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How to Divide a Business in a Divorce

As with issues of child custody and support, dividing assets between divorcing spouses can be highly contentious.

Missouri is a dual-property state and attempts to distribute property by first sorting the property into marital and non-marital categories.

Generally, marital property may be property that was acquired after the date of the marriage, provided it was not acquired by gift or inheritance and provided it was not an exchange for non-marital property. Marital property is considered to be owned equally by the husband and wife and is to be divided equitably between husband and wife.

Non-marital property may include property owned by either spouse before the marriage. This category may also include property acquired after the marriage, such as a bequest inherited by one spouse or a gift to one spouse. In general, non-marital property is the separate property of one spouse and it is not divided in the divorce. The spouse who acquired the separate property may have the separate property set aside to that spouse.

Categorizing the Business

When one or both spouses have an interest in or own a business, dividing a business presents thorny issues and defies easy categorization as marital or non-marital property.

There are several important factors that can help determine whether a business interest is separate or marital, which include but are not limited to:

  • The date of marriage and the date one or both spouses started the business, invested in the business, or acquired a share of the business;
  • The monies that were used to fund the business and the source of those funds;
  • Money contributed to the business by either spouse; and
  • The work and time either spouse put into developing the business.

What the Business is Worth

After determining whether a spouse has a valid interest in the business as part of the marital property, the value of that interest must be calculated. Three commonly used methods of determining a business’ value are:

  • Asset formula – This method calculates value using the formula, Assets – Liabilities = Value. Assets can be tangible or intangible. Tangible assets include infrastructure, inventory, and anything else related to the business that can be physically touched. Intangible assets include patents, accounts receivables, goodwill, and other assets that are less concrete.
  • Market approach – This method calculates value by comparing the business to similar businesses that have been sold.
  • Income – This method is the one that is often applied. It uses historical data and specific formulas to predict cash flow and profits for the business.

Expert Evaluation

Often, one or both spouses may choose to hire an expert to evaluate the business. Such experts research and review the history of the business and consider the finances, assets, and liabilities of the business. An expert may employ one or more of the methods outlined above to determine the business’s value.

Contact A St. Louis Divorce Attorney

As shown here, deciding how to divide a business in a divorce is a complex matter with many issues and factors to consider. Call(636) 552-4841 today for a Free Consultation and speak with Jay Galmiche, a seasoned St. Louis Divorce Attorney with over three decades of experience. The Galmiche Law Firm, P.C. serves the areas of Chesterfield, Ballwin, Town & Country, and Wildwood, Missouri, along with surrounding areas.