What is the impact of a Louisville divorce on business owners? Do you or your spouse own a business, an investment or shares in a corporation, or a professional practice? It is prudent to evaluate the impact of your divorce on your business interests. How will the divorce impact the operational aspect of your company? Is the business interest, in whole or in part, a marital asset in your divorce?
In most cases the operational aspects of the company or professional practice will not be impacted by the process of a divorce. One exception to this may involve a scenario where both spouses have an interest in or are involved in the operational aspects of the company. What happens if they will not be able to work together during and after the divorce? How does this affect their ownership interests in the future? The divorce and business attorneys at Dodd and Dodd have decades of experience in these legally complex and financially sophisticated cases.
If you are worried about the impact of a Louisville divorce on business owners the first thing you need to know is not to change any aspect of your company or practice operations. This is especially true from the perspective of your income, as well as the income or value of your company. Our Family Courts see through any attempt to manipulate performance, sales, income or the value of a company in the months (and years) leading up to the divorce. It is quite straight forward for a forensic accountant to work through business financials and tax returns and identify attempts to hide income, affect performance or reduce the potential valuation of the professional practice or corporate interests. Any attempt to manipulate this process could come back to you in the form of sanctions, or the outright loss of your business altogether.
There was a recent case where the owner of the company substantially reduced their salary (income), and even the amount of sales and income generated by the business for a period of several months before filing for divorce. Forensic accounting easily brought these issues to the attention of the Court. The Judge not only applied a different strategy to determine valuation (based upon 3 years of prior actual performance), but the business owner faced sanctions that substantially reduced their portion of assets during marital property division . Any attempt to manipulate or lower the value of a business or professional practice in an attempt to reduce the impact of a Louisville divorce on business owners will come to light and face harsh consequences.
In the above case the business owner appealed the Divorce Court’s decision, and lost that appeal.
So how will a business or professional practice be approached in the context of a divorce? The first question is usually focused on a determination of whether the asset(s) in question are the separate property of the business owner, marital asset(s), or a blend of the two. The business interest(s) must be valued through an expert appraiser. This is often a contentious process as each party in the divorce has a substantially different interest in the valuation of the company. The higher the valuation, the more the business owner will have to pay their former spouse in order to protect their ownership position through and after the divorce (if the business asset is in whole or in part considered to be marital property).
Marital property is to be equitably divided between the parties. A business owner must offset their spouse’s marital property interest in the company through other assets such as retirement or pensions, equity in the family home, or some other contractual arrangement. What are the short and long-term tax implications of each choice in this process?
What is the impact of a Louisville divorce on business owners and professionals in practice? You need the sound advice and counsel of Louisville family law, tax and business attorneys with decades of experience. 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.
