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Dividing a Professional Practice as an Asset in Divorce

When a married couple divorces, dividing the assets can be difficult and contentious. Property division can be further complicated when one spouse owns a business, especially if it is a type of professional practice.

During a divorce, the family court judge is required to divide all marital property in a way that is fair, just and reasonable to both parties. Michigan equitable distribution law generally views either spouse’s business interests as property that can be divided. This can be problematic in the case of a professional practice. Most professions — such as medicine, dentistry, law and accounting — require special licensing that is regulated by the state. The applicable laws generally prohibit someone who is not licensed from having an ownership interest in a professional practice.

When a professional practice is deemed marital property, the family court can take evidence as to the monetary worth of the practice and award the non-owner spouse an equivalent amount from other marital assets. In the alternative, the courts can award the non-owner spouse a portion of the salary or ownership draw the owner spouse will receive from the business. Still another alternative is that the business owner spouse signs a promissory note for a certain amount of money and makes regular payments to the non-owner spouse over several years. This solution can be good for spouses who want a stable income that is not directly tied to the profitability of the practice.

In equitable distribution, only marital assets are divided between spouses. In general, a spouse fully retains all assets that he or she owned prior to the marriage. However, a non-owner spouse can be awarded an interest in property that the other spouse owned prior to marriage if the non-owner spouse helped to improve or grow the asset during the marriage. For example, suppose that a wife started a professional practice before getting married. If her husband contributed in some way to the practice during the marriage — such as by providing business capital or by working at the company for a reduced salary — then he can be entitled to compensation with value equivalent to an ownership interest.

Dawson Family Law, PLLC in Sterling Heights, Michigan represents people in divorce and family law matters throughout the greater Detroit metropolitan area. Feel free to contact me online or call 833-671-4445 for an initial consultation.

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