How will divorce affect a Louisville family business? Do you and your spouse own part or all of a small business? Are you facing the end of your marriage and wondering what will happen to the company? Do you own a business together? Do both parties work for the company? What if the company is owned by the family of one of the spouses? Is the family business, in whole or in part, a marital asset? How will a small company or professional practice be handled in a Kentucky divorce?
Here in Kentucky, marital property is generally to be equitably divided between the two parties. If part or all of the family business in question is marital property, that interest must be divided “equitably” between the two parties as part of the process of marital property division.
Do both spouses currently work together in the business? Can you separate your role as a business owner from your role as a former spouse? It may be possible for the two of you to continue to work together. However, it is quite often necessary for one of the former spouses to step away from the business. In this case, any marital interest that either spouse may have in the company must be addressed.
Most business owners want to maintain their ownership of the company and retain control after the divorce is finalized. When this is the case, how will divorce affect my Louisville family business?
The central question in these matters usually comes down to this: What portion of the business ownership is considered marital property?
When was the business acquired? How did each party come to be involved in the company? When was the business formed initially? Was this before or after the date of the marriage? If the family business was already in place before the marriage, was any of the married couple’s money or labor invested in the company?
This can be both a legally and financially complex issue. When was the business acquired? If the business interest was acquired during the term of the marriage, it will usually be considered to be marital property. A family business may have been in existence long before the marriage. In these cases, one must determine the amount of marital funds and labor invested in the family business in question. In these cases, the asset is considered “commingled,” meaning that part of the company is the separate property of one spouse, and part of the company’s value consists of marital property to be equitably divided.
If any portion of the family business is determined to be, in whole or in part, a marital asset, the next step in the process is to establish the valuation of the marital interest in the family business itself. It won’t matter to the Court what the opinion of each owner is regarding valuation. There are specific processes for establishing the valuation of a business interest under the Kentucky Family Code. There are various formulas, based on multiple factors, including the company’s assets and liabilities, annualized sales over a specified period, and the duration of the company’s operations. What would a willing buyer be willing to offer to the owner(s) of the company in any arm’s-length transaction involving the family business?
Several factors will determine the answer to the question, “How will divorce affect my Louisville family business?” There is obviously a lot at stake in these cases. This is why you will need the proven, experienced counsel and representation of the divorce and family law attorneys at Dodd & Dodd. These cases often involve substantial tax-related issues, especially when determining the present value of specific assets used to offset the business interest during marital property division.
We invite you to review the strong recommendations of our former clients and the legal industry and contact Dodd & Dodd or call 502-584-1108 to schedule an appointment with one of our attorneys.
