Valuation of a Professional Practice

The valuation of a professional practice in a divorce action in New York is a complex process. There are numerous legal, financial, practical, and evidentiary factors and considerations which must be identified, analyzed, and reconciled before a judge can determine the true value of a practice.

Lee Rosen, of the Rosen Law Firm in North Carolina, recently published a concise overview of the valuation process. I thought the article did a very good job of identifying all of the steps in the valuation process and identifying the different issues which need to be addressed in a appraisal of a professional practice. The process and procedure for a valuation described by Rosen is generally the same in New York.

The key to understanding how valuation is done in New York divorce actions is this: (1) there is no single required valuation method or technique, (2) the role of the expert appraiser is absolutely critical, and (3) the Court has enormous discretion in deciding what method to adopt, how to apply the method to the facts of the case, and in deciding the precise value of the practice. This ambiguity leaves a good deal of room for a competent, well-prepared, attorney or appraiser to effectively advance the client’s case.