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What happens to a business asset in a divorce?

On Behalf of | Feb 28, 2023 | Divorce |

Divorce can be a complex process and diving further into the division of assets can make the process more intimidating. From family homes to retirement assets, the courts will assess all properties during the proceeding and determine whether they are marital, their values and how they will divide the same between the spouses. Being something of value, a business is also part of the court’s assessment.

Just and equitable distribution

Under Maryland laws, all property gained during the marriage is subject to allocation and is to be split in a just and equitable manner between spouses. Businesses acquired during the marriage are also marital property. But how exactly are they split?

How does the court split the business?

Generally, family courts assess the business’s value and consider it when they split all marital properties between spouses. This way, it is possible for one spouse to get the business while the other receives a property of comparable value. However, the courts also consider each spouse’s contributions and efforts they put into the business. This can sometimes complicate the determination of the business value.

Depending on each case’s circumstances, the determination of the division of a private business in a divorce may lead to one of the following:

  • Buyout: The spouse with greater involvement in the business receives ownership and buys the other spouse out of their ownership share.
  • Sell and split: The court may recommend selling the business and having the spouses split the profits.
  • Partnership: While this is a rare option, the spouses may continue operating the business jointly as business partners.

Assessment of value

When it comes to business valuation, the courts consider the business’s fair market value. They may hire a valuator for a proper valuation, which involves reviewing how much a willing buyer would pay for the interest in the business.

It is important to keep yourself aware of the court’s considerations in the marital property division process and business valuation to adequately protect your interests and rights and ensure an equitable property division.

Terenzini & Lucero, LLC.

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