How Are Business Assets Divided in a Divorce?  

Dividing business assets during a divorce is no simple task. For business owners and spouses alike, these assets often represent years of hard work, dedication, and financial investment. When a marriage ends, determining how to handle business assets fairly can quickly become a complex and emotional process.  

At Gertz & Rosen, we bring over 45 years of experience navigating the intricate overlap between family and business law. We understand that the division of business assets in a divorce depends heavily on the unique circumstances of each couple, as well as various financial and legal factors. However, we’re here to walk you through the general process, giving you a clearer understanding of what you might run into as you move forward.

Distinguishing Marital vs. Separate Property

One of the first steps in dividing business assets is determining whether they are marital property or separate property. Here’s a closer look at what each means in the context of a divorce:

Marital Property

Marital property includes assets acquired during the marriage, regardless of whose name is on the ownership documents. A business established or significantly increased in value during the marriage may be deemed marital property and subject to division.

Separate Property

Separate property refers to assets acquired before the marriage or through inheritance or gifts intended for one spouse alone. A business founded before the marriage may fall into this category, but any increase in its value during the marriage could be deemed marital property, especially if both spouses contributed to its growth.  

Understanding the distinction between marital and separate property is crucial. Commingling, such as reinvestments or shared financial contributions, could make separate property subject to division.  

Determining the Value of Business Assets

Fairly dividing business assets requires understanding their value. Courts rely on objective methods to appraise these assets accurately.

Common Methods for Business Valuation

• Income Approach: Evaluate the business’s earning potential by analyzing historical cash flow and projecting future profits.  
• Asset-Based Approach: Focuses on the total value of the business’s assets minus liabilities.  
• Market Approach: Estimates value based on the selling price of comparable businesses in the market.  

Role of Financial Experts

Valuing a business requires collaboration with certified financial professionals, such as accountants or appraisers. These experts provide reports detailing the business’s worth, helping the court make informed decisions. Additionally, their testimony can clarify financial intricacies, ensuring an equitable division process.  

Looking at Other Influential Factors

After valuing the business assets and determining whether they are classified as marital or separate property, the courts consider additional factors that impact their division. Under Ohio law, assets are distributed based on the principle of equitable distribution, ensuring a fair—though not necessarily equal—division.

Key Considerations for Courts

1. Duration of the Marriage  

Longer marriages with greater shared contributions may lean toward an equal division.  

2. Contribution to the Business

Did one or both spouses actively manage or help grow the business? Their contributions could impact how the court allocates assets.  

3. Economic Impact  

Courts assess how dividing business assets could affect each spouse’s financial stability or the continuity of the business itself.    

Potential Ways Courts May Divide Business Assets

Selling the Business  

One common solution is to sell the business outright and divide the proceeds equally between the spouses. This approach ensures both parties receive a fair monetary share, providing a clean financial break.

Co-Ownership  

If the spouses maintain a positive working relationship, the court may decide they continue co-owning the business. This allows the business to operate as usual while profits and responsibilities are shared between the parties.

Buyout Arrangement  

Another option is a buyout arrangement, where one spouse purchases the other’s share of the business assets. This enables one party to take sole ownership while compensating the other fairly for their share.

Each method is designed to balance fairness, financial stability, and the long-term sustainability of the business.

Protect Your Future with Gertz & Rosen

Dividing business assets during a divorce is a challenging and intricate process with significant implications for both personal and financial futures. The outcome varies based on the unique details of each case, but no matter how complex the situation, having experienced legal counsel is essential to achieving a fair and lasting resolution.

With a deep understanding of both business and family law, the team at Gertz & Rosen is uniquely equipped to protect your interests, offering practical solutions tailored to your specific needs. Our dedication to providing personalized, professional guidance makes us a trusted ally in even the most difficult situations. Contact Gertz & Rosen today for a consultation and take the first step toward securing your future.