November 28, 2021

Volume XI, Number 332

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What is the Value of a Lawyer's Interest in a Law Firm?

Most law firms have partnership or shareholder agreements which state a certain value for a shareholder’s interest in the law firm.  Although the value set forth in these agreements is normally the most a lawyer can withdraw from the firm upon termination, it is not the value that is generally accepted by divorce courts in the state of Virginia. 

The recent case of Brake v. Brake, 2014 WL1301689 (Va. App. 4/1/14), illustrates this point.  In the Brake case, there was a battle of expert witnesses on valuing Husband’s interest in the law firm.   The Husband's expert took the position that it was the amount set forth in the shareholder agreement, which was $20,000.  The Wife's expert valued the Husband’s interest in the law firm at $308,000.  The Court accepted the Wife’s valuation and indicated that was the intrinsic value to the Husband and Wife of the Husband’s interest in the law firm.

Intrinsic value of a law firm is generally significantly more than the stated value in a shareholder’s or partnership agreement.  The case of Howell v. Howell, 31 Va. App. 332 (2000), the Court used an excess earnings approach to value a law firm interest at much more than the amount set forth in the shareholder’s agreement.

If you are involved in a divorce that involves a lawyer’s partnership interest, make sure you obtain a learned expert who is briefed on laws in the state of Virginia on intrinsic value and can give a reasoned and well-balanced valuation. 

© 2021 Odin, Feldman & Pittleman, P.C.National Law Review, Volume IV, Number 295
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About this Author

J. Patrick McConnell, Odin Feldman Law Firm, Family Law Attorney
Shareholder

With more than 30 years of experience in Family & Domestic Relations law, Patrick McConnell represents clients who have particularly complicated matters that cross state or international boundaries, or that involve complex financial issues. His background in finance and knowledge of tax law provide insight that can lead to innovative solutions. When necessary, Patrick teams with an attorney from the firm’s Estate Planning or Corporate practice areas to assist with the preservation of wealth for his clients' children or their future generations.

Patrick is chair of the Family...

703-218-2185
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