What happens to a Louisville small business in a divorce? If you own a small business you have in all likelihood invested a huge amount of your own time, money, sweat, work, thoughts and action to start and build your company.
The key issue in these complex divorce cases is the characterization of the business asset itself in terms of marital property. What portion (if any) of the company is marital property, and what portion is the separate property of the business owner? Can the company be a combination of both, also known as a “blended” asset?
If it was begun prior to the marriage and has been self-sustaining it may very well be the separate property of the business owner. You may own it in conjunction with your spouse. If so, or if it was started after the date of the marriage it will likely be marital property which is subject to equal division. Once the characterization of the business is accomplished, what happens to a Louisville small business in a divorce which was started or acquired by one of the spouses?
The next step in the process is to establish the valuation of the business asset. What is the company worth if it was sold from a willing seller to a willing buyer at arm’s length? What have similar businesses recently sold for in similar vertical and geographical markets? It may be necessary for an expert appraiser to establish the valuation based upon income factorization, which uses annualized income over a period of years multiplied by a “factor” based upon the nature of the company itself.
Ultimately the options are to sell the business and divide any marital interest in the company between the spouses, or for the owner of the company to “offset” or buy out the other spouse’s marital interest in the business. The business owner can accomplish this by offsetting the other spouse’s marital interest in the business through the owner’s marital share of the equity in the home, retirement or pension, investments or marital assets. It may be in the interests of both parties for the non-business owner to contractually secure their marital interest in the company to make sure the business can continue to operate and prosper.
What happens to a Louisville small business in a divorce depends on a variety of factors, and the ability of the parties to work through these issues and reach a settlement or place the issue before the Court. This is why it is important to work with the proven, experienced divorce and family law attorneys at Dodd & Dodd. We have managed many cases involving a small business over our decades of work in Louisville.
We invite you to review the strong recommendations of our former clients and contact us or call 502-584-1108 to schedule an appointment with one of our experienced divorce and family law attorneys.
