Montgomery and Howard County Maryland Asset Division for Business Owners

Determining business interests during a divorce

People can have different types of interest in a business. Common examples include:

• A sole proprietorship. Here the owner of the business runs the business and is responsible for the debts of the business. Examples can include professional services, general contracting and the sale of products.
• A partnership. A partner generally shares the value of the business, the daily operation of the business and the responsibilities and debts of the business with other partners. Written partnership agreements are typically used to create a legal partnership.
• A corporate interest. In this business entity, an individual usually owns stock in a company or multiple companies. He/she may also have a management or employee position with the company. Evidence of ownership is usually through the company stock. Evidence of management or employment is usually through an employment contract and the payment of benefits.

Spouses do not need to have an ownership of a business to be entitled to benefits in the company, such as pension plans and stock ownership plans.

Our Howard and Montgomery County asset division lawyers can help determine the extent of business interest by:

• Examining tax returns
• Investigating any county filings or filings with the state that might show legal interest
• Questioning your spouse, business partners and corporate management about these interests
• Working with financial experts to ensure that all properties are valued correctly

How business assets are divided

When dividing business assets, the first task is to determine the current value of your spouse’s interest and any shared business assets. The value of a business interest is generally what someone is willing to pay to purchase interest. Sometimes, value can be determined by examining any buyout terms in a partnership agreement. Usually, our lawyers will use an appraiser or some financial expert to determine value.

The second task is to determine how the business interest can be divided. Many practical considerations and legal factors need to be reviewed. In some cases, the interest can easily be sold. For example, shares of common stock can be sold. In other cases, the sale of the business may not be feasible. If one spouse is an accountant for example, selling his/her practice may mean ready cash but may deprive both spouses and children of the income they need for alimony, support and survival.

When direct exchanges are not workable, a buyout is often managed. In pension cases, a qualified domestic relations order (QDRO) is required to transfer the pension or part of the pension payments to another spouse.