A physician in her white coat at her clinic office desk, a laptop and a stethoscope in front of her, the mountains in the window

Divorce for physicians, dentists and lawyers: goodwill, income, and who keeps the practice.

A professional practice is the asset Colorado law treats most differently from the way its owner thinks about it. The degree is not property; the goodwill is, and it is valued on what you earn above a comparable employee. The buy-sell formula you signed is evidence, not a cap. The same income that values the practice sets the maintenance, and Colorado has rejected the double-dip argument three times. And because only a licensee can own the practice, you keep it and pay for the other half. This page is how each of those works, with the cases.

  1. 01The degree, and the goodwill
  2. 02How a practice is valued
  3. 03The buy-sell formula
  4. 04The double dip
  5. 05Income for support
  6. 06Who keeps it, and how it is paid
  7. 07Records, patients, and privacy
  8. →What people ask first
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The practice is worth what a stranger would pay for it. The court has never entirely believed that.

Every professional going through a divorce says the same thing in the first meeting: the practice is me; without me it is a lease and some equipment; no one would buy it. Colorado courts have heard that argument since 1979, when the Court of Appeals reversed a trial judge who valued a dentist’s sole proprietorship at its equipment and receivables, and held that the value of goodwill incident to the practice, an asset acquired during the marriage, must be considered as marital property. The Supreme Court settled the method in 1992 in a case about a partner in a ninety-lawyer Denver firm: capitalize the amount by which the professional’s historical earnings exceed what a comparably trained non-owner earns. It affirmed $113,000 of goodwill against a withdrawal formula that paid $42,000.

I represent physicians, dentists, lawyers, CPAs, architects and other practice owners, and I represent their spouses, and the work is the same from either chair: the value is an argument about the comparison salary, the multiple and the standard of value; the income is an argument about add-backs and retained earnings; the buyout is an exercise in keeping the practice solvent while paying for half of it. What follows is the law as the Colorado courts have actually stated it, and the practice of it.

A dental operatory with the chair and light, empty
Only a licensee can own it

Goodwill is marital; the license is not.

Since 1979 the goodwill of a professional practice acquired during the marriage is marital property. The degree and the license are not, and stay with the professional.

Excess earnings is the approved method.

Historical earnings above what a comparable non-owner would earn, capitalized; affirmed by the Colorado Supreme Court in 1992. A buy-sell formula is evidence to be weighed, not the value.

The maintenance formula stops at $240,000.

Above that combined annual income the guideline amount does not apply; the court decides maintenance on the statutory factors, which is where a practice owner’s case is fought.

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The degree is not property. The goodwill is.

Two lines the Colorado Supreme Court drew decades ago, and they still decide the first argument in every professional’s divorce.

A grant agreement and a laptop with handwritten notes
Not assignable, not property; compensated another way

Graham, Olar, and the supporting spouse.

A degree or license is not property and cannot be divided; the spouse who paid for it is compensated through maintenance and the property division, under an express statutory factor.

The degree. In In re Marriage of Graham (1978) a wife who had supported her husband through an M.B.A. was awarded a share of the degree’s appraised value. The Supreme Court reversed: an educational degree is simply not encompassed even by the broad views of the concept of property; it cannot be assigned, sold, transferred, conveyed or pledged. The same is true of a medical license, a bar admission and a board certification. They are the professional’s alone.

The contribution. In Olar (1987) the court reaffirmed Graham and answered the fairness problem it created: a trial court may use an award of maintenance as a tool to balance the equities and compensate a spouse whose work enabled the other to obtain an education, because when a couple works together toward an advanced degree there is an expectation of a higher standard of living in the future. The maintenance statute now says so expressly, listing as a factor a significant economic or noneconomic contribution to the marriage or to the economic, educational or occupational advancement of a party, including completing an education. The property statute’s first factor, each spouse’s contribution to the acquisition of the marital property, does the same work in the division.

The loans. Student loans taken during the marriage are marital debt, but classification does not foreclose the court’s ability to award such debts to the spouse who incurred them. In practice the professional usually carries the professional-school debt, and the division accounts for it.

A lawyer and a forensic accountant at a conference table, the binders and a calculator between them, the analysis on her laptop
A value to the owner above the tangible assets

Nichols, Martin, and the goodwill.

