Divorce can be difficult for any couple. When one or both spouses own a business, separating assets can be even more challenging. It is important that you preserve everything you have worked hard for, including your company’s future.
If you are an entrepreneur separating from your partner, talk to an experienced divorce lawyer for business owners in Miramar. A skilled attorney could help you through the legal process while zealously defending your business interests.
In a divorce involving a business, it is crucial to determine whether the company is marital property. Under Florida law, property acquired during a marriage is generally considered a marital asset. Once the company’s status is determined, the business owner may retain an appraiser or other valuation expert. With the expert’s help, the business can be accurately assessed, and a judge may then divide any marital portion between the parties.
Typically, a business like a medical practice or a restaurant is not actually divided between the spouses. Instead, one spouse could pay the other a certain amount to buy out their marital interest in the business. A capable divorce lawyer could structure an appropriate buy-out arrangement.
Accurately calculating an individual’s income is essential to determining child and spousal support. In many cases, business owners are self-employed and entitled to take certain tax deductions as business expenses. For example, a business owner might deduct their car loan payment if they use it for business purposes.
Unfortunately, some attorneys and opposing parties may not fully understand the tax benefits and limitations of self-employment. Additionally, family court judges will carefully scrutinize the business owner’s tax returns and financial statements to determine whether the owner has accurately reported all their income and deductions. Because an inaccurate income calculation could result in an unfair child support or spousal support award, it is essential to work with a skilled divorce attorney who understands business finances.
Retained earnings represent a company’s net income not paid out as dividends to owners or shareholders. The income is generally left in the business accounts to help grow the business and manage its day-to-day operations. The handling of retained earnings can impact several aspects of a divorce, including property distribution, alimony, and child support.
Under Florida Statute §61.30, self-employment income includes business income, which is defined as gross receipts minus necessary expenses. This definition leaves open the possibility that retained earnings could be included in a spouse’s total income. If so, a judge could award spousal and child support payments based partly on the retained income, even if the spouse does not actually receive it.
The situation may become even more problematic if the business owner uses the retained income to pay the business’s debts and keep it afloat, which they are permitted to do. In fact, state law prevents business owners from taking distributions if their company is not meeting its other financial obligations. However, if a judge includes the retained earnings and the owner’s support obligations are then based on an artificially inflated income, the owner may not be able to pay alimony or child support at all.
One of the primary challenges in divorce cases involving businesses is the misunderstanding of the laws relating to the treatment of retained earnings. If a divorcing spouse owns a business, it may be up to them and their attorney to educate the opposing party on the nature of the business operations and how their retained earnings are structured.
A divorce action can be more complicated when one or both parties own a business. In addition to determining the business owner’s income, it may also be necessary to appraise the company.
If you or your spouse owns a business, contact a capable attorney today. Our legal team could provide sound advice and connect you with the necessary accountants, appraisers, and other professionals to accurately calculate your income and value your business interests. Contact our firm today to speak with a divorce lawyer for business owners in Miramar.