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Valuation of medical practice is necessary in a divorce

Many Pennsylvania physicians operate their own medical practices or belong to a physician group that runs a medical business. With the practice being both an asset and the source of your income, its value matters when negotiating a divorce settlement. A complex mix of assets and liabilities influence the overall value of the enterprise. Your share of the business’s value arises from your ownership share derived from your initial investment and how much stock you hold if any was issued.

The role of a forensic accountant

Medical practices are a special form of business. Complicated billing, patient numbers, future outlook and medical specialty among other factors influence a medical group’s value. For divorce purposes, you would hire a forensic accountant, specifically experienced with medical businesses, to calculate the value.

The forensic accountant looks at:

  • Tangible assets like office and medical equipment
  • Accounts receivable
  • Building lease
  • Reputation of the practice
  • Outlook for future income
  • Salary you have been collecting
  • Debts
  • Payroll and retirement plan contributions
  • Taxes and insurance

Dueling accountants

Because the value of your share of the practice guides what your ex-spouse will receive in the settlement, your ex-spouse may hire a different forensic accountant. The methodology and opinions of the other accountant may produce a substantially different valuation. You might succeed in negotiating a compromise between the two figures. Otherwise, a court will have to decide the value of this part of marital property.

Your business agreement

The documentation behind your practice could specify actions in the case of a partner’s divorce. The business agreement may require you to cash out your holdings in the practice to fund the divorce settlement. In the case of expected future stock awards after a vesting period, you may have to forfeit that value. At a minimum, you need to inform your business partners about the divorce because it may have legal ramifications for the whole business.

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