Practice goodwill acquired during the marriage is marital property in Colorado, valued to the owner, and no published Colorado case excludes personal goodwill.

The practice is different. Nichols (1979) drew the line the professional’s argument keeps trying to erase: goodwill’s limited marketability distinguishes it from the degree, which is personal to its holder and non-transferable. The dentist’s practice had goodwill; the goodwill was acquired during the marriage; it was marital property, whether or not the dentist ever intended to sell.

Value to the owner. In Martin (1985) the expert found no profit after a reasonable owner salary, and the court still affirmed $40,000 of goodwill: the value of goodwill is not necessarily dependent upon what a willing buyer would pay; the important consideration is whether the business has a value to the owner above and beyond the tangible assets. That sentence is the root of the value-to-the-owner standard that Colorado appraisers still argue against fair market value, and the reason the “no one would buy it” argument does not end the case.

No personal-goodwill carve-out. Many states exclude personal goodwill, the value that attaches to the individual rather than the enterprise, from the marital estate. Colorado’s published cases have never adopted that rule: Nichols, Martin, Bookout, Huff and Banning divide practice goodwill without it. The case sometimes cited for a personal-goodwill rule, Cardona (2014), is about accrued vacation leave and never mentions goodwill. In Colorado the personal-versus-enterprise distinction is an argument about how much the goodwill is worth, made through the appraiser, not a rule of exclusion.

How a practice is valued: the excess-earnings method, and its levers.

The Supreme Court approved the method in In re Marriage of Huff, 834 P.2d 244 (Colo. 1992), and every practice valuation since has been an argument about its inputs.

The stepWhat the appraiser doesWhere the fight is
1. Normalize the earningsHistorical earnings of the practice, adjusted: personal expenses run through the practice added back, one-time items removed, family members’ salaries examined.The add-backs. The vehicle, the travel, the phone, the spouse on the payroll, the retirement contributions. Each one is an argument.
2. Subtract reasonable compensationWhat a comparably trained, non-owner professional would be paid to do the owner’s clinical or legal work: specialty survey data (MGMA percentiles for physicians, bar surveys for lawyers) at a stated percentile.The percentile. The 25th versus the 75th percentile of the same survey can move a physician’s goodwill from zero to seven figures. It also sets the income for maintenance, from the other direction.
3. Capitalize the excessThe earnings above reasonable compensation, capitalized at a multiple that reflects risk: three times in Huff; a five-year weighted average in Bookout.The multiple, and the weighting of recent years. A practice whose earnings are rising argues for the average; one whose earnings are falling argues for last year.
4. Add the tangible assetsEquipment, leasehold improvements, cash, and the receivables and work in process, net of collection risk and cost.Receivables and WIP are off-balance-sheet for a cash-basis practice, and real. A formula that discounts them fifty percent may be rejected when the professional is staying.
5. The standard of value, and discountsFair market value (what a buyer would pay, with marketability and minority discounts) or value to the owner (what the practice is worth to the professional who keeps it, usually without discounts). Colorado has adopted neither as a rule.The Supreme Court held in Thornhill (2010) that a trial court may, in its discretion, apply a marketability discount in a divorce; it did not have to. The appraiser’s choice of standard is the argument beneath the discount.

Three numbers from the cases: a dental proprietorship valued at $10,560 in equipment and receivables, reversed for omitting goodwill; a law partner’s interest valued at $113,000 by excess earnings against a $42,442 withdrawal formula, affirmed; a physical-therapy practice valued at $595,000 by capitalizing earnings over a $70,000 replacement salary, affirmed. The Business Valuation page covers the standards of value and the approaches in full.

The buy-sell formula: evidence, not a cap.

The partnership agreement, the shareholder agreement and the redemption agreement all say what a departing owner is paid. The professional going through a divorce always wants that to be the value. It is not.

A Schedule K-1 and a profit and loss statement, one line highlighted
Written to protect the firm from departures, not to value the estate

Keyser and Huff.

The price or formula in a partnership or shareholder agreement is weighed with all the circumstances; a formula for departing owners does not bind a court valuing the interest of one who is staying.

