Divorce and Business-What Happens When They Intersect?
Marriages and business partnerships: two of the most common binding contracts between people that can be doubly messy to untangle if forced to be done simultaneously.
If you’re facing the prospect of divorce from someone who owns their own business, or if you’re divorcing someone with whom you own a business, you may have some questions unique to your situation and requiring special attention.
What Happens First?
If you are facing the prospect of divorce, and are in this situation of being in business for yourself or with your partner, you may want to consider consulting an attorney to assist in the complex issues this situation will involve. The first step the court will take will be to determine whether or not the business is considered as a marital asset, and the next step will be to determine the value of the business.
If the business was owned and/or operated by the person before becoming married, or if the business is covered under a prenuptial agreement, it may be considered as part of the “non-marital assets or liabilities” and may not be a part of the division of assets during the divorce process.
However, if the business was opened together by the married couple, or if one person founded the business after the marriage, the business may be considered a part of the marriage assets and subject to equitable division by the court during the divorce proceedings.
What If Our Business Is Considered Part of the Marital Assets?
Florida Statue 61.075 explains that in all marital assets (including businesses), the court begins with the premise that division should be equal, unless relevant factors provide reason for unequal division.
Unless agreed upon by both the husband and wife beforehand, the process of examining factors which determine the “equitable” division in the eyes of the law becomes extremely complicated and prolonged. Sometimes, the court may enter an interim order so that the business assets can be partially distributed during the course of the proceedings, before final judgment is made.
If the business is judged to be a marital asset, the court will begin an analysis of a number of factors to determine the value of the business. This may involve investigation into accounting documentation, business and personal tax records, an evaluation of business-owned assets, and any other pertinent information.
While this situation can be stressful and involve many coordinating professionals evaluating different criteria, it is a necessary part of the process. Taking the time to place a numerical value on the business itself is the fairest way to determine a monetary amount to be awarded to each person once the business partnership is separated.
What Will Happen to the Business After the Divorce?
Depending on the individual situation, it may be better after divorce proceedings to dissolve the business entirely, or re-establish it under new ownership and business regulations. Discuss all possible options with your attorney during the course of the divorce proceedings, as different plans for the business’s future can affect the details of the divorce itself (such as child support or alimony awards).
If it is best to dissolve the business, Florida State Statue 607.1403 explains that a business can be dissolved by filing an Article of Dissolution with the court after documentation is obtained that all shareholders have approved of this dissolution. There are a number of steps to be considered and your attorney will be able to help you navigate all the necessities.
If it would be best to restructure the business under different ownership, make your divorce attorney aware of this and consult to see if additional business legal council will be necessary. Consider all particulars with the Florida Department of Business and Professional Regulation (DBPR) about the necessary steps for your particular business in this process.