How is the marital property interest in a business or professional practice divided in a Louisville divorce? How do you establish the existence of and ultimately the valuation of any marital interest in a business or professional practice in a Louisville divorce case? Generally speaking, in these cases there are three important steps in the process. First, the Court and the parties must determine whether the asset is marital property, the separate property of the business owner or a commingled asset. Next, a “valuation” of the business or professional practice must be established in Court. Once the valuation is established, the marital property interest in the business or professional practice (if any) is divided as part of the marital property distribution.
One of the keys in the process of dividing business ownership interests in a Louisville divorce is the date when the business or practice was formed or acquired. If the business was acquired prior to the marriage it could be considered to be “separate property” and will not be affected by the divorce. The status of an otherwise “separate” asset can become clouded when marital funds or labor are invested into the business during the course of the marriage.
If the business ownership interest was obtained during the course of the marriage, or if marital funds or labor were potentially commingled with the company the present value of the business must be established, so that marital property interests in the company or practice can be divided.
In most cases, a full valuation of a business or professional practice must be established through the expert testimony of external witnesses. Establishing the valuation of any business ownership interest or professional practice includes many factors such as the market value of “what a willing buyer would pay to a willing seller if there is no compulsion on either party to conclude the transaction.” It must also consider “goodwill” or the “probability that the business will continue in the future as in the past, adding to the profits of the concern and contributing to the means of meeting its engagements as they come in.” This must be taken into consideration before a judge can order the marital interest of a business or professional practice divided in a Louisville divorce.
The valuation and ultimate disposition of a family business in which both spouses participate can be quite complex. Will one of the spouses buy the other out, or will both parties continue to operate the business? Is it in everyone’s best interest to just sell the business and divide the proceeds? If one party intends to retain ownership, the spouse who owns the business is usually required to compensate the other spouse for that party’s portion of the marital property interest of the business. This may involve offsetting the marital interest in the business with retirement accounts and/or the equity in the family home.
There are usually substantial tax implications in these cases and the ability of Dodd & Dodd attorneys to provide tax insight and advice. Allen M. Dodd has a “Master of Laws” or LL.M in taxation, and provides extensive analyzation of business and corporate tax returns and associated issues as well as investigation in attempting to hide income and assets for our clients.
How is a marital property or commingled interest in a business or professional practice divided in a Louisville divorce? Our experienced Louisville divorce attorneys have decades of expertise in these matters. If you are involved in a Louisville divorce and either you or your former spouse owns an interest in a professional practice or business both parties should be represented by their own experienced attorney. We invite you to review the strong recommendations of our former clients and contact us or call 502-584-1108 to schedule an appointment with one of our experienced divorce and family law attorneys.