The ophthalmologist. In Keyser (1991) a redemption agreement fixed a twenty-five percent interest in a group practice at $45,000 of book value, with no goodwill. The trial court adopted $150,800 from national sale data for ophthalmology practices, and the Court of Appeals affirmed: the price, or pricing formula, fixed in a buy-sell agreement is not facially dispositive, but must be considered in light of its provisions and all of the circumstances pertinent to the agreement.

The partner who is staying. In Huff the withdrawal formula produced $42,442, discounted receivables plus the capital account, and the Supreme Court refused to apply it to a partner who had no intention of leaving: to accept that figure ignores all the present facts and intentions of the parties. A formula written to protect the firm from departing partners does not measure what the practice is worth to the one who keeps it.

What the agreement is good for. It is evidence: of what the professionals themselves thought the practice was worth when they were not divorcing, of the terms of a buy-in, of the discount they applied to receivables. A recent arm’s-length buy-in by a new partner is strong evidence of value, and in Antuna (2000) a physician’s shares were valued at the present value of what a new physician entering the practice would pay. The other spouse is not a party to the agreement and cannot be forced into the entity by it; the agreement cannot cap what the marital estate receives.

The double dip, and why Colorado has rejected it.

The professional’s second argument, after “no one would buy it,” is that the practice cannot be valued on income that is also being used to set maintenance. Three Colorado decisions say it can.

A check being written for spousal maintenance
A snapshot of the past, and a claim on the future

Huff, Bookout, Banning, Antuna.

Colorado values goodwill on past excess earnings and sets maintenance on future income, and has held three times that using the same earnings for both is not a double recovery.

The argument. In Huff the husband put it plainly: double dipping occurs because that same future income is the source from which the wife’s maintenance is paid. The Supreme Court answered that the excess-earnings method capitalizes the amount by which the attorney’s historical earnings exceeded what a comparably situated attorney earned during that period; it does not convert the husband’s future income into property; on the contrary, it avoids valuing a business or partnership on the basis of post-divorce earnings and profits. The value is a snapshot of the past; the maintenance is a claim on the future.

The Court of Appeals, twice. Bookout (1991) held that goodwill is a property or asset which supplements the earning capacity of another asset, a business or a profession, and is not the earning capacity itself, so the wife did not receive a double recovery when the practice was valued on capitalized earnings and maintenance was set on the same earnings. Antuna (2000) restated it for a medical practice: support based on the same income stream used to capitalize excess earnings is not a double recovery. Banning (1998) added that goodwill has already been accumulated and is an existing intangible asset, so nothing is subtracted from the income for maintenance because the goodwill was divided.

The lever that remains. The maintenance statute lists, as a factor, the distribution of marital property, including whether additional marital property may be awarded to reduce or alleviate the need for maintenance. A large practice equalization payment is an argument for a smaller or shorter maintenance award, and a professional whose income sits above the formula’s ceiling makes it on the factors, where it belongs. It is not an argument against the valuation.

Income for support, above the ceiling.

A professional’s income is defined by the statute, not by the K-1, and for most physicians and partners the maintenance formula stops applying before the analysis begins.

The ruleIn the statute’s wordsFor a practice owner
Self-employment incomeGross receipts minus ordinary and necessary expenses required to produce such income; ordinary and necessary expenses do not include the accelerated component of depreciation or any other business expenses the court finds inappropriate.The practice’s books, not the return, with depreciation and disputed expenses examined line by line.
Personal draws expensed through the practiceAny moneys drawn by a self-employed individual for personal use that are deducted as a business expense must be considered income from self-employment.The vehicle, the travel, the meals, the phone, the family on the payroll: added back.
Pass-through incomeIncome from general partnerships, limited partnerships, closely held corporations or limited liability companies, unless the parent is a passive investor with a minority interest and no managerial duties, in which case income may be limited to actual cash distributions.A partner or PC shareholder is not a passive investor. Distributions are income, and retained earnings are argued as a business need, with the books.
In-kind paymentsExpense reimbursements or in-kind payments that are significant and reduce personal living expenses.The practice-paid car, insurance and club dues.
The formula’s ceilingIf the parties’ combined annual adjusted gross income exceeds two hundred forty thousand dollars, the guideline calculation does not apply, and the court shall instead consider the factors; it may consider the advisory term.Most professional households. Maintenance is decided on need, ability to pay, the standard of living, the property division and the contribution factor, and it is argued from evidence, not run through a calculator.
The same definition for maintenanceThe maintenance statute repeats the child support statute’s definition of gross income and the self-employment rule.One income figure, established once, serves both, and it is the same figure the appraiser used as reasonable compensation from the other side.

