Once a couple decides to end their marriage, there may be issues of custody and visitation if there are children of the marriage, and over division of the marital assets. Marital assets are all property, including debts, that were obtained or accumulated during the marriage. This includes a business, whether it was started and owned by only one of the spouses before the marriage or was acquired or begun after the marriage began. Even if one of the spouses is a non-owner of the business, a major issue of dispute in such cases may be whether the non-owner spouse has an interest in the business and for how much. In most of these cases, retaining a divorce lawyer experienced in handling business interests in a divorce is essential.

Assets are Divided on an Equitable Basis

Massachusetts is an equitable distribution state whereby all marital assets are divided on a fair and equitable basis, which  means that one spouse may receive more than 50% of those assets. Therefore, it is highly recommended that you and your spouse attempt to divide your assets without court intervention, which can lead to an undesirable outcome for at least one of you as well as the considerable legal fees you may owe if your divorce is litigated. If you and your spouse are unable to agree, you can try mediation to resolve your differences. But for the parties who are relegated to litigation, there are a number of factors that a Massachusetts court will consider in arriving at an equitable distribution of your assets, including your interest in the family business.

  1. Length of the marriage
  2. Age of the parties
  3. Health of the parties
  4. Bad conduct of a party (e.g., drug or alcohol addiction, abusive behavior, gambling, spending large sums on a mistress)
  5. Incomes of both
  6. Education
  7. Employability of both parties
  8. The respective liabilities
  9. If minor children are involved and their needs
  10. Opportunities for future acquisition of income or capital by either party
  11. Contributions of a non-working spouse to the household
  12. Contributions of the spouses in the appreciation in value of their respective estates
  13. Contribution of a non-business owner to the operation or management of the business
  14. When the business was acquired or first began operations
  15. Contribution of the business-owning spouse to making it profitable before the marriage, if applicable

In any divorce matter where a business is involved, it is imperative that you and your divorce lawyer review these factors so that you can arrive at a strategy in how to approach the delicate issue of asset division.

Valuing the Business

Of course, the business must be valued before the court can divide the interests accordingly. A business valuation expert chosen by the parties or the court if the parties are unable to agree on anyone will be retained to place a monetary value on the business and to ascertain what income is being derived. Some businesses may have multiple owners so that their contributions and incomes must be determined. Determining income is also essential if child support payments are to be made.

In some businesses, business-owning spouses may be using the income to pay their own personal expenses. Owners may have entrusted the business operations to someone else and just collected the income or they may have put in substantial hours themselves. These are just some issues that an experienced business valuation expert will examine.

Once the valuation is made, the court will decide the interest of the non-business owning spouse in the business. The parties then have to decide how the other party is to be paid. This can occur by any of three main ways:

  1. Buy-out. This can be achieved either in a lump sum, structured buy-out, or by installment payments.
  2. Co-ownership. In some cases, the divorced spouses may agree to continue operating the business if the divorce has been amicable and they are able to continue to work together such as in a joint medical practice. If t a party wanted a buy-out but the business is experiencing a downturn due to market conditions, the parties may opt to continue joint ownership to a point when it becomes profitable. At this point, the business may be valuated, and one spouse is bought out.
  3. Sale. Another option is to simply sell the business and divide the assets equally or an agreed basis or have the court divide it on an equitable basis in the absence of any agreement.

Retain the Law Firm of Lovenberg & Associates

Divorce is a wrenching time for both parties whenever children and business interests are involved. Consult with a divorce lawyer from Lovenberg & Associates if you have a business or your spouse has one in which the respective interests of both parties needs to be determined and negotiated. Call us today at (617) 973-9950 to schedule a consultation about any divorce issues or concerns you may have.