Divorce is challenging for anyone, especially entrepreneurs who have built their businesses from the ground up and are worried about their business interests. In Florida, protecting your business in a marital split requires planning and strategy.
Florida law considers businesses that started or grew during the marriage to be marital property and subject to equitable distribution in divorce. This means your spouse may be entitled to a portion of your business value, even if they weren’t involved in the day-to-day operations of the business. Consulting with an experienced Florida divorce attorney who understands business valuation can help protect your entrepreneurial interests during this difficult time.
Understanding Marital vs. Non-Marital Assets
Personal vs. Business Assets
In Florida, marital assets are generally all property acquired during the marriage. This can include business interests, even if only one spouse is actively involved in the business.
Non-marital assets are property owned before marriage or received as gifts or inheritances during marriage. These assets usually stay with the original owner after divorce.
Business owners should always keep records of their business financial history. This will help prove which parts of the business are marital or non-marital assets.
Commingling funds can muddy the waters between personal and business assets. To avoid this complication, business owners should keep separate bank accounts for personal and business finances.
Evaluating the Business Value
Valuing the business is crucial in divorce. Florida courts require professional valuations to get an accurate picture of the business.
There are a few ways to value a business, including the income, market, or asset-based approaches. The method used depends on the type of business and the financial information available.
Courts look at revenue, profits, assets, and potential future earnings when valuing a business. They may also compare your business to industry trends and other similar businesses.
Be prepared to provide your financial statements, tax returns, and any other relevant documents during the valuation process.
Legal Structures Impact on Asset Protection
Sole Proprietorships and Divorce
Sole proprietorships provide little to no protection for business assets in divorce because they don’t create a separate legal entity. This makes it challenging to tell apart personal and business assets.
In Florida, courts may consider the entire business as marital property if it was started during the marriage. Even if it was started before marriage, any increase in value could be subject to division.
Entrepreneurs with sole proprietorships face a significant risk of losing control or ownership of their business in a divorce. This lack of protection often leads to complex valuations and potential forced sales.
LLCs, Corporations, and Partnerships
Limited Liability Companies (LLCs), corporations, and partnerships provide stronger asset protection during a divorce. These structures create separate legal entities, helping to protect business assets from personal claims.
LLCs provide flexibility and tax benefits while keeping a clear separation between personal and business assets. Corporations offer the strongest protection but keep in mind that they come with more complex administrative requirements.
Partnerships can be tricky, as the level of protection depends on the specific agreement and structure. Limited partnerships may offer more protection than general partnerships.
Worried About the Impact of Divorce on Your Business?
Just as entrepreneurs often hire lawyers to protect their company, it’s essential to navigate the complex legal considerations of divorce effectively to safeguard your business and personal interests. When you work with our experienced legal counsel, you can minimize the impact of divorce on your entrepreneurial assets and emerge with your hard-earned assets intact. Call us today to schedule a consultation with us.
Emily A. Konicek brings 14 years of experience to your family law concerns. Emily excels at mediation, negotiation and litigation, and can help you pursue a course of action that helps you meet your goals for the future and for your family.
