Divorce When You Own a Medical, Dental, or Professional Practice in Utah
Short answer: When a Utah divorce involves a medical, dental, law, or other professional practice, the court decides whether the practice is marital, values it, and divides that value equitably under Utah Code § 81-4-406(4). Enterprise goodwill is generally divisible, while personal goodwill tied to the professional usually is not. Utah licensing law limits ownership of professional corporations and professional LLCs to licensed professionals, so the practicing spouse almost always keeps the practice and pays the other spouse through a buyout or an offset against other assets.
Why Professional Practices Are Different
A dental office, medical group, veterinary clinic, accounting firm, or law practice is a business, but it is a business built around a licensed individual. Much of its value depends on that person's skill, reputation, and relationships with patients or clients. That raises questions that do not come up with most companies: how much of the value belongs to the practice and how much belongs to the professional, and whether a non-licensed spouse can hold any ownership at all.
Is the Practice Marital Property?
A practice started during the marriage is generally marital. A practice that existed before the marriage starts as separate property, but growth during the marriage can become marital when the other spouse contributed to it or when marital and practice funds were commingled. See Premarital Businesses in Utah Divorce and Commingling in Utah Divorce.
A spouse's work in the practice matters. In Dunn v. Dunn, 802 P.2d 1314 (Utah Ct. App. 1990), the Court of Appeals held that a physician's professional corporation, founded and grown during the marriage, was marital property. The wife had performed bookkeeping and secretarial work for the corporation without pay and ran the household while her husband worked 60 to 70 hours a week, and the court treated those efforts as a contribution to the growth of the practice.
Goodwill Usually Drives the Number
For most professional practices, goodwill is the largest part of the value. Utah courts divide it into two categories. Enterprise goodwill belongs to the practice itself: its name, location, staff, systems, payer contracts, and patient or client base that would stay with the practice if the owner left. It is marital property subject to division. Personal goodwill belongs to the professional: reputation, skill, and relationships that leave when that person leaves. It is generally not divided as property.
The split can change the outcome dramatically. In Lunt v. Lunt, 2024 UT App 148, the Court of Appeals affirmed a finding that only 5% of the husband's business value was personal goodwill and the remaining 95% was institutional goodwill subject to division. A practice with several providers, a strong brand, and established referral systems tends to carry more enterprise goodwill. A solo practice where patients follow one provider tends to carry more personal goodwill. See Goodwill in Utah Divorce.
Licensing Rules Limit Who Can Own the Practice
Utah restricts ownership of professional entities. In a professional corporation, a person generally may not be a shareholder unless licensed to provide the same professional services, and shares may be issued or voluntarily transferred only to such licensed persons. Utah Code §§ 16-11-7, 16-11-8. A professional services LLC is limited in a similar way: an interest generally may be transferred only to the company or to an individual licensed to provide the same type of professional service. Utah Code § 48-3a-1110.
The practical result is that a court rarely awards a non-licensed spouse an ownership stake in the practice. Instead, the practicing spouse keeps the practice and the other spouse receives equivalent value in another form. Many practices also have buy-sell or shareholder agreements that affect the analysis. See Buy-Sell Agreements in Utah Divorce.
Valuation Issues Specific to Practices
Valuing a practice involves issues that a general business appraisal can miss:
Accounts receivable and unbilled work, which can be substantial in medical and legal practices
Normalizing the owner's compensation to what the market would pay a professional to do the same work, so the remaining profit can be measured
Equipment, leases, and debt tied to the practice
Payer mix and reimbursement trends in healthcare practices
The risk of counting the same income twice, once in the practice value and again in support. See Double-Dipping in Utah Divorce.
Income for Support
A practicing professional's income for support is not limited to the salary on a W-2. For child support, self-employment income is gross receipts minus the expenses necessary to operate the business at a reasonable level, and it may differ from the business income on a tax return. Utah Code § 81-6-203(4). See Self-Employment Income and Child Support in Utah and Alimony in Utah When a Spouse Owns a Business.
How the Practice Gets Divided
Because the practicing spouse keeps the practice, the other spouse's share is usually paid through an offset against other marital assets, such as the home or retirement accounts, or through a structured buyout over time. A buyout note should be secured, because the practice's value and the professional's earnings can change after the decree.
Frequently Asked Questions
Will my spouse become a co-owner of my practice?
Almost never. Utah generally limits ownership of professional corporations and professional LLCs to licensed professionals, so the court awards the practice to the practicing spouse and gives the other spouse equivalent value in another form. Utah Code §§ 16-11-7, 16-11-8, 48-3a-1110.
Is my professional reputation divided in the divorce?
Personal goodwill tied to your own reputation and skill is generally not divided as property. Enterprise goodwill that would stay with the practice if you left is marital property subject to division.
My spouse worked in the practice. Does that matter?
Yes. In Dunn v. Dunn, the court treated a wife's unpaid bookkeeping and secretarial work, along with running the household, as a contribution to the growth of her husband's professional corporation.
I started my practice before we married. Is it still at risk?
The practice starts as separate property, but growth during the marriage can become marital when the other spouse contributed to it or marital funds were mixed in. The outcome depends on tracing and the specific facts.
If Your Divorce Involves a Professional Practice
Professional practice cases turn on the goodwill analysis, the governing entity documents, and the income evidence, and the record for each has to be built early. Contact Jeremy Miller at Pearson Butler to discuss how these issues apply to your practice.