When a couple divorces in Florida, it is almost always necessary to split all assets and debts equitably. This includes any family businesses. During this process, the court must decide if it is feasible to split ownership of the business or if it would be in the best interests of both parties to sell the business and divide the proceeds.
Your unique circumstances
There are key things that the judge will look for when deciding how to divide the business:
• The date of its inception
• What each of you has contributed to its success
• The impact the divorce will have on the business’s ability to continue operating
• The impact on the lifestyle of each spouse
If you launched your business after tying the knot, your spouse would have a right to claim a portion of it. Contributing to the business’s success doesn’t necessarily mean that your spouse directly worked on the company; things like taking care of the kids, your home, and any other issue so you can focus most of your energy on the business will also count as a contribution.
Also, your lives after the divorce process will count. Judges often try to ensure that divorcing couples maintain or come as close as possible to their standard of living while married. Therefore, they may give the other spouse a share of the business to even out the financial situation after the divorce.
Day-to-day operations
If the court awards your spouse a stake in the business, you will be responsible for adapting to their newfound role. This could include giving them input on important decisions that affect the company’s future or sharing financial information regularly.
Tax implications
It’s important to keep in mind that any arrangement you make during the property division process will affect your tax situation. For instance, if you decide to sell the family business and split the proceeds, the IRS will consider the sale price taxable income for both parties. Similarly, any stock you transfer to your spouse will be subject to taxes based on its value.
A divorce will most likely affect your business in almost every capacity. However, understanding your rights and knowing what to expect may help you and your partner.