If you own a joint business in Florida and you have chosen to divorce, then your business can be broken apart to meet the legal requirement for an equitable division of marital assets between both couples. Spouses can claim ownership of a joint business in a contentious divorce. He or she may demand you split the proceeds from selling the business or outright buy out your spouse.
All associated business assets such as intellectual property, real estate, and inventory might be considered subject to sharing with your spouse as a part of equitable distribution of the marital property.
In this article, we will explore what happens to your joint business in a Florida divorce so that individuals can be better prepared to know if their business is subject to property division and protect their interests.
Is a Joint Business a Marital Property in Florida
According to Florida’s equitable distribution law, the marital assets and debts of a divorcing couple must be equitably divided between both parties. A marital property can now include a business that is jointly or individually acquired during the marriage. However, a business a spouse got before the marriage might be considered non-marital property if the other spouse has no hand in operating the business.
But, if a spouse can show that they have contributed in any form or way to the increase in value or growth of a business, then it is considered a marital asset. Contributions can come in the form of sweat equity or marital funds. Sweat equity refers to physical work done for the business or other sacrifices to support the business’s growth. The court usually presumes that some of the business profits were spent on household expenses or family support. This means that there is a mix of funds from one spouse with funds belonging to the other spouse; therefore, it is a business marital property.
How is a Business Valued During Divorce
During a divorce case, a major task is to ascertain the valuation and inventory of the assets and debts of the couple. There are different ways that a business value is measured. They include:
- Appraised Value: Here, a professional accountant or business appraiser having knowledge and expertise in business valuation is called upon to assess the business’s fair market value.
- Market value: Here, the valuations of similar businesses are compared, also considering the potential of your business’s continued growth and earnings.
- Book value: This value is based on the liabilities and assets listed in the company books. Also, the right adjustments for appreciation or depreciation and income shown in tax returns and other appropriate financial records are also considered.
During a divorce business valuation, having an attorney ensures that there are no mistakes. Attorneys often take it upon themselves to hire a business consultant to assess the physical assets and books of their client’s business, make market comparisons, and create a fair valuation. Moreover, you will also need to make your physical assets, business books, and other important information available to your spouse’s divorce lawyer so they can also develop a business value. When negotiating the business disposition, both legal teams must come to an agreement on a figure for the value of the business.
How is a Joint Business Divided in a Divorce
In the state of Florida, joint marital assets are usually divided fairly, except if there is enough justification for an equitable distribution. A joint business can be divided in divorce in several ways. It can be sold, and the proceeds are equally divided among the spouses, or both parties can continue co-owning the business. Lastly, one party can buy out the other’s interest in the business.
Each method has its merits and demerits. So, you must consider each of them carefully before choosing any option. If you are considering getting a divorce and you have a joint business, you should consult with an experienced divorce attorney in Boca Raton, West Palm Beach, and Stuart, Florida.
Selling the Business
You can choose to sell the business and then split the proceeds. It is a good option when one party intends to keep the business but doesn’t have enough assets or funds to compensate the other party for their interest or when neither party intends to retain the business. However, it can be quite time-consuming to find an outside buyer for a closely held company. This often results in a lengthened divorce process, so choosing this option is usually good only in a few circumstances.
Buying Out the Other Party Business Interest
A situation where the spouse with the highest involvement in the business buys out the business interest of the other party is a common way of distributing joint assets in a divorce case. However, this method will only work if the buying party has enough funds to buy out the other party. If not, the buying party will have to give up interest on other marital assets, such as a joint brokerage account or a marital home, to achieve the buyout.
Moreover, the benefit of this method is that it allows the party who runs the business to continue without interference from the other party. Furthermore, it creates a clean break to live financially independently and move forward from one another.
Co Owning the Business
The last way to divide a joint marital business is for both parties to continue jointly operating and owning the business after divorce. This method often comes with several issues. The reality is that married couples get divorced because their relationship is not thriving, healthy, and strong. Therefore, many spouses cannot remain business partners after they divorce. Moreover, when in a contested divorce, this option becomes invalidated because its ownership is impossible. That said, it is quite unlikely for a court to compel former spouses to remain in a business together.
Conclusion
During a divorce of joint ownership in Florida, you must hire a law firm with experience in family law and help clients divide marital property and businesses equitably. A skilled divorce attorney from Boca Raton, West Palm Beach, and Stuart, Florida, will advocate for your best interest during the negotiations involving the disposition of your business. Visit our website to book your consultation today.
