How A Business Is Handled In A Florida Divorce

How Does a Business Handled in a Florida Divorce www.beinerlaw.com
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HOW A BUSINESS
IS HANDLED IN A
FLORIDA DIVORCE
“Part of the divorce process involves dividing the marital
assets and debts the couple have accrued during the
marriage. People typically think of issues relating
to custody and/or support as the catalysts for
animosity during a divorce; however, thedivision
of assets can be equally contentious.”

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When a marriage ends there
are really two separate endings
– the emotional end of the
relationship and the legal
cessation to the union, which is
accomplished through the
divorce process. Part of the
divorce involves dividingthe
marital assets and debts that a
couple has accrued during the
marriage. People typically
think of issues relating to
custody and/or support as the
catalysts for animosity during a
divorce; however, the division
of assets can be equally
contentious. This is particularly
true when complicated assets
are involved, such as a closely
held business. Unlike most other marital assets, a business may continue to be
income producing and therefore may have an ongoing value in the future. Just as no
two divorces are alike, no two businesses are exactly the same. Therefore, only an
experienced Florida family law attorney can offer you individualized advice and
guidance if you are contemplating divorce in which a closely held business will be
involved. An overview of how the law treats a business asset in a divorce, may be
helpful to you.

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What Is a Closely Held Business?
People often hold stock in a publicly traded business, making them a shareholder.
Technically, as a shareholder, you are an owner of the business; however, unless you
are a majority shareholder
who materially participates
in the operation of the
business, your interest in
the business can be treated
in much the same way as
any other marital asset. If,
however, you and/or your
spouse own a closely held
business, the “division” of
the business in a divorce is
much more complicated. A closely held business is a private company with few
(usually less than five) shareholders, such as a:
Professional practice (law, medicine, accounting)
Family farm or ranch
Boutiques
Internet based business
Service based small business
Small specialty retail store(s)
Neighborhood restaurant(s)

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How Are Marital Debts and Assets Divided in Florida?
In the State of Florida, marital debts and assets must be divided using “Equitable
distribution” principles. “Equitable” does not always means equal. Instead, a court
must make a fair division of the marital debts and assets after considering all
relevant factors.
Separate vs. Marital Property
Before negotiating the division of marital assets, a determination must be made
regarding what assets are marital property and what assets are separate property.
Only marital assets are divided in a divorce. Separate assets remain the sole

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property of the owner of the property. Generally speaking, marital property
includes all assets acquired during the marriage; separate property includes assets
one spouse owned prior to the marriage. Like all rules, however, there are
exceptions to the general rule regarding marital and separate property. The most
common exceptions include:
Property gifted to one party during the marriage may be separate property.
Inherited property will usually be considered separate property even if
inherited during the marriage.
Separate property can become marital property if the asset is “co-mingled”,
meaning the owner of
the property
“mingles” or mixes
the property with
marital property.
If a valid pre-marital
or post-marital
agreement was
executed by the
parties, the terms of
the agreement will determine whether assets are marital or separate
property.
Is a Closely Held Business a Marital Asset?
Only an experienced Florida family law attorney can determine if your closely held
business will be considered marital property; however, absent a pre-marital or post-

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marital agreement specifying that the business is separate property, most closely
held business are at least partially marital property. Even if the business was owned
by one party prior to the marriage, there is a good probability that the business has
been co-mingled during the marriage.
Valuing a Closely Held Business
The first step in dividing a business during a divorce is to determine what the
business is worth. Business
owners typically know what
their business earned in
recent years, but many do not
know what the business is
actually worth. A Certified
Business Appraiser is
routinely used to value a
business for purposes of a
divorce. Three methods are
commonly used to value a
closely held business:
Market approach – this methods attempts to value the business based on the
sale of similar businesses in the recent past.
Asset approach – this method values the business by looking at the value of
both tangible and intangible assets and debts of the business.
Income approach – this method looks at past and present income and
converts that into expected economic benefits.

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Unique Issues When a Business Is a Marital Asset
When a business is one of the marital assets that must be divided in a divorce, the
process of arriving at an “equitable distribution” of marital property is more
difficult:
Value -- the parties rarely agree on the value of the business. Moreover, two
Appraisers may arrive at significantly disparate values for the business.
Intent – the parties may not agree with regard to the future of the business.
Should the business remain in its current form, change structure, terminate
and re-open as a different business altogether, or be dissolved permanently?
Liquidity – if the business will remain operational with only one spouse continuing
to own the business,
the other spouse must
be compensated for
his/her interest in the
asset. Many small
businesses have few
liquid assets,
presenting a
challenge when it
comes to
compensating the
non-owner spouse.

