Splitting the Family Business in Divorce

Splitting the Family Business in Divorce

Many divorcing couples own a family business operated by one or both individuals. When it comes to separating assets it can be difficult to determine how to split the business. Separating interests in a family business is both a difficult and exhausting process. Luckily, state divorce law provides some general guidelines to assist in these matters.

Property Division in the State of Utah

Utah operates under the doctrine of equitable distribution. The courts will divide marital property in a fair manner rather than imposing an equal 50/50 split. The judge will consider the personal and financial situations of each party. This includes factoring in both the marital and separate property interests. The court will then try to separate the property in a way that protects the welfare of both parties.

Is the Business Marital or Separate Property?

Under Utah's laws only marital property is divisible between the litigants. Marital property includes anything obtained during the course of the marriage. Separate property is an interest that a person owned before the marriage. Thus, determining whether a business is marital property depends on when it started. It also depends on whether ownership transferred to the other spouse.

Another tricky situation occurs when a separate business experiences growth during a marriage. If marital property funds finance the growth of the business there could be a joint interest. There could also be a marital property interest in the wages earned from the business.

Marital Property Businesses

The division process is still difficult when a business qualifies as marital property. The easiest solution is for the couple to come to an agreement about the business. They may decide to continue the business as is or to sell it and divide the proceeds. The court could intervene and split the interest relative to each party's contributions. Yet, business division will need to occur one way or another to complete the divorce.

Obtaining the Value of a Business

The court will determine the monetary interest of both parties in a joint business. Real estate and business professionals usually assist in this process. They will review the value of property and assets to estimate a dollar amount. Use of these experts can make the divorce process slower and more expensive. Experts from both sides will advocate for their client's position thus causing discord.

There are different theories to determine the value. These include the market, income, or asset methods. The market approach uses the sale price of similar businesses to fix a value. The income method uses past income to determine how much the business could be worth. The asset approach simplifies the matter by subtracting total liabilities from assets.

Is it Worth Fighting for a Business Interest?

Whether it makes sense to litigate over an interest in a family business depends on the circumstances. When the potential monetary benefit is substantial it could be worth the effort. Yet, don't expect it to be a simple process. Even small businesses are difficult to value. For help in this type of matter contact a qualified attorney with experience in this area.

Please contact the experienced family law attorneys at Spencer & Collier, LLC at 801-566-1884 for advice and assistance.

Tags: Utah, family business, marital property business

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