Impact of Divorce on Joint Properties or Business in Florida
When two people get married to each other, they wish for a happily ever after. Sadly, the fact is 52 percent of first marriages and 70 percent of second and third marriages end in divorce . Although divorce is difficult for both parties, the matter becomes arduous when either of the spouses owns a business. Most of the time, business is the most valued asset a person owns. We understand that you have spent countless hours and resources to flourish your business. Orange Park area Divorce Lawyer states that marital property, debts, and assets are equally divided between both partners in Florida. If you start and own business during the marriage, then it is regarded as a marital asset, which has to be divided between the two.
There are nine Community Property States: Arizona, Idaho, California, Louisiana, New Mexico, Nevada, Texas, Wisconsin, and Washington. Community Property states consider both the parties as equal owners of all marital property (a 50-50 split is the rule). The remaining 41 states are the Equitable-Distribution States. The Equitable-Distribution States consider factors such as spouse's earning power, the length of the marriage, and the involvement in building the business while determining a settlement.
Settlements in Equitable Distribution States do not need to be equal, but they should be fair. Factors considered are:
- Does one party own the business prior to the marriage.
- Contribution that each party made to the business during the marriage period.
- Involvement of any third party.
How Divorce Affects Your Business?
As a business owner divorce might put you in a position, you don't want to be in- you could end up in a business partnership with your soon to be ex-spouse. You may have to give half of the business in community property states or the same amount in equitable distribution states. You had none of these scenarios in mind, but this is what could happen if you don't take needed steps in advance. When a couple owns assets such as cars, a house, bank and retirement accounts, stocks, etc.instead of giving half a business to the spouse in a divorce, these assets can be divided so that you can keep your business and your spouse gets an extra share of the assets.
Before going any further let's understand about separate vs. marital property Separate property is:
- Property that was owned by the person prior to marriage.
- A gift received by only one spouse from a third party.
- Inheritance received by one spouse.
The separate property loses its status when it is mixed with marital property and vice versa. For example, you own a house, and you add your spouse as co-owner, or if you deposit the inheritance received by you from your parents into a joint account with your spouse, then it is most likely considered as marital property.
All other property acquired during the marriage is termed as marital property irrespective of which spouse owns it.
When the value of your business increases during the marriage, the increased value could be considered as marital property.
Dividing a Business after Divorce.
The very first step in dividing a business is to find the value of the business. A valuation specialist should be retained. Referrals for certified personals can be obtained from either American Society of Business Appraisers (ASA) or Institute of Business Appraisers (IBA) . It is best for each party to retain its business valuation expert.
Deciding the Value of a Business
The way of business valuation is the same, whether it is conducted for the purpose of divorce or for buying or selling. The expert examines the financial records of the business, such as:
- Cash flow
- Profit and loss statements
- Assets, like inventory, equipment, and real property
- Customer goodwill
The valuation expert also looks at other factors like economic conditions and trends that can affect future profitability, location of the business. After analyzing all the factors, the expert determines a fair market value , which is the amount a buyer willingly pays to take over the business.
After The Business Valuation
After the business valuation , both the parties should decide how they want to deal with the business. They can sell the business and divide the proceeds between them, or they can agree to run the business jointly.
What if one party wants to keep the business and the other does not?
Best divorce attorney in Jacksonville says if one spouse wants to keep the business and the other one does not, the spouse who wants to keep the business can buy out the business by compensating the value of the interest in business or he can give the spouse equal value in the marital property.
Divorce lawyer in Daytona Beach suggests going for Prenuptial and Postnuptial Agreements. It is best never to mix marriage and business. If you are a business owner (no matter how big or small) heading for a divorce, you should consult expert lawyers who can help you in making the best decision.
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