Closely held businesses are among the most complicated assets to deal with during a divorce proceeding. In addition to the obvious issues of valuation — and the difficulty inherent in distributing a business in kind — special issues can arise when the formation of such a business predates the marriage. This can frequently cause parties on both sides to misunderstand the degree of interest they may have and thereby consent to a divorce agreement that does not accurately reflect their rights.
All marital property is subject to equitable distribution during divorce. The Florida divorce code defines marital property, in part, as the enhancement in value of non-marital assets brought about by the efforts of either spouse during the marriage or the expenditure of marital funds. Consider how this applies to the following scenario:
- A woman founds a business with her own funds.
- Subsequent to the formation, she marries a man.
- The woman continues to operate the business to great success during the marriage. The man takes no part in the operation. The business is self-sufficient and does not require any investment of marital funds to support its growth.
- After several years, the husband and wife divorce. At that time, the value of the business has increased significantly since they were married.
It may be easy to assume that the husband would have little if any interest in the wife’s business under these circumstances. However, that may not be the case. Because the woman actively worked to expand the business during the marriage, a large portion of the business’ equity may actually be a marital asset, despite the fact that the husband did not contribute. While a court would hopefully examine the totality of circumstances to reach a fair result that recognizes the husband’s lack of contribution, it is still an issue that a Tampa Bay divorce attorney would need to carefully address.