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Factors to Consider When “Dividing” a Business
Determining the value of closely held business in a Florida divorce is only the first
hurdle. Deciding how best to “divide” the business is often an even bigger hurdle.
Factors that are usually considered when deciding how to handle a business in a
divorce include:
Legal ownership – what is the current legal structure? Is the business a
corporation, partnership or sole proprietorship?
Material participation – do both parties actually participate in the operation
of the business or is the business predominantly run by one party?
Profitability – has the
business been making a
profit in recent years? Is it
likely to continue to be
profitable?
Debts – what are the debts
of the business and who is
and will be responsible for
them?
Future intentions –who wants to
continue to operate the business – one, both, or neither or the parties?

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Common Methods for “Dividing” A Closely Held Business in a
Florida Divorce
With most marital assets one of two things happens in a divorce – the asset is simply
awarded to one of the parties or the asset is sold and the sale proceeds split
between the parties. With a business, neither of those options may be practical
without making some adjustments. Some common ways of handling the division of a
closely held business in a divorce include:
Selling – if both parties agree, the business can be sold, all debts paid, and
then the sales proceeds split between the parties.
Continuing as co-owners – if both parties have been participating in the
business, it may make financial sense to continue as co-owners after the

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divorce. Of course, this only works if the parties are emotionally able to work
together post-divorce.
Buying out –one party may “buy-out” the other party. Basically, this involves
the party who plans to continue running the business compensating the other
party for his/her interest in the business. If sufficient liquid assets of the
business are not available to facilitate the buy-out, other marital assets might
be used and/or future profits could be awarded to the non-owner.
Whenever a closely held business is part of a divorce, it complicates theprocess,
even if the parties are committed being amicable.
If you are contemplating a divorce in the State of Florida and have a closely held
business as one of your marital assets, be sure to consult with an experienced
Florida family law attorney with expertise in this area before moving forward.Please
call BEINER, INKELES, and HORVITZ, P.A. at 561-750-1800 so we can assist you in
protecting your rights, while reaching an expeditious settlement.

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About Beiner, Inkeles& Horvitz
Beiner, Inkeles& Horvitz, with offices in Boca Raton and New York City, is a boutique law firm
(four attorneys with a combined experience of more than 100 years and two paralegals), large
enough to have all of the latest, sophisticated modalities to ensure that our clients are receiving
cutting edge legal support, yet small enough that each client receives the personal attention of one
of our very experienced senior attorneys. We have extensive experience in all areas of family law,
including negotiating and drafting Pre-Nuptial and Post-Nuptial Agreements; obtaining relativlely
simple, uncontested divorces; litigating complex divorce cases involving child-support, equitable
distribution schemes, alimony, and pension and profit-sharing QDRO’s; seeking modification of
existing support and visitation Orders.
We also meet with clients to understand their particular familial and financial circumstances,
counsel them with regard to how they can pass their wealth to their loved ones as simply as
possible, avoiding probate, while reducing or eliminating their potential estate tax exposure.
Using Revocable (Living) Trusts, HEALTH CARE Proxies, Pre-Need Guardian Designations, and
other such estate planning tools, we attempt to assure that our clients will be cared for and
protected both during their lives and thereafter.
We invite you to call for a consultation with one of our senior attorneys to discuss your particular
needs and concerns, so that we can advise and counsel you and attempt to resolve your matter
amicably and expeditiously. Our firm offers mediation as a way to resolve conflict without lengthy
and costly litigation. Stephen Beiner is a Florida Certified Mediator and Harvey Nussbaum now
devotes all of his practice to mediation. We can either serve as a mediator to attempt to resolve
the pending issues in your matter or we can accompany you to mediation to make sure that your
rights are protected during the negotiation and settlement process.
And if you have gotten a bad result in your case and you think the judge has erred, we handle
appeals from previous decisions; appeals must be filed within 30 days of the decision being
rendered by the Court.
Beiner, Inkeles& Horvitz, P.A.
2000 Glades Road, Suite 110
Boca Raton, FL 33431
Phone: 561.750.1800
Fax: 561.338.3803
Website: www.beinerlaw.com
Email: info@beinerlaw.com

How A Business Is Handled In A Florida Divorce

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How A Business Is Handled In A Florida Divorce