How Are Business Assets Divided in Divorce?

Schwartz, Fox & Saltzman, LLC. – Philadelphia Divorce Lawyers

If you are a business owner considering divorce, you are right to be concerned about how your business is treated by the court. Pennsylvania is an “equitable distribution” state, meaning, marital assets are divided fairly between spouses, not necessarily equally. 

Is your business a marital asset? If so, what are your options? What counts as marital vs separate property?

Talk with the experienced high net worth divorce lawyers at Schwartz, Fox & Saltzman. We have over forty years of experience helping families in the Philadelphia area get through divorce with the best results possible. We hire professionals to assist us in valuing your business and determine what is fair for your family. 

What Qualifies as Business Assets in a Divorce

A business asset may be more than a physical building, equipment, supplies, inventory or stock, cash on hand and receivables. Business assets may include intangible assets such as the goodwill, the strength of your brand, and the abilities or talent of your employees. 

In addition to assets, a business may have liabilities such as a building or equipment lease, open lines of credit, loans perhaps, backed with a spouse’s personal guarantee and other debt.

How Business Assets Get Valued

Assessing the fair market value of business assets is much more complicated than simply examining what revenues and liabilities. An experienced high asset family law attorney employs a forensic accountant in a business valuation to examine financial records, assets, and liabilities. We also consider the business’ reputation, ability, and potential for growth. 

How Business Assets Get Divided in a Divorce

If the business is a marital asset, it must be divided fairly in an equitable distribution state. As part of the assessment of the business’ value, we consider the contributions of each spouse to the business. Is one spouse more involved with the day-to-day running of the business than the other? Is one spouse the “face” of the business, without whom the business brand would suffer? Did one spouse contribute more funds to start or expand the business, or invest family money in the business?

The answers to these and many other questions will help us determine what the fair distribution of the business value should be in your particular situation.

Options for Handling a Business During a Divorce

Once you determine and agree on how you will move forward on dividing business assets, you have several options:

One Spouse Buys the Other’s Share

Buy-out is very common among business co-owners upon divorce. That said, a buy-out does not have to be a cash proposition in divorce. The spouse wishing to retain the business may give their spouse other marital property exchange for complete ownership of the business. 

Again, this entails a full financial assessment to determine what is considered marital property, which in high net worth marriages may include real estate here or abroad, recreational vehicles, boats, airplanes, art, jewelry, collectibles, and other assets. Be sure to consult with a high-asset family law attorney who regularly works with accountants and appraisers in these areas.

Sell the Business

Unfortunately, selling the business may be necessary. We work to avoid this result as much as possible.

In this case a high net worth divorce lawyer, together with appropriate financial professionals, helps you value the business, identify potential purchasers, and close that transaction.

What Courts Consider for Dividing a Business

A family law judge in Pennsylvania considers the following factors, along with many other factors, when determining how business interests should be divided in divorce and in assessing the couple’s proposed distribution of business assets in their divorce proceedings:

  • Was the company in business prior to the marriage? If so, how long?
  • Did the spouses own the business equally?
  • Did one spouse contribute to the business with separate, non-marital money?
  • Did one spouse give a personal guarantee for company liabilities?
  • Was one spouse more involved in the business than the other?
  • Is one spouse’s involvement essential to the success of the business?
  • What sacrifices did one spouse make to allow the other to open or continue operating the business?
  • Can other marital assets be divided so as to leave the business intact in the hands of one spouse?

Talk with a High-Asset Divorce Lawyer

Your business is likely your largest marital asset, and how your business assets are valued and distributed in your divorce has a lasting impact on you, your family, and all of the other stakeholders in your business.

Consult with a high asset divorce attorney to ensure your business is accurately valued, your goals for the business are realized if at all possible, and you receive the distribution of marital property that is fair.

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