DIVORCE: What Happens to My Business?
Transcript
One question I get a lot from people going through a divorce is, “What happens to my business?”
Welcome, everybody! I’m A.J. Grossman, a divorce lawyer, Florida Supreme Court Certified Family Mediator, and dispute resolution specialist with Leap Frog Divorce.
Do You Have to Continue Running a Business With Your Spouse?
Some people mistakenly believe that if they own and operate a business with their spouse, they’ll be forced to continue working together after the divorce.
For example, imagine a wife who owns an event planning company while her husband serves as the company’s CFO and manages its finances. Many couples in this situation worry that they’ll have to continue running the business together even after their marriage ends.
That isn’t necessarily the case. Some former spouses may choose to continue working together, and that arrangement can work for certain couples. However, there are other options to consider.
How Is a Business Valued During Divorce?
In many cases, the business needs to be valued so that its financial worth can be considered as part of the divorce.
For a business that has been operating for a while and has significant value, I often discuss hiring a business valuation expert with my client. These professionals have the knowledge and experience to evaluate different types of businesses and prepare a report estimating the business’s value.
Ideally, you and your spouse can agree on the valuation. Reaching an agreement can help avoid the additional expense and complexity of having competing experts.
If you cannot agree, your spouse may hire a separate business valuation expert. If the case proceeds to trial, the judge may hear testimony from both experts and determine which valuation evidence is most persuasive.
The court can then determine how the business’s value should be addressed as part of the equitable distribution of marital assets and liabilities.
Can You Keep Your Business After Divorce?
Let’s say you own a business valued at $1 million and want to continue operating it after the divorce.
Depending on the circumstances, you may be able to retain ownership of the business while accounting for your spouse’s share of its marital value through other assets, a payment, or another agreed-upon arrangement.
For example, if $1 million represents the business’s marital value, a hypothetical equal division of that value would allocate $500,000 to each spouse. That doesn’t necessarily mean your spouse receives half the business itself. Instead, the division may be structured so that you retain the business while your spouse receives other assets or compensation to account for their share.
The appropriate approach depends on the facts of your case, including the business’s valuation and the overall division of marital assets and liabilities.
What If You Started the Business Before Marriage?
Another common misconception is that if you started the business yourself, your spouse has no right to any of its value.
Florida law is more complicated than that.
A business started during the marriage may be subject to equitable distribution. If you started it before the marriage, its premarital value may be treated differently, but certain increases in value during the marriage may also need to be examined.
The outcome depends on factors such as when the business was established, how its value changed during the marriage, and the circumstances surrounding that increase.
Simply starting a business yourself doesn’t automatically mean that its entire value will be excluded from the divorce. It’s important to understand how Florida law applies to your particular situation.
Get Guidance on Your Business and Your Divorce
Business ownership can make a divorce more complicated, especially when a significant portion of a couple’s wealth is tied up in the company.
Understanding how business valuation and equitable distribution work can help you make informed decisions about your financial future and whether you may be able to keep operating your business after the divorce.
I’m A.J. Grossman, a divorce lawyer, Florida Supreme Court Certified Family Mediator, and dispute resolution specialist with Leap Frog Divorce. I hope you found this video helpful. If you did, please consider liking it and subscribing to my channel. I’m releasing new videos all the time.
Have a wonderful day, and be well!
