Treatment of a Business as Marital Property
Division of marital property is but one of many aspects of a divorce proceeding, yet possibly the most problematic. The more assets a couple shares, the more complicated the division becomes. When couples who live in Maryland file for divorce, they might contemplate selling the family home, splitting the rental income from the beach house, or deciding who gets the Mercedes CLA and who gets the Honda minivan. But when a marriage comes to an end, the division of a business as marital property requires the assistance of business valuation experts, certified public accountants (CPAs), even forensic analysts.
Similar to other assets acquired by a couple during the marriage, a family-owned business typically is divisible in a divorce proceeding to the extent that the interest in the business was acquired during the marriage—even if it is solely owned and operated by one spouse. In order to provide an equitable distribution of a business’s interest, a court must determine the value of each spouse’s business interest accumulated during the marriage.
Valuing the Business as Marital Property
Business valuation, in particular, can be multifarious, calling for a detailed review of all the business records to determine the fair market value of each spouse’s interest. A business, small or large, normally is worth more than what appears on the balance sheet and income statement; much of the business’s value can be found in its goodwill—the reputation and image that exist within the community it serves. This calls for an expert who specializes in appraising companies and uses various business valuation approaches to analyze a company’s worth.
Seeking an Equitable Distribution of Business as Marital Property
In Maryland, a business interest acquired during the marriage is considered marital property; however, a court cannot change ownership of stock in a company from one spouse to the other. So depending on the division of ownership in the business, an equitable distribution of the asset may not be feasible. Dissolving the corporation could become necessary, or a monetary award might help reach an equitable result while leaving the business intact.
Division of a business as marital property during divorce proceedings is complicated due to ownership variations, valuation methods, and the existence of employees. If you are contemplating a divorce and you or your spouse own a business, consult with an experienced family law attorney who can explain what it means to have ownership interest in a business that might be treated as marital property. Contact Howard County, MD, attorney Fred L. Coover, Esq., of Coover Law Firm, LLC, at 410-995-1100.
Disclaimer: The information in this blog post is provided for general educational & informational purposes only. It is not intended to convey legal advice or serve as a substitute for legal counsel on any subject matter.