What Will Happen to Your Business if You Get Divorced?

Among all the property and assets that businesspeople fear that they will lose the most in a divorce, it is their business. And while division of  business often falls more under the category of family law, as opposed to business law, any businessperson who faces divorce likely will want to know what will happen to their business.

Get Both Attorneys Involved

Before getting onto what actually will happen with the business, it is important to note that business people getting divorced should have their family law attorney and their business law attorney, working closely. Many high level divorce attorneys are not corporate lawyers, and may not know about how a divorce affects their client’s company, or how corporate documents may affect what can and cannot be done in, and to settle, a divorce.

Marital or Nonmarital Property?

Many people believe that if they had started or owned their business before they were married, that the business cannot be divided in the divorce. This is not true. The business can be seen as marital property, if both spouses put time, money, or effort into growing that business.

How Much is it Worth?

The first step is that the business may have to be valued. The spouses may have to agree on a business evaluator, or else, they will both want their own, and a way to resolve conflicting valuations. Things like the value of intellectual property or future business, or the business’ name and reputation, must all be valued, as well as its hard assets like inventory or machinery.

Just finalizing what the business is worth can take time, effort and funds. If there are allegations that funds are being hidden or assets aren’t disclosed, it can lead to uncomfortable discovery into your business financial accounts.

Who Gets What Percentage?

Once the business is valued, the court will have to decide how much of the business belongs to which spouse. Because Florida is an equitable distribution state, there is no assumption that the business is owned equally, 50-50, by both spouses.

Paying a Spouse Their Share

Once it is determined how much of the business is owed to each spouse, comes the matter of paying that interest to the spouse who won’t be keeping, and thus running, the business.

There are two options. The business could just be closed and its profits and assets liquidated in the percentages that each spouse owns, but obviously that isn’t ideal for business owners.

More likely is that the spouse who wants to keep the business will need to find a way to “buy out” the others’ interest in the business. That may include paying him or her his or her interest in the business, but it may also include buying his or her stock or shares, depending on what the corporate documents say.

Life happens. How will it affect your business? Let us help. Call the West Palm Beach business litigation attorneys at Pike & Lustig today.

Sources:

flcourts.gov/content/download/862618/file/2023-01%20AAML%20-%20Equitable%20Distribution%20Outline.pdf

investopedia.com/terms/b/business-valuation.asp#:~:text=A%20business%20valuation%2C%20also%20known,of%20its%20departments%20or%20units