Divorce and the resulting division of assets can be a stressful and upsetting experience. However, owning a business or professional practice can take the stress of a divorce to the next level. Divorces involving professional practices can be complicated, costly, and lengthy to resolve. There are many factors that can influence what happens to a business in a divorce including the type of business, a spouse’s contribution to the business, the structure of ownership, and more.
Business owners in Colorado need to be aware of what could happen to their assets and professional practice in the event of a divorce. Business owners should ideally protect their business affairs and assets prior to marriage, however, this does not always occur. The experienced family law attorneys at Johnson Law Group can advise you on how to protect your business in a divorce and help you understand your legal options. Call our legal team today for a complimentary consultation at (720) 744-3513, or text-to-chat (720) 744-3513.
Dividing Property in a Divorce
Property acquired during a marriage in Colorado is typically considered “marital property”. This can include any businesses and professional practices as well as:
- Real estate
- Vehicles
- Bank accounts
- Investments such as mutual funds and stocks
- Retirement accounts
Separate or “non-marital” property, on the other hand, typically refers to any assets that the couple held in their own name before marriage. However, non-marital property can also include:
- Property received by one spouse during marriage by gift or inheritance
- Property excluded by a legal agreement such as a pre-nuptial contract
However, the concept of separate property is not as straightforward as it seems. For example, if a property (such as a medical, chiropractor, dental, or legal practice) that one of the spouses owned before the marriage, increased considerably in value during the marriage, the other spouse is generally entitled to some of the increase in value.
Colorado courts typically divide property equitably. This can mean that assets are divided fairly with each spouse either receiving half of the assets. In some cases, one spouse will receive more than the other depending on certain factors such as:
- Financial and non-financial contributions from each spouse to the common household
- Marital property value
- Earning capacity of each spouse after the divorce
- Childcare responsibilities of each spouse after the divorce
What Happens with Debt?
Debts will also be divided according to whether the debt was incurred before or in the marriage. If one spouse had incurred any debt before the marriage, that spouse will be responsible for the debt after a divorce. Likewise, any common marital debt will remain the responsibility of both spouses after the divorce. However, just like with marital property, debt issues are not always clear-cut and can prove legally challenging to resolve. Having an experienced family law attorney at Johnson Law Group by your side can help with resolving both your property and debt issues related to your professional practice.
Division of Professional Practice Assets in Colorado
According to the American Bar Association (ABA), the most popular way to deal with a business in a divorce is for one spouse to buy out the other. However, in general, business and professional practice assets have to follow the same guidelines as other property in a divorce. An individually owned business, particularly if it existed before the marriage, is generally considered non-marital property.
However, if your business increased in value during the marriage, your spouse could be entitled to a share of the increase in value. Further complications can arise if the professional practice provides a significant part or all of the income for your household. Owning any type of business in Colorado can significantly affect a divorce settlement.
Valuing a Professional Practice
Divorces involving professional practices such as those operated by doctors, chiropractors, dentists, lawyers, and accountants will include a valuation of the practice or business. In Colorado, a valuation will include:
- The value of the business at the time of the divorce
- The value of any future business income for spousal support
The valuation process for professional practices in the state of Colorado can be complex and values may vary widely depending on who is carrying out the valuation of the business. Any plans you have for your professional practice after the divorce can also have an influence on the valuation and division of the business. When it comes to options for your professional practice after a divorce, you may want to consider selling your share, continuing to operate the business with your ex-spouse, or buying out your ex-spouse.
Dividing a Professional Practice
Professional practices can present some unique valuation challenges that do not apply to other businesses. Most practices will have ongoing clients or repeat patients. In order to determine a final value for professional practice, repeat clients and goodwill have to be considered. In cases where only one spouse holds the professional qualification required to run the practice, they will be the logical choice for continuing with the practice. When it comes to dividing a professional practice in a divorce, courts could decide on the following:
- Give the professional practice to the person who has the professional qualification required and wishes to continue running the practice. The other spouse will then be compensated in some way financially.
- Order the sale of the professional practice and split the proceeds between the spouses.
- Allow the spouses to continue running the professional practice together after divorce.
Professional practice and divorce can be an exceedingly complicated issue and there is no one-size-fits-all approach. If you are a Colorado business owner facing a divorce, you should consult with an experienced family law attorney who has a track record of representing business owners and can advise you on your legal rights. The Johnson Law Group can work tirelessly to defend business owners’ best interests and help them protect the assets they have worked so hard for over the course of many years.
Contact The Johnson Law Group Today
Whether you are currently going through a divorce or would like to make preparations for protecting your professional practice with a prenuptial agreement, our experienced family law attorneys can help. The Johnson Law Group is a dedicated and passionate team of lawyers that can offer you personalized attention. We can help with legal advice that is tailored to your unique situation and family circumstances. Call us today and find out how we could help you at (720) 744-3513, or text-to-chat at (720) 744-3513.
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