The reasonable-compensation figure is the hinge of a professional’s case: a high salary shrinks the goodwill and raises the income for support; a low one does the reverse. An owner who argues both directions loses both. The Income Determination page covers the add-backs in detail, and the Maintenance Calculator runs the formula where it still applies.

Who keeps the practice, and how the other half is paid.

The ownership statutes answer the first question. The second is a financing problem, solved after tax.

A K-1, a profit and loss statement and receipts with a highlighter
The practice stays with the license

Only a licensee can own it.

Colorado’s ownership statutes and the rules of professional conduct keep the practice with the licensed spouse; the marital share is paid in other assets or over time.

Physicians. Corporations shall not practice medicine, and a medical professional corporation may be formed only if all shareholders are persons licensed to practice medicine in Colorado. A non-physician spouse cannot receive shares, and the court does not order a practice sold to a stranger to satisfy a division.

Dentists. Only a dentist licensed to practice dentistry in this state may be the proprietor of a dental practice. The same result.

Lawyers. The rules of professional conduct bar non-lawyer ownership of a law practice and the sharing of fees with non-lawyers, and a former spouse cannot be paid a share of the firm’s future fees as such. The value is paid out of the lawyer’s assets and income.

What that means. The professional keeps the practice and its goodwill, and the marital share is paid with other assets first: the professional takes the practice and the other spouse takes a larger share of the house, the retirement accounts and the investments, valued after tax. Where the estate is not large enough, the balance is an equalization judgment paid over time. In Bookout a $595,000 practice was paid for with $150,000 over fifteen years, and affirmed.

The structureHow it worksWhat to watch
OffsetThe professional keeps the practice; the other spouse takes an equal value in retirement accounts (by QDRO), real estate or investments, each priced after tax.A pre-tax retirement dollar is not worth a cash dollar. The Tax Strategy page covers the pricing.
Equalization judgment, in installmentsA stated sum paid over three to ten years at a stated interest rate, with a schedule that the practice’s cash flow can carry.Security: a lien on practice assets or receivables, an assignment of a life insurance policy, acceleration on default, fees for enforcement. Not deductible; not taxable to the recipient.
Property in lieu of maintenanceA larger share of property, or a larger equalization, in exchange for a smaller or shorter maintenance award, under the maintenance factor that allows it.Maintenance stops on remarriage and can be modified; property does not and cannot. Each side prices that difference.
Tax on the transferTransfers of property between spouses incident to the divorce carry no gain or loss and a carryover basis.The professional who later sells the practice pays the whole gain; the spouse who took the retirement account pays tax on withdrawal. Priced in advance.
Practice debt, tail coverage, guaranteesPractice loans, lines of credit and equipment leases reduce value; personal guarantees are listed and indemnified in the decree; a claims-made malpractice tail is a liability that surfaces on departure.A spouse who guaranteed the practice line of credit is released or indemnified in the decree, or remains liable for a business they no longer share.
Non-competesA covenant restricting a physician’s right to practice on termination is void in Colorado, though damages reasonably related to the injury may be recovered; 2025 legislation extended the rule to dentists and advanced practice nurses.An unenforceable covenant supports the argument that goodwill attaches to the person and would not survive a sale; it is an argument about value, not a bar to it.

Licensing is not at stake in the divorce itself. Child support arrears of more than six months’ gross amount can trigger denial, suspension or revocation of a professional license under the child support enforcement statute, with attorney licenses handled by the Supreme Court; a protection order can affect hospital credentialing and prescribing questions. Both are avoided by compliance and, where needed, by the modification remedies on the Modifying Child Support page.

Records, patients, and privacy.

The valuation needs the practice’s numbers, not its patients’ names, and the law lets the case be run that way.

A sealed envelope and a folder on a desk, a city skyline outside
The numbers, not the names

What is produced, and how it is protected.

A practice is valued from its ledger, production reports and agreements; patient and client identities stay out of the case, under a qualified protective order where any patient-level data is needed at all.

