Divorces can be among the most stressful experiences you go through on a personal level. Unfortunately, even in the most amicable of circumstances there can be elements of the process that complicate matters. As entrepreneurship becomes more accessible, among the increasingly common examples of complexity is business ownership.
You may have spent years building a business that is successful, or have only recently begun embarking on an entrepreneurial journey that you think could really make a difference. In either case, you’ve created an enterprise that is uniquely yours. It’s no wonder, then, that you may be concerned that your wife could be entitled to half of that business if you divorce.
Consulting an experienced Florida divorce attorney is essential in these circumstances. Nevertheless, it’s worth getting to grips with some of the basic considerations in these cases before moving forward.
The Concept of Equitable Distribution
The primary thing to be aware of in all divorces is that Florida is an equitable distribution state What does this mean? Essentially, it refers to the fact that the Florida family courts are required under Florida Statute §61.075 to ensure that marital assets are divided in a way that is fair. This doesn’t always mean a straight 50/50 split, but rather that judges have the discretion on how items are divided, but should achieve a balance.
In some circumstances, this may include businesses. If the company is considered marital property, it will need to be audited and included as one of the assets that form part of equitable distribution. It may be reassuring, though, to understand that this doesn’t always mean the business itself will be divided. Rather, the courts can consider how the business and other marital assets may be distributed in the most fair and non-disruptive way.
Is the Business a Marital Asset?
Before getting into the weeds of actually considering a business for division or distribution, it’s important to establish whether it’s actually a marital asset. If it doesn’t fall under this definition, then the law states that—in most circumstances—it doesn’t form part of the distribution process at all.
So, when is a business usually considered marital property?
- When it was started during the marriage
- When it was purchased using shared marital funds
- If the business has developed or been expanded through the use of either joint marital assets or the combined efforts of both spouses
While there can be nuances involved in either of these circumstances, these are usually clear-cut examples of a business being marital property and, therefore, subject to division.
On the other hand, a business is often considered non-marital property when:
- It was owned by a single spouse prior to the marriage
- It was acquired through inheritance or was gifted specifically to one spouse
- A prenuptial or postnuptial agreement is in place that protects ownership of the business
While a business may be considered non-marital property, the increase in value of the business during the marriage may sometimes be treated as a marital asset.
What if My Spouse Isn’t Involved in the Business?
If the company falls under the definition of marital property, it doesn’t matter how much or little your spouse is directly involved in the business; it is likely to still be considered for distribution.
Additionally, it’s important to bear in mind that courts recognize that spouses contribute to the success of a business in different ways. For instance, if their management of household responsibilities or taking the bulk of the childcare enabled you to better focus on your business, the courts may consider this a contribution to the company, even if it was started prior to the marriage.
If your spouse owns a business that is a marital asset, it is important to fully document how your efforts have contributed to their success
What Happens if a Business is a Marital Asset?
If a business falls under the definition of a marital asset, the next step is typically to value it. This is because the strict financial value of the company will be used to establish how best to balance out the full range of all assets and liabilities.
This process is usually performed by financial experts, often appointed by both your attorney and that of your spouse. There are a few approaches taken to valuation.
| Model | Meaning |
|---|---|
| Income-based | Values the company by evaluating the cash flow of the business and its earning potential. |
| Market-based | Values the company by assessing its attributes and comparing it to the valuations of similar companies. |
| Asset-based | The valuation is reached by deducting the company’s liabilities from its assets. |
While these are the most common approaches to valuation, experts can also consider other elements, such as goodwill, intellectual property, and customer relationships. Unless there are disputes over accuracy, the valuation will then form part of equitable distribution.
How Could the Business Be Divided?
In some circumstances, it is possible that your wife could be awarded co-ownership of the business. However, this is relatively uncommon, particularly if they’re not actively involved already. Indeed, an experienced Florida divorce lawyer may express to the courts how this could produce greater conflict.
Instead, there are other approaches the court tends to use to include the business during asset distribution. These include:
- Buyouts – If funds are readily available, the owner may pay the other spouse their share of the business’ value in cash
- Asset Offsetting – One spouse keeps the business in its entirety, in exchange for the other receiving additional marital assets of another type
- Structured Payments – One spouse retains ownership of the business, with an agreement in place to repay the value of the other spouse’s portion of ownership over time
- Alimony – Instead of the ownership of the business being divided, the other spouse will receive a portion of business income as part of alimony
In the majority of cases, the courts will aim to minimize disruption to your business while ensuring an equitable division of assets. It is vital to work with an experienced Florida divorce attorney to represent the interests of you and your business, alongside offering practical solutions.
Wrapping Up
Your business isn’t necessarily at risk as a result of your divorce. Even if it is confirmed that the company is considered a marital asset, there are options to minimize disruption. That said, it is vital to collaborate with legal representatives throughout establishment of asset status, accurate valuation, and the division itself.
Our dedicated Florida family law attorneys have significant experience in navigating these complex situations. By reaching out to us, we can help review your circumstances and make a plan for representation that serves your best interests and helps your business continue to thrive.
