Many Americans today own professional practices. There are about 1.4 million accountants nationwide, with many of these individuals owning their own firms. Lawyers follow closely, with about 1.3 million attorneys operating in the United States. Many of these lawyers own their own firms. The same goes for many medical professionals. About 200,000 dentists span the nation, and many also own their own professional practices. Unfortunately, some of these professionals will eventually divorce – but what happens to their clinics or firms in this situation? When it comes to divorce, there is one unspoken challenge that many professionals are completely unaware of.
The Obvious Choice for Divorcing Professionals
If the marital estate holds some kind of professional practice, the obvious option is to keep the business intact at all costs. These firms and clinics may have taken decades to establish, and selling the business could be detrimental in many ways. Liquidating this asset may feel crushing for the professional spouse who has worked so hard to establish it. It might seem unthinkable to throw away such a central part of not only their career but also their identity.
Maintaining the business also ensures financial stability for both spouses. A business can generate tremendous income over the decades, and this income can provide economic security for the foreseeable future. This could be especially critical for spouses who walk away from marriages having no real job skills. The income might also be important for spouses approaching retirement age.
Maintaining the business can be challenging, however. If spouses do not sell it, they need to find some other way to divide it. One option is to co-own the professional practice in the future, but the unique features of this business can make this surprisingly difficult.
Spouses Often Need Professional Licenses to Maintain Ownership of Practices
After spouses agree to co-own the professional practice going forward, they may encounter a serious roadblock: The need for licensing. Many spouses are completely unaware that in order to maintain an ownership share in these businesses, a professional license may be necessary. This is true across numerous practices – including many law firms, accounting firms, and medical practices.
Perhaps most notably, the majority of US jurisdictions prevent non-lawyers from owning or investing in law firms. Many other types of professional practices do not follow such strict rules, and this may make continued ownership of law firms very difficult for divorcing spouses. The prohibition against simply investing in law firms makes it difficult to circumvent this rule with strategies like promissory notes.
Most states also prohibit non-dentists from owning dental practices. All parties involved in the ownership or operation of the practice must hold valid dental licenses, and this may prove challenging in the event of a divorce. In addition, most states ban any kind of profit-sharing arrangements between dentists and unlicensed non-dentists – making it even more challenging to circumvent these regulations. However, a handful of states do not follow these rules.
When it comes to accounting firms, the Uniform Accountancy Act states that non-accountants can own accounting firms. However, the majority of the accounting firms must be owned by licensed accountants. While these rules are more divorce-friendly, they nonetheless make equal divisions virtually impossible.
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