Divorce is a stressful experience with numerous personal and financial repercussions for both spouses. For business owners going through divorce, a key question will be how a divorce impacts their business. Since divorce involves the division of marital property under state law, business interests can become part of the process if any business assets fall under the category of marital property.
Understanding the interplay between personal and business affairs during divorce can be challenging. By retaining one of our divorce lawyers for business owners in Frederick, you can rest assured that your ownership stays protected to the fullest extent possible under state law. To learn more about your legal rights in a divorce case, reach out to the dedicated divorce attorneys at Rolle & DeLorenzo today.
Under state law, all marital assets must go through a fair and equitable division. Maryland Code, Family Law § 8-201 defines marital property as property acquired by a spouse during the marriage. Property not considered to be marital property under state law can include:
Whether the ownership stakes in a business belong to marital property will depend on several factors. For example, many mistakenly believe that shielding their business within a Limited Liability Company or other corporate entity will protect the assets from being divided during divorce. While corporate structures can protect against general liability, it does not necessarily protect assets from a divorce judgment.
In addition, Courts will investigate whether the other spouse contributed materially to the business during the marriage or whether marital property was used to support the business. Another myth is that a business is non-marital property if it was formed before the marriage. Pre-nuptial agreements are advisable for business owners, but even a well-crafted one will be subject to scrutiny during the divorce process.
Several factors can turn a non-marital business into marital property. It is best to have one of our skilled divorce attorneys for business owners in Frederick at your side during all stages.
When the Court must examine the value of a business during the divorce process, it can look at assets and liabilities, past and projected earnings, and bank records, along with other financial information. The court typically uses three methods to value a business: assets, income, and market.
An asset-based approach adds all assets owned by the business and compares this with its total liabilities. For an income-based approach, evaluators look at what the business will likely earn in the future and create a current valuation based on those figures. The market-based approach evaluates similar businesses that have sold recently and uses sales figures to estimate what the spouse’s business would sell for on the open market.
Different approaches can show different values. For example, a company might have a high current market value but low assets compared to its debts. Spouses will often argue over which valuation is most accurate, and this is where one of our knowledgeable divorce attorneys with experience handling business valuations can be invaluable for business owners in Frederick.
Divorce is an uncertain process and can involve some risk to business ownership. Our experienced divorce lawyers for business owners in Frederick can help you understand whether any of your business might fall into the category of marital property and how best to protect your interests. To learn more, contact our legal team at Rolle & DeLorenzo to set up your free initial consultation today.
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