2665 S. Bayshore Drive, Suite 1204, Miami, Florida 33133

Miami Attorneys Assist with Business Valuation in Divorce

Board-certified family law specialist protects your investment

Business owners who go through a divorce can lose more than they bargained for, unless they have determined representation to protect their business interests. If your spouse played no role in founding the business or developing it, you may think your business is protected. But if you started or grew the business substantially while you were married, a court may decide it is part of your marital estate. Under certain circumstances, you can lose control of the business you founded or your brand. But whatever your situation, Rafool, LLC can help. We have vast experience with complex, high-net-worth divorces, and we’re prepared to take decisive steps to protect your company, your brand and your wealth.

When is a business marital property?

There are rules for determining whether an asset, such as a business, is marital or nonmarital property, but those rules are open to interpretation. Generally, a business is separate if one spouse founded the business before the marriage or started the business during the marriage using nonmarital assets. However, even if these circumstances exist, a business can still be marital property if the other spouse participated actively in the development of the business. This goes beyond working as an employee or “pitching in” from time to time. If the other spouse did regular work for less-than-market-value compensation, and that work was instrumental to the growth of the business, a court can find the other spouse has an equity interest in the company. And unless there is a prenuptial or postnuptial agreement that stipulates otherwise, a court could easily determine that a closely held business is marital property.

How is the business to be valued?

If the business is assigned to the marital estate, a value must be assigned. There are numerous ways of assigning value, starting with revenue and tangible assets, such as real estate, supplies, equipment, and contracts. This is an area where business owners who’ve been underreporting income for tax purposes or paying employees under the table can get into serious trouble from a spouse who knows what’s been going on.

Moreover, the income a business generates and is expected to generate in the near future is not the be-all and end-all. Businesses also have intangible assets with potentially greater value. If a business has strong branding, an established trademark, and customer goodwill, it is poised for growth. A spouse who has an equity interest in the business also has an interest in the brand. So, settling for a buyout based on current revenue would be very short-sighted. On the other hand, if the public associates the brand with the couple, will their divorce damage the brand? It may be necessary to consult a financial expert to assess the value of the company’s intellectual property holdings before understanding the true value of the company.

How can an ongoing business be distributed?

Once the value of the business is ascertained, there are two questions to answer: How much of the business is the other spouse entitled to? What is the best way of settling the other spouse’s claim on the business? To answer the first question, the court applies the statutory factors for equitable distribution in the Florida Statutes §61.075 and assigns a percentage of ownership. To the extent that each party can convince the court that the business got to where it is because of their unique and irreplaceable contributions, the greater their ownership share may be.

As for distributing the business, there are many considerations. Does either party or both parties want to continue owning the business? Are there sufficient funds available to buy out one of the spouses? If a buyout isn’t feasible, should the separated spouse receive royalties, and if so, in what amount? If one spouse is separated from the business, are their assets he or she can leave with? For example, can the separated spouse start a new venture under the company brand?

These are complex issues that you cannot trust to just any family law attorney. We have an established track record of success in high-net-worth divorces and those involving complex financial assets. We are ready to put our knowledge and experience to work for you.

For answers to questions on divorce costs involving businesses, schedule a consultation at our Miami office

Rafool, LLC protects your financial rights to your business during the divorce process as we work for optimal results. Call us at 305-567-9400 or contact our Miami office online to schedule a consultation.

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