Dividing the Family Business in a Boca Raton Divorce
Whether it’s a law firm, medical practice, construction company or some other business, many couples own and operate a business together. And because for many of these couples, the business is their sole source of income, divorce often involves difficult issues regarding the award, valuation and buy-out of the business.
Florida Business Valuation and Award of Business
One of the most important aspects of dividing a family business is first determining the value of the business. There are a number of factors that go into determining business valuation, depending on the type of business. Some of these factors include:
- Cash on hand;
- Projected profits and losses;
- Value of assets and liabilities;
- Value of inventory;
- Value of personal and/or real property, and;
- Personal/professional goodwill.
Business valuation is a complex issue that involves weighing a variety of factors. At Schwartz | White we work closely with forensic accountants who examine all of these, and other factors, closely to come up with an accurate business valuation that can be used as a starting point for discussion regarding how the business should be divided and how to structure the buy-out.
Except in those rare cases where the couple is able to continue to work together, or where the business can be cleanly divided, the business must be awarded to one party in the divorce. This means that the spouse who will receive the business must buy-out the other spouse’s interest. Depending on the client’s net worth, this may be as simple as one spouse cutting a check to the other spouse for her share of the business.
It may also be possible to award property equal to the value of the business interest to be bought out to balance the ledger. For example, the business is valued at $500,000 and is awarded to the wife. Based on the equitable division of the marital estate, each spouse is entitled to $250,000. Instead of writing a check, the wife agrees to let the husband have her half of the house (valued at $175,000) and $75,000 of her share in the stock portfolio.
In cases where the business and/or the spouse inheriting the business does not have enough cash flow, or if there is not enough other property that can be used to balance the ledger, it will be necessary to structure a buy-out. This could include lump-sum payments at predetermined intervals, payment in full by a certain date with no pre-determined amounts, or some other method that the parties agree to.
Our Boca Raton Divorce Attorneys Can Help Divide Your Business
Drawing on more than 50 years of combined experience handling divorce and business valuation and division, the attorneys at Schwartz | White have a strong understanding of the diverse and complex issues that go into dividing a family business in divorce. Our Boca Raton business valuation attorneys work closely with forensic accountants to determine the value of the business and come up with creative solutions for structuring the buy-out to ensure that both spouses receive a fair settlement, and that the business will be able to continue to provide a stream of income that can fun child support and/or alimony payments. If you are getting divorced and own a family business, contact us at 561-391-9943, or complete our convenient web form, to schedule an appointment today to discuss your case.