A closely held business may be one of your most valuable assets — and as such, division of a closely held business in a divorce may be one of the most contested issues. It becomes even more complicated if marital assets unrelated to the business have been pledged as security for debts of the business. Did one spouse contribute time and advice that helped build the business? And, of course, ultimately, what is the true value of the business in the divorce?
Under Florida law, the court begins with the premise that equitable distribution of the assets and debts of the marriage should be equal, unless there is a justification for unequal distribution. Among these potential justifications is the “desirability of retaining any asset, including an interest in a business, corporation, or professional practice, intact and free from any claim or interference by the other party.” That does not necessarily mean, however, that the spouse who is not going to retain an interest in the business is not going to be compensated for his/her share of the business. In this case, having an attorney on your side who understands the complexity of business valuation in a divorce situation is important. Factors to consider include:
- The type of business: Consumer or industrial companies with predictable cash flows and consistent expenditures may be easier to value than a professional practice.
- The method of valuation: Determining the value of a business is often based on one of three appraisal methods. A market approach uses the price of similar, recently sold businesses to estimate the value. A business may also be valued based on the income (profit) it generates. An asset basis takes into account the assets and liabilities of a business to determine a value.
- The date of valuation: This valuation is more important than you may think, as market forces and even deliberate actions of a spouse can change the value of a business. In general, the value of a business may be established on the date of separation, the date of petition or the trial date. But the Court will ultimately decide what date will be used. A Court will base its decision as to the date on all of the circumstances of the case.
Establishing a business value in a divorce is complex and requires the assistance of a skilled divorce attorney in Jacksonville, Florida with experience in this area of equitable property distribution.
Attorney Shane Herbert also contributed to this blog post.