Divorce can be devastating in many ways, especially financially. Some people who are divorcing may have a small business or even be in business with their spouse. Whether your enterprise is a sole proprietorship, partnership, Limited Liability Company (LLC), or corporation, you will need to know: How will my divorce impact my small business?
Equitable Division, Divorce, and Your Business Interests
Outside of limited circumstances, assets acquired during the marriage will be considered for equitable division during divorce. Therefore, if you owned and earned income from your small business during your marriage, it will most likely be considered a marital asset.
Valuing and dividing small business interests during divorce can be complex, and working with an experienced attorney is crucial. While you will definitely want the advice and guidance of a family law attorney, it’s equally important to have business counsel to help you ensure your business interests are being considered and protected during the divorce process.
Valuation of the Business
When a small business is at issue during a divorce, the entity, like any marital asset, will need to be valued. Valuation is typically completed by an expert such as a Certified Public Accountant (CPA) or another financial professional.
Small businesses can be valued as either an ongoing business or for their total (liquidation) value. The ongoing business method is typically used with entities expected to remain operational after the divorce. Liquidation value is usually used for businesses that will be sold.
A valuation can be completed using various methods. The market-based approach looks at other comparable businesses to determine the enterprise’s estimated value. Liquidation examines what a business and its assets are expected to sell for upon closure. Income-based valuation examines net income.
Business valuation can become highly contentious. For the business owner, having others review their records and operations can be disruptive and invasive. For the spouse seeking a valuation, there is often a concern that their ex is undervaluing the asset. You will want to have an attorney at your side who understands business during this process. Your small business attorney can help ensure that your business is fairly evaluated.
Dividing Your Small Business Asset
Depending on your circumstances, multiple things could happen once your small business is valued. For example, your ex may be awarded an ownership interest in your business. You could also end up having to sell your enterprise. However, it’s also possible that you will be able to negotiate a settlement that leaves your business intact and wholly under your control. Your equitable division options will depend on you, your ex, your other assets, and the facts of your case.
Protecting Your Small Business Before and During Divorce
You can take steps to protect your small business before and during a divorce. Sometimes parties will enter into legally binding contracts such as a prenuptial or postnuptial agreement to safeguard their business assets. They may also arrange to buy out their former spouse’s interest in the enterprise or negotiate another settlement option.
The best way to determine your protective options is by working with a Florida small business attorney. Your business lawyer can help you develop strategies and solutions to protect your enterprise and plan for its future.
Contact an Experienced Florida Business Attorney
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with commercial leasing, business, and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.