The records. Three fiscal years of financial statements plus year-to-date are mandatory disclosures; the general ledger, production reports by provider, payroll, the retirement plan records, the partnership or shareholder agreement with the capital-account history and every recent buy-in and buy-out are produced on request or subpoena, in proportion to the case. None of it requires patient or client identities. Production reports are run by provider and procedure code, not by name.

Protected health information. Where any patient-level data is genuinely needed, federal privacy rules permit disclosure under a court order limited to what the order expressly authorizes, or under a subpoena with a qualified protective order that bars use for any purpose other than the litigation and requires return or destruction at the end. A law firm’s client confidences are handled by redaction and the same protective order.

The public file. Sworn financial statements, financial disclosures, separation agreements and expert valuations filed with a Colorado court are suppressed from public access under the judicial branch’s access directive, and the decree can be drafted to identify the separation agreement rather than restate its terms. A physician’s practice value does not have to become a public document. The Privacy page sets out what is and is not visible.

What I tell every professional before the practice is valued.

Six things, in the order they come up. Not legal advice for your case; the mistakes I have watched for thirty years.

Across a conference table from her lawyer, a woman listens, a closed folder in front of her, the foothills in the window
  1. Stop arguing that no one would buy it.

    Colorado values goodwill to the owner and has since 1985. The argument that wins is about the comparison salary, the multiple and the standard of value, made through an appraiser.

  2. Pick one reasonable-compensation figure and live with it.

    It sets the goodwill from one side and your income for support from the other. An owner who argues both directions loses both.

  3. Do not lean on the buy-sell agreement.

    It is evidence, weighed with the circumstances, and a formula for departing partners does not bind a court valuing a partner who is staying.

  4. Above $240,000, maintenance is argued, not calculated.

    The formula is off. The property division, the standard of living and the contribution factor decide it, and a large equalization is an argument for a smaller award.

  5. Keep the practice, and pay for it after tax.

    The ownership statutes keep it with you. The other half is paid in retirement, real estate or installments, each priced at what its owner will keep, and secured.

  6. Produce the numbers, protect the names.

    Ledger, production reports and agreements, under a protective order; patient and client identities never enter the case.

Six things people get wrong.

The practice is just me; it has no value without me.

Colorado has divided professional goodwill since 1979, valued to the owner above the tangible assets, whether or not the practice could be sold.

My spouse could end up owning part of the practice.

Not in Colorado. Only a licensed physician, dentist or lawyer can own the practice; the other spouse is paid in other assets or over time.

The buy-sell agreement sets the value.

It is evidence, not a cap, and a departing-partner formula does not bind a court valuing a partner who is staying.

The practice can't be valued on the same income that sets maintenance.

The Supreme Court and the Court of Appeals have rejected that argument, three times. Goodwill is a snapshot of past excess earnings; maintenance is a claim on future income.

Colorado excludes personal goodwill.

No published Colorado case does. The case sometimes cited for it is about accrued vacation leave. The distinction is an argument about value, not a rule.

My spouse paid for medical school, so they own part of my degree.

The degree is not property. The contribution is compensated through maintenance and the property division, under an express statutory factor.

What to bring, and what to settle first.

Before the first meeting

Bring the practice.

  • Three years of practice financial statements and returns, plus year-to-date
  • The partnership, shareholder or operating agreement, with every buy-in and buy-out since you joined
  • Your compensation history: W-2s, K-1s, distributions, benefits paid by the practice
  • Production reports by provider for three years, without patient names
  • Practice debt: loans, lines of credit, leases, and every personal guarantee
  • The malpractice policy and any tail-coverage terms; any non-compete
Before you propose

Six things settled first.

  • The standard of value the appraiser will use, and whether a discount is in play
  • One reasonable-compensation figure, for value and for income
  • The add-backs, conceded or contested, line by line
  • The maintenance case above the formula’s ceiling, on the factors
  • How the other half is paid: offset, installments, property in lieu of maintenance, secured
  • The protective order for the practice’s records

The degree is yours. The goodwill is marital. The practice stays with the license, and the other half is paid after tax.

Start with a confidential conversation: tell me about the practice →

The questions physicians, dentists and lawyers ask.

Will I lose my practice?

