Is my Professional Corporation Considered Family Property?

For many professionals, including lawyers, doctors, dentists, and accountants, a professional practice is much more than just a job. For many professionals, their role is the product of many years of education, personal sacrifice and adherence to rigorous professional standards. But what happens to that practice if your marriage breaks down? Can your spouse claim a share of your professional corporation? The short answer is yes. At least in part.

Under the Family Property Act, the value of a person’s professional corporation under which they practice may be considered family property that is subject to division in situations of separation and divorce.

How the value of a professional corporation is calculated, and what exactly is divisible, can be complex. It may depend on factors including: the structure of the practice, the type of work involved, and the professional’s individual circumstances.

What Is “Family Property” in Alberta?

The Family Property Act presumes an equal division of assets accumulated during the marriage or adult interdependent relationship. This includes businesses, professional corporations, and, in some cases, increases in the value of exempt property.

If a professional practice, such as a law firm, dental office, or medical clinic, was created or grew in value during the course of the marriage, its value may be subject to property division upon divorce or separation, even if only one spouse was actively involved in the business.

Is a Professional Corporation Part of Family Property?

If your professional practice is incorporated (e.g., a Medicine Professional Corporation, Legal Professional Corporation, or Chartered Professional Accountant Professional Corporation), then your shares in the corporation are considered family property and, in the context of family law, they are subject to division like any other asset.

The division of a professional corporation involves several unique considerations that distinguish it from other types of corporations. These nuances include:

• Ownership Restrictions: Many professional regulatory bodies require that only licensed and registered individuals or members can own shares in the professional corporation. This means a non-professional spouse cannot directly receive shares from a professional corporation.
• Valuation: Although one spouse may be unable to receive shares in a professional corporation, the value of those shares may still be included in the division of family property. This means that, instead of transferring the shares themselves, the value of those shares must be compensated through other assets or a lump-sum payment.

In many instances, the Court will require that the valuation of a professional corporation be conducted by a qualified Chartered Business Valuator (“CBV”) or accountant who is able to prepare a formal valuation.

The date of valuation is usually the date of separation or trial, but this can vary depending on the facts of each case.

• Debts and Liabilities: When valuing a professional corporation for the purposes of property division, it is important to look beyond gross revenue or assets of the professional corporation. Corporate debt, such as business loans, lines of credit, or equipment financing, can significantly reduce the net value of the practice. Similarly, the existence of professional liability insurance, which is a requirement for many regulated professionals, may impact risk and valuation but does not necessarily add to the business’s tangible value.

Other financial components must also be considered. For example, shareholder loans, amounts the professional has loaned to or borrowed from the corporation, can either increase or reduce the net value depending on the direction of the balance. Retained earnings (profits kept within the corporation rather than paid out) and working capital (current assets minus current liabilities) also play a key role in assessing the financial valuation of the professional corporation.

A comprehensive valuation of the professional corporation should account for all of these factors to ensure that any division or equalization is based on a realistic picture of its net worth.

Can a Spouse Receive Half of a Professional Practice?

While the value of a professional practice may be divisible under the Family Property Act, this does not mean that your former spouse can automatically receive half of the practice itself, especially not in the form of shares or ownership in the corporation.

Most professional regulatory bodies, including the Law Society of Alberta, the College of Physicians and Surgeons of Alberta, and CPA Alberta, impose strict rules on who can own or control a professional corporation. Generally, only licensed professionals in good standing can hold voting shares in these entities. As a result, non-professional spouses cannot become shareholders, directors, or officers of the professional corporation, even if they are entitled to a share of its value under family law.

This creates a practical and legal limitation: the shares cannot be divided, but their value can be equalized.

In practice, this means that if a professional corporation is determined to have value (whether based on assets, goodwill, or retained earnings), that value will be factored into the overall division of family property. The spouse who retains the professional practice will typically be required to compensate the other spouse through other means, such as:

• A lump-sum equalization payment;
• A transfer of other assets (e.g., home equity, savings, investments); or
• A structured payout over time (often secured by a promissory note or other security).

The goal here is not to split the practice in half, but rather to ensure that the non-professional spouse receives a fair share of the family property without violating professional regulatory requirements or compromising the practice itself.

Final Thoughts

A professional practice can absolutely be considered family property, even if your spouse played no role in the business. The good news is that with sound legal guidance, it is possible to preserve your practice while reaching a fair division of property.

If you are a professional facing separation or divorce, do not wait until court proceedings begin. Early planning can protect your interests and prevent costly disputes down the line.

Need legal guidance tailored to professionals? Our team at Hayher Lee LLP helps professionals navigate the division of corporate assets.