Often the thorniest and most complex economic issue in resolving a divorce is protecting the family business or a closely held entity. Frequently one spouse owns all or part of a business that has been the source of income for the family throughout the marriage. Sometimes the business has been in one spouse’s family for generations. The person who owns a share in the business is the “titled spouse”.
The non-titled spouse is frequently entitled to a portion of the business value…but seldom a piece of the actual business, received typically through a “buy-out”. That claim to a share in a business remains even if the spouse did not do any real work in the business. Such an interest is created in the law through the spouse’s “indirect contributions”. Examples of such indirect contributions would include caring for children, caring for the household matters, freeing up the spouse from other duties to allow more time to be spent building the business, brainstorming and commiserating with a spouse about business matters, entertaining employees and clients, etc.
In order to determine a non-titled spouse’s claim to a piece of the action, an expert is hired to value the business. Once a value is established, discussion will begin to negotiate the percentage of that value to which the non-titled spouse would be entitled (seldom as much as 50%) and whether that sum will be paid through a trade- off of other assets, a straight buy-out, or payments structured over time. If part of the business was acquired during the marriage, but another part either existed before or was obtained as a gift or inheritance, only the marital portion will be considered.
Having experienced professionals navigate this challenging component of divorce is vital to a fair and reasoned outcome.