Dividing a Small Business in a Divorce

Many Florida couples operate small businesses together to support themselves and their families. In some cases, the couple operates the business as equal partners. In other cases, one partner operates the business full time while the other stays home with their children, works at the business part time, or works at a job with another company. In all cases where a small business provides part or all of a married couple’s income, the business or the couple’s share in the business is considered a marital asset. When the couple divorces, it must be divided alongside their other marital assets according to the doctrine of equitable distribution.

Determine your Plan for the Small Business

Before you can divide your business into equitable shares, determine your plan for the business’ future. This will determine the most appropriate way to value and divide it. Talk to your spouse to get his or her thoughts about the business’ future and his or her divorce goals. Possible scenarios for your business include:

• Selling the business and dividing the profits;
• If there is another business partner, having the partner buy out your interest in the business, then dividing the profit from this buyout;
• If one partner wants to continue operating the business, he or she can buy out the other’s share; and
• If both parties want to continue to operate the business and can do so without conflict, they can reincorporate it as a partnership and continue to operate the business side by side.

In any case, the business must be valued accurately to determine how it can factor into the couple’s asset division.

Valuing the Small Business for Division

There are three ways a small business can be valued. Often, a small business appraiser is brought in to value a divorcing couple’s business. The valuation methods the appraiser may use are:

• The Asset Approach. This is the most complex valuation method. The appraiser considers all of a business’ assets, tangible and intangible, to determine a fair value for it. These assets include its income, its equipment, its popularity within the community, and its employees’ skills;

• The Market Approach. With this approach, the appraiser compares the business to similar businesses in the area that recently sold to determine an appropriate value; and

• The Income Approach. With this approach, only the business’ financials are considered when determining its value. These include its current income and its projected future growth as well as the risks it faces.

Draper Law Office can Help you Through the Property Division Process

In any divorce, the couple’s marital assets have to be divided. In your divorce, your lawyer’s job is to act as your advocate and guide you through this process. Contact our team at Draper Law Office online or by calling 866-767-4711 today to schedule your free, no-obligation consultation in one of our two florida offices.