Divorce Involving a Dental Practice in Colorado: Questions and Answers on Valuation and Goodwill

By Matthew C. Clawson, Colorado Family Law Attorney

Divorce becomes significantly more complex when one spouse owns a dental practice. Whether the case is filed in Colorado Springs, Falcon, Pueblo, Castle Rock, or Parker, the involvement of a dental business creates issues that do not exist in a typical marital dissolution. Dental practices contain high-value assets, advanced equipment, strong hygiene-driven revenue, long-standing community relationships, and, in many areas, growing interest from Dental Service Organizations. These elements make valuation and income analysis significantly more complicated. This guide explains what dental professionals and their spouses need to understand from the start.

Why Divorce Involving a Dental Practice Is More Complicated in Colorado

Dental practices in Colorado Springs, Castle Rock, and Parker rely on complex revenue structures that blend clinical production with hygiene-generated income. Most practices use multiple hygienists and associates, and many maintain strong brand recognition throughout neighborhoods and school systems. Communities such as Falcon and Parker continue to expand, and dental practices in these areas often attract the attention of DSOs. Colorado law prohibits non-dentists from owning a dental practice. As a result, the court cannot split the business between spouses. Instead, the court must determine how much of the practice’s value is marital property and then award the non-dentist spouse a financial payment.

What Goodwill Means in a Dental Divorce Case

Goodwill is the intangible value that contributes to a dental practice’s success in communities such as Colorado Springs, Pueblo, and Castle Rock. It represents patient loyalty, trust, professional reputation, and the expectation of future earnings. Colorado divides goodwill into personal goodwill and enterprise goodwill. Personal goodwill is tied directly to the dentist’s individual skills, personality, clinical reputation, and the ability to retain patients based on personal connection. Personal goodwill disappears when the dentist leaves the practice and is not treated as marital property. Enterprise goodwill is tied to the business itself. It includes staff performance, the hygiene program, established systems, branding, marketing, location, and recurring patient flow. Enterprise goodwill remains with the business and can be divided in a Colorado divorce. Correctly identifying which type of goodwill is present can change the marital valuation by hundreds of thousands of dollars.

Why the Non-Dentist Spouse Cannot Own the Practice

Colorado law does not permit non-dentists to own a dental practice in Colorado Springs, Falcon, Castle Rock, Parker, Pueblo, or anywhere else in the state. The dentist, therefore, keeps one hundred percent ownership of the business. However, the non-dentist spouse may receive a cash buyout, a larger award of other assets, or a structured equalization payment over time.

How a Dental Practice Is Valued in a Colorado Divorce

A comprehensive valuation requires a forensic accountant or business appraiser who understands the dental industry. The expert reviews tax returns and financial statements for the previous three to five years, analyzes doctor and hygiene production, examines accounts receivable, evaluates staff structure, and studies overhead trends. The expert also reviews patient retention data, new patient flow, associate productivity, equipment schedules, compensation models, and practice management reports. Geographic differences matter. A dental practice in Pueblo may have different reimbursement rates and growth patterns than one in Parker or Castle Rock. After gathering data, the expert identifies tangible assets, enterprise goodwill, personal goodwill, and the dentist’s true income. This valuation is often the most important component of the entire case.

How the Dentist’s True Income Is Calculated for Support

Dentists often have income that does not appear clearly on a tax return. Production based pay, hygiene percentages, associate splits, business distributions, owner draws, retirement contributions, and fringe benefits all affect true income. A financial expert identifies discretionary business expenses and evaluates fringe benefits such as vehicles, travel, continuing education, meals, and telecommunications. Courts use this information to determine child support and spousal maintenance. The purpose is to calculate earning capacity accurately, which is essential in Colorado Springs, Castle Rock, and Pueblo.

What Happens If the Dentist’s Income Suddenly Declines

Sudden reductions in income or production are common during divorce. A financial expert evaluates production history, scheduling patterns, staff utilization, changes in hours worked, shifts in procedure mix, increased expenses, missing bonuses, or altered payroll structures. Courts in El Paso County, Douglas County, and Pueblo County may impute income if they believe the dentist intentionally reduced earnings or altered business operations without justification.

How DSO Sales Affect Dental Divorce Cases

DSO activity is an important factor in many dental practice valuations. DSOs frequently target growing markets such as Parker, Castle Rock, and Colorado Springs. If the dentist has spoken with a broker, created EBITDA documentation, received a letter of intent, or is preparing for a sale, these actions can have major implications. A potential DSO sale affects enterprise goodwill, the practice’s fair market value, projected W2 income after the sale, stock or equity rollovers, bonus structures, and contingent earn outs. All of these issues must be examined carefully in a divorce.

What the Non-Dentist Spouse Should Know Early

The non-dentist spouse does not need to understand the details of dental practice management. What matters is knowing that the practice will be valued, goodwill must be correctly categorized, income will be analyzed closely, and sudden financial changes will be scrutinized. Colorado courts do not tolerate hiding business assets or manipulating financial information. The non-dentist spouse may be entitled to temporary support and may receive a share of the marital value of the practice. It is important not to confront staff or attempt to access business systems directly.

What the Dentist Should Know Early

The dentist should keep the practice stable. Reducing hours, altering payroll, shifting production to associates, making major purchases, rebranding, changing compensation structures, or discussing the divorce with employees can create serious valuation problems. These actions may damage credibility and increase litigation costs. Business operations should remain consistent until professional guidance indicates otherwise.

What Happens When Both Sides Hire Experts

It is common in Colorado Springs, Castle Rock, Parker, and Pueblo for each party to hire their own valuation expert. Judges evaluate the credibility of each expert, the methods used, the accuracy of the data, and whether personal and enterprise goodwill are separated correctly. The court may adopt one valuation, combine elements of both, or rely on a neutral expert.

Common Mistakes Spouses Make

Spouses often assume the practice is worth whatever the dentist claims, rely too heavily on tax returns, underestimate the importance of goodwill, or delay hiring a qualified expert. Many believe a DSO sale benefits only the dentist. These assumptions can lead to a significant undervaluation of the marital estate.

Common Mistakes Dentists Make

Dentists sometimes reduce production, alter business operations, make emotional decisions, hide information, or sign DSO agreements without legal review. Many assume that personal goodwill protects the entire practice value. These mistakes can create unnecessary litigation and financial exposure.

Final Thoughts for Colorado Dental Divorce Cases

Divorce involving a dental practice requires proper valuation, accurate goodwill separation, careful income analysis, and a legal strategy informed by the realities of dental ownership. Whether you live in Colorado Springs, Falcon, Pueblo, Castle Rock, or Parker, the right legal and financial team can protect your interests and guide you through this complex process.

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We can be reached at www.clawsonattorney.com, and Matthew can be contacted directly at Matthew@clawson.law. For more information about our top-rated legal services, fill out our online form or call (719) 602-5888 to schedule a free initial consultation.