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The Role of Professional Licenses in Divorce

Professional licensing in Texas might create some opportunities not enjoyed in many other states.  This generally bodes well  if you are an architect, chiropractor, dentist, medical doctor, engineer, lawyer, insurance agent, realtor or other type of licensed practitioner, this license will add certain unique elements to a divorce. Some of the most common concerns in these types of divorces are high financial stakes in addition to the reputation of licensed individuals. Clients also often express concerns about maintaining practices with the minimal amount of damages. This article will discuss the most common issues that arise during divorces in Texas when professional licenses are involved and how Texas law resolves such situations.

The Value of Professional Licenses

Texas is a community property state, which means that all of the assets a couple earns during a marriage are considered communal property and must be split fairly during a divorce. Because Texas is a community property state, a portion of your practice might be considered the property of your former spouse. Aspects of your professional license that are vulnerable to division of property during a divorce include  the value of current contracts, office space, intellectual property, and business appreciation. The determination of whether these assets are considered communal property will depend on the date of purchase or acquisition. Short of agreement, the only presumption that can overcome this determination is evidence that this property is separate property.

However, in Texas the license itself has no value.  Furthermore, the Court cannot take into account the value of the license holder’s personal goodwill.  Put another way, what is the practice/business worth if knowing the license holder could compete against the old business tomorrow.

Determining the Value of a Professional Practice

In determining the value of a professional practice, a divorce court will likely rely upon, in the most simple terms, what are the assets (cash, equipment, receivables) and what are the payables (rent, insurance, accounts payable). Goodwill generally is not considered.

It is critical to remember that goodwill in Texas must be separated from the worth of a particular person. For example, if professional practice in question is the solo practice of a professional then goodwill will not be considered.  However, if the professional is in a partnership or other entity, that person’s interest may carry a value of the entity’s goodwill.   To make it simple, Joe Jones, individual practicing lawyer will have no goodwill value at the time of divorce.  But if Lawyer Jones is in a partnership that carries its own goodwill (Jones, Moses, and Blackstone), then Jones’s interest in the firm’s goodwill may have value to be calculated separately from the individual.

Should the court determines that goodwill exists for the professional practice in question then the court will set about determining the value of the practice’s goodwill. Establishing the existence of a practice’s goodwill in Texas is a difficult task for any lawyer because goodwill is not an exact financial amount. Often, the divorce lawyer must rely on the opinion of an experienced business appraiser or analyst. If you believe that you are involved in a divorce that involves a professional license, do not hesitate to contact a skilled divorce lawyer.

Divorces involving professional licenses require the advice of experienced divorce lawyers with strong track records. Schedule a consultation at Lindamood & Robinson, P.C. with one of our knowledgeable Houston lawyers to make sure you receive the compensation you deserve.

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