Property division often serves as a major point of contention during a divorce. This makes sense considering many marriages end due to financial reasons and the separating spouses naturally desire a fair split.
While houses, cars and bank accounts are often what people think about when considering property division, they are not the only assets subject to it. Many do not realize that their small businesses may also end up divided.
Is the business separate or marital property?
Florida adheres to an “equitable distribution” policy, meaning they split marital property based on fairness rather than equality. Marital property consists of any assets acquired during the union or that are in the name of both spouses. Separate property, which is generally what each person came into the marriage with, is not part of the division process. Businesses that are marital property (started during the marriage, the other spouse invested time or money into it, or the spouses are partners) are subject to distribution.
If the business is separate property, is it lost?
When splitting a business, judges usually do not actually split the business. It is more likely that the judge will give half of the value of the business to each spouse. The one that owns or wants to keep the business must pay that value in money to the other one. However, if the spouse wanting to keep the business is unable to pay this, he or she may have to sell it to produce the funds.
A divorce can impact small businesses if they are marital property. However, this does not mean entrepreneurs will necessarily lose them.