What to Know About Dividing a Business in a Divorce
During a divorce, both assets and liabilities will be divided between the spouses. This process is called equitable distribution. The court will determine which assets are marital property and which ones are separate property, and then they distribute marital assets between the parties. If you own a business with your spouse, this will be included in the asset distribution.
Determining the value of some assets is easy and pretty straightforward, but determining the value of a business can be far more complicated. Therefore, you need an expert valuation on the business to ensure you are getting your fair share of the business.
If you have a marital business or a large asset portfolio, you need to speak with a Boca Raton divorce attorney who has ample experience in high-value-asset divorces.
Determining Whether a Business is Separate or Marital Property
The first step in deciding how to divide a business is to determine whether it’s separate or marital property. The marriage date and the date the business was started or acquired will be important factors. Next, the source of start-up or acquisition funds and labor-related or financial contributions during the course of the marriage will be looked at. There is a mistaken belief that if a business was acquired prior to the marriage, it’s automatically separate property. That is not necessarily the case. If a spouse invests marital assets into the business, then the other spouse is entitled to a portion of that. And, if the business’s profits increase due to funds contributed during the marriage, the other spouse could benefit from that value increase as well.
Once you’ve determined a spouse is entitled to a portion of the business, you have to determine what that value is. Not surprisingly, the spouse who stands to lose will claim the business is not worth much, while the spouse who stands to receive a settlement will say the value is much higher.
There are several methods that can be utilized and they can be rather complex. If both parties agree on value and the business interest is small, they can stipulate to its value and continue on with distributing the remainder of assets. In most cases, an expert is required. This person has the expertise to delve into the business’s background, its finances, assets and liabilities, and more. The person is typically an Accredited Senior Appraiser (ASA) or a Certified Business Appraiser (CBA), or they might even be a Certified Public Accountant (CPA).
If the business has a really high value, both sides might retain their own business valuation expert, and then they will battle it out. Each expert may have to testify in court as to their individual valuation. This will obviously result in higher legal costs, so if the business interest is small, a business valuation expert is likely not worth the increased cost.
If you need more information on valuing a business or need representation for a divorce, the team at the Law Offices of Schwartz | White have years of experience handling Florida divorce matters, including complex and high net worth asset portfolios. Contact us online or call our office at 561-391-9943.