In many cases, a martial business ranging from a minority stock ownership in a business, such as a car dealership, to a physician practice, may be a large source of marital income. However, when a divorce is filed, there are three major problems a spouse may face with such in maintaining what he or she believes is a just and equal division and maintaining a lifestyle as if the divorce had not occurred. This blog addresses three key problems in high-asset divorces or where there are high-income earners.
First, with certain businesses, the value of the business is the goodwill of the particular husband or wife and not a name or the business itself. However, this may be subject to dispute and it is key to engage a seasoned business valuator at the outset of the divorce to determine the range, which may be $0 to millions.
Second, certain businesses have mandatory buy-sell agreements. These fix a method of valuation in the event a stockholder or owner has a divorce filing. While this may result in a payment that is a marital asset subject to division, the real value of the stock may not come to pass because of this term of being issued the stock. The purpose of these agreements in small corporations is to keep disgruntled ex-spouses from interfering with this business and may even result in a loss of employment.
Third, in a closely-held corporation, if a spouse in a divorce owns less than half of the stock, unless they bylaws specify differently, he or she may be “frozen” out with a divorce filing whereby the other stock owner refuses to provide a value for this ownership. This is a complex question that requires a close look at the state’s business laws and compliance with the bylaws.
In short, where a business is a large part of the marital estate as to value or income, it is key to get experts involved early on in the process. Failure to do so may significantly weaken one’s position and net award at a divorce trial. This blog post was written by attorneys at Ciyou & Dixon, P.C. who handle divorce cases throughout the State. This is not intended as a solicitation for legal services or legal advice. It is advertising.
