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Divorce and a medical practice

On Behalf of | Dec 6, 2021 | Divorce

Many doctors in California have a successful practice that serves as a private professional business. The success of this business model is well-known throughout society. However, medical practices are treated just like any other private business when a doctor gets divorced, and a valuation of that practice becomes a central issue when property division is determined by the court. The doctor who is also a professional entrepreneur must look at how to protect the business as much as possible going forward, which means a valid financial evaluation of the operation at the time of divorce.

Professional valuation assistance

Many divorcing professional business managers seek operational valuation assistance from a trained financial expert who can determine an objective valuation on any asset to be divided in the divorce. California courts recognize this option when divorces are going through mediation because spouses can easily have a difference in opinion regarding a medical practice valuation, and the accepted calculation of the financial specialist can serve as a neutral evaluation.

Community property in California

The primary rule of community property distribution in a divorce settlement is a 50-50 split of assets. Medical practice assets that are acquired before becoming married are typically personal property. Only assets obtained during the term of marriage is considered community property, which can include increased value in a medical practice during that time. Medical professionals who became married after establishing their practice can have prior increases in business value exempted from distribution based on legal union time restrictions.

It is also important to note that non-physicians cannot act as partners in a medical practice, so offering a percentage of ownership cannot be part of the settlement unless both spouses are physicians. Additionally, assets can also be claimed in domestic relationship separations as well as for spouses who are legally married.