No. Colorado law does not let a non-physician own shares in a medical professional corporation, a non-dentist be the proprietor of a dental practice, or a non-lawyer own a law firm, so the court cannot make your spouse a co-owner and does not order practices sold. The practice is valued, its marital share is divided, and you keep it and pay for the other half with other assets, an equalization judgment, or installments secured by the practice.

My spouse says the practice is worth millions. Is it?

Possibly, and the number is an argument about method. Colorado values professional goodwill as marital property and has approved the excess-earnings method: what you earn above what a comparable non-owner professional earns, capitalized. Everything turns on the comparison salary, the multiple, the standard of value and whether a marketability discount applies. A partner in a ninety-lawyer firm whose withdrawal formula gave $42,000 was valued at $113,000 by the Colorado Supreme Court’s approved method; a solo dentist’s $10,560 in equipment and receivables was reversed for leaving goodwill out.

My shareholder agreement says book value with no goodwill. Isn't that the number?

No. The Court of Appeals held that the price or pricing formula in a buy-sell agreement is not facially dispositive and must be weighed with all the circumstances, and the Supreme Court refused to apply a withdrawal formula to a partner who was staying, because doing so ignored the present facts and intentions of the parties. The formula is evidence of value; it is not a cap.

My income already sets the maintenance. How can the practice be valued on the same income?

Colorado has rejected the double-dip argument three times. The Supreme Court held that capitalizing the amount by which a lawyer’s historical earnings exceeded a comparable non-owner’s does not convert future income into property, and the Court of Appeals has held twice that support based on the same income stream is not a double recovery, because goodwill supplements earning capacity and is not the earning capacity itself. The lever that remains is the maintenance statute’s own factor: property awarded to reduce or alleviate the need for maintenance.

We earn more than $240,000 together. Is there still a maintenance formula?

No. Above $240,000 of combined annual adjusted gross income the guideline formula does not apply, and the court instead decides maintenance on the statutory factors: need, ability to pay, the marital standard of living, the property division, and a spouse’s contribution to the other’s education or professional advancement, among others. The term table may still be consulted. For most physicians and partners this is the maintenance case, and it is argued, not calculated.

My spouse supported me through medical school. Do they own part of my degree?

No. The Colorado Supreme Court held in 1978 that a professional degree is not property, and reaffirmed it in 1987 while holding that the supporting spouse’s contribution is compensated through maintenance and the property division. The maintenance statute now lists a significant contribution to the other spouse’s education or occupational advancement as an express factor. Student loans taken during the marriage are marital debt, though the court may assign them to the borrower.

Can my spouse subpoena my patient or client files?

Not the identities. A valuation needs the general ledger, production reports, payroll, the partnership agreement and the buy-in history, none of which requires patient names, and protected health information is produced under a court order or a qualified protective order that limits use to the litigation and requires return or destruction. A law firm’s client confidences are handled with redaction and a protective order. I have never needed a patient’s name to value a practice.

How do I pay a buyout without gutting the practice?

Installments over several years at a stated interest rate, secured by a lien on the practice assets or by a retirement account through a QDRO, with acceleration on default and life insurance; or an offset against retirement and real estate so that less cash leaves the practice. Transfers incident to the divorce carry no tax, and an equalization judgment is not deductible, so the payment schedule is built after tax. The Court of Appeals affirmed a $595,000 practice paid with $150,000 over fifteen years.

Keep reading

Where to go next.

The next page in this chapter, the pages that belong with it, and the blog posts on the same question.

From the blog, on this topic

All articles from the blog →

You built the practice patient by patient. The case should respect that.

A consultation is a working session, in person in Greenwood Village or by video: bring the last three years of practice financials and the ownership agreement, and I will tell you what the practice is likely worth under each method, what your income is for support, and how a buyout can be paid. Your note reaches my office directly; during business hours we call you back within the hour, run the conflicts check, and set the meeting.

The fastest thing you can do today

Talk to us about your case.

303-507-5529

One call. A real person picks up, hears you out, and tells you how we would handle what you are facing and what to do first. No phone tree, no sales pitch, no obligation. Your first conversation is with our intake paralegal, who will get you to Aaron fast.

Rather write? Send a short note and during business hours we call you back within the hour.

A person answersMonday–Friday, 9 to 5No obligation