goodwill has no physical form, it involves relationships with not only clients and the community, but vendors as well. A company’s reputation and how it is presented in the community are key in goodwill.

When a Spouse Earns Interest in a Professional Practice

The laws regarding property division apply to a professional practice or business just as any other property in a marriage. While separate property includes a professional practice or any other property owned by a spouse prior to marriage, a business can become marital property when spouses used assets of the practice to support or contribute to their marriage. Whenever a spouse donates their labor and marital assets or income are used to operate and expand the business, that spouse may be eligible for interest in the practice that is then valued and must be paid.

Consider Scheduling a Consultation with Simpson Legal Group, LLC

With so many things to consider, it is easy to see why dividing a professional practice in a divorce is not straightforward and simple. As an owner, it is natural to be concerned about the professional practice and whether you will be able to keep it following the divorce and continue operating as usual. You may also worry about whether the reputation of the practice will be negatively impacted. An experienced Iowa divorce lawyer can provide legal guidance and support to help you navigate what is a confusing and complex legal system. Those with a professional practice may want to consider scheduling a consultation with Simpson Legal Group, LLC at 712-256-9899.


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50 Northcrest Drive, Council Bluffs, Iowa 51503
Phone: 712.256.9899

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