Valuing, Dividing, and Determining Income from a Business Interest in a Divorce

April 16, 2014 (Press-News.org) Often in dissolution of marriage cases, one party to the divorce owns a business or a partial interest in a business entity such as a corporation, partnership, LLC, etc. What happens to the business or the value thereof in the divorce? A common question business owners going through a divorce ask is whether or not their business is a "marital asset". Florida requires that all marital property be divided equitably between the parties, and any business or business interest acquired during the marriage and/or with marital funds will be subject to the equitable distribution laws, even if only one spouse was involved in the transaction, ownership, and/or operation of the business.

Additionally, business interests acquired prior to the marriage may become assets having value which is subject to division in the divorce as well. One or both spouses may have contributed efforts, labor, or funds toward growing the business or enhancing the value of the entity during the marriage, and, if that happens, the enhancement or appreciation in value due to these "marital efforts" or "marital labor" is a marital asset and will be subject to equitable distribution in the divorce. Spouses may disagree as to the value that should be attributed to these enhancements, which can cause the proceedings to become highly contested and will also typically require the use of a forensic accountant and/or business valuation expert.

It can also be extremely difficult to learn or establish the income a business owner, but determining both parties' incomes is necessary and crucial to the determination of alimony and child support. Assessing this number may also include the use of forensic accountants or those individuals experienced at valuating businesses in a particular region or industry. While a business owner's tax returns will list what is considered "income" for IRS purposes, there are typically other aspects of income which the family court will consider when it comes to determining "gross income" for purposes of negotiating or trying the issues of child support or alimony payments.

Specifically, under the Florida statutes, income includes not only salary, wages, bonuses, commissions, royalties, interest and dividends, etc., but also the reimbursement of certain business expenses, which could be substantial. This may be for travel or meal expenses, as well as for health and life insurance payments that the individual may make. The family court will consider those items to be income when determining what a party's income is before ruling on support awards.

Most business owners will be focused on finding a solution that allows for the continued operation of the business entity. This may result in very complicated discussions about the assets of the couple, and it is important that individuals have representation at this time.

If you or your spouse own a business and are considering a divorce, you need to speak to an experienced, Board Certified family law attorney as soon as possible. Your attorney can offer you practical advice on how these assets may be divided in a divorce, and help you work toward a resolution that meets your goals.

Article provided by Lewert Law Offices, P.A.
Visit us at www.lewertlaw.com