Division of Business Assets in Divorce
Often, the most hotly contested aspect of divorce is asset division. Division of marital property includes businesses, and both parties often feel they have a right to more than what the other party is willing to concede. There are 30.2 million small businesses in the U.S., according to Fundera. As such, the chances of a married couple owning a business are pretty high, and division of small businesses is a common issue in divorce.
Is the Business Marital Property?
The first step is to determine whether the business is even marital property. Marital property is all real property, assets, and debt acquired during marriage. Property acquired before marriage is not marital property, and does not get divided between spouses absent a comingling of the asset or other improvement of the asset credited to the efforts of the spouse. For example: what if a wife started a business before the marriage, got married, and then the husband invested $50,000 into the business, worked for the business for 10 years, managed the books, or contributed in some other way? All contributions that each spouse made to the business during the course of the marriage, whether the business was owned by one spouse before the marriage began or not, will be taken into account by the court when it comes to determining whether the business is marital property or non marital property. Additionally, any pre or post nuptial agreements will affect the division of your business.
What is the Value of the Business?
According to the Hartford, there are a variety of ways that small businesses can be valued. Each method likely does not take into account the true value of your business, however. For example, you may need to include the location of your business, the economic conditions that will affect the business in the future, and/or other characteristics of your business in addition to annual sales, for example, to properly determine the true value of your business. A few of the methods used by professionals to valuate small businesses include the following:
- Calculate all of the tangible assets, minus debt;
- Use a discounted cash flow analysis;
- Multiply annual revenue by an industry standard, such as two or three; and
- Earnings multiples or Price to Earnings Ratio.
Do not take your spouse’s word regarding the value of the business. Your spouse could be hiding business assets or misleading you on the value. Both parties should hire qualified business appraisers through the American Society of Business Appraisers, the Institute of Business Appraisers, or another certified professional that specializes in business appraisal.
Dividing the Business
Court’s abhor permitting divorced spouses to run the business together after divorce, but there are a few options for dividing the assets. These include but are not limited to the following:
- Sell the business and divide the assets;
- One spouse keeps the business and buys out the other spouse;
- One spouse keeps the business and the other gets the family home or other marital assets; and
- One party keeps the business and makes monthly payments to the other spouse for a predetermined amount.
Call a Port St. Lucie Asset Division Lawyer Today
When conflicts regarding a small, medium, or large business arise, it is important to seek competent legal advice to ensure that your best interests are upheld. You put time, energy, and money into the business, and our attorneys understand how important fair division of assets is to you. Call the Port St. Lucie divorce attorneys at Baginski Brandt & Brandt today at 772-466-0707 to schedule a free consultation.
Resources:
thehartford.com/business-insurance/strategy/selling-a-business/determining-market-value
fundera.com/blog/small-business-employment-and-growth-statistics
https://www.bbblegal.com/divorcing-a-spouse-that-has-a-substance-abuse-problem/
