How does one value a share in a partnership in a divorce? How are professional practices valued in a divorce?
People facing a divorce are often concerned about their financial futures. One such financial concern regards the valuation of shares in a partnership during a divorce. Parties may also wonder how professional practices are valued in a divorce.
Say, for example, that Taylor and Alex have shares in a financial management business. Also, Taylor owns a medical practice. Now that they are divorcing, Taylor and Alex want to know how their assets will be divided, and specifically, how the shares in the financial management business and the medical practice will be divided.
In Massachusetts, assets are divided on an equitable basis. A judge’s decision as to what is equitable will not be reversed unless “plainly wrong and excessive.” A court may assign all or any part of the estate of the other, including, but not limited to, retirement benefits, military retirement benefits, pension, profit-sharing, annuity, deferred compensation, and insurance. The definition of estate is broadly defined, however. In fact, Massachusetts courts allow the division of premarital property and post-marital property on a case-by-case basis. With regard to the division of shares in a partnership, courts will generally interpret G.L. c. 208 § 34 to include partnership assets within the scope of the possible assets that may be divided in a divorce.
Valuing a business:
Shares of a partnership and business practice interests are part of the marital estate and may be valued by a valuation expert to assess the market value of the asset. In Massachusetts, a professional practice, like a medical practice, is subject to division during the divorce process. Massachusetts courts may order one of the parties in a divorce to relinquish their share of ownership in the business and receive payment either as a lump sum or in a series of installment payments. A court may order the sale of the business and the spouse receives the profits. One spouse could buy-out the business from the other spouse or offset the business with other assets.
During the valuation process, there are generally three valuation methods: the market approach (estimates business value by comparing the business to a similar business that recently sold); the income approach (estimates business value by converting economic benefits into a value); and the asset approach (estimates business value based on the assets and liabilities of the business).
In the above example, Taylor and Alex have several possible options afforded to them. A Massachusetts Probate and Family Court will divide the estate equitably based upon the parties’ needs and what is most equitable based on their individual case.
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 Adams v. Adams, 459 Mass. 361, 371 (2011) (citing to Bowring v. Reid, 399 Mass. 265, 267 (1987))
 Adams, 459 Mass. at 371 (citing to Redding v. Redding, 398 Mass. 102, 108 (1986))
 M.G.L. c. 208 § 34
 Rice v. Rice, 372 Mass. 398, 400 (1977) (holding that an estate is all property to which the party holds title, however acquired.)
 Moriarty v. Stone, 41 Mass. App. Ct. 151, 156 (1996) ; Brower v. Brower, 61 Mass. App. Ct. 216, 218 (2004)
 Goldman v. Goldman, 28 Mass. App. Ct. 603, 613 (1990).