Divorce for Business Owners in Norwood, MA

If you or your spouse owns a business, or you and your spouse own one together, divorce can be especially stressful. This is because you’re not just splitting up a household. You might also be dividing something you’ve poured years of time, money, and energy into, not to mention your heart. Don’t worry if you’re not the business owner but supported the business by raising kids or managing the home; that contribution counts, too. With so many elements involved in business ownership, it’s smart to learn more about how Massachusetts family law can treat business assets in Norfolk Probate and Family Court and what steps you can take to protect yourself.

How Massachusetts Courts Treat Business Interests in a Norwood Divorce

Massachusetts law considers all property marital. This is true even if the property was acquired prior to the marriage or is in one spouse’s name. Businesses are no exception. That being said, whether a business will actually be divided in a divorce will turn on a few factors:

• The business’s value beyond income: If the business represents and is successful due to the owner’s identity and presence, and, as a result, wouldn’t sell for much on the open market, it may not count as a divisible asset.
• When the business was started: If it was founded before the marriage or after separation, it might not be subject to division in a Norwood, MA business owner divorce.
• Length of the marriage: A short marriage might make division less likely.

Even if the business is subject to division, it doesn’t mean it will be split down the middle.

Property Division in a Norwood, MA Business Divorce

In Massachusetts, any property either spouse owns, no matter whose name it’s in or when they acquired it, is deemed part of the marital estate. That means whether you brought it into the marriage or picked it up along the way, it’s all on the table during a divorce.

Massachusetts follows an equitable distribution approach, focusing on fairness rather than a strict 50/50 split. So, while the outcome might be equal, it doesn’t have to be.

If you and your spouse can’t agree on how to divide everything, either on your own or through mediation, a judge will eventually have to step in. If they do, they will make the call on any outstanding issues based on a number of factors, including how and when the assets were acquired.

It’s common for couples to trade one asset for another to “offset” them. For example, one spouse might keep the marital home while the other gets a bigger share of the retirement savings. When a business is involved, the process gets more involved. A local divorce attorney in Norwood who understands how property division works can help you envision a fair settlement for your situation.

How Business Valuation Works in a Norwood, MA, Divorce

Business valuation involves figuring out the real, fair market value of the business. The elements considered are:

• Capital
• Assets
• Profit and loss statements
• Future earning potential
• Goodwill (depending on the nature of the business)
• Management
• Operations

Sometimes, the spouse who runs the business will keep it, while the other spouse may get an offset through another asset or a buyout. A Massachusetts divorce lawyer experienced in cases where a business is an element can help you engage with the right professionals, including forensic accountants and CPAs, to work through the numbers with you.

Cooperating With the Valuation Process

Business valuations don’t always happen, but both spouses must cooperate when they do. The more transparent everyone is from the beginning, the faster and less expensive the divorce process will be. If you are expecting there will be a business valuation, here is what a valuation expert may ask for:

• Tax returns (typically for the past 3 years)
• Business bank account statements
• Profit and loss reports

Trying to hide income or taking action to undervalue your business won’t help and will likely hurt your case. If you do anything shady like this, you risk losing credibility in court and getting hit with an unfavorable ruling. A Norwood business divorce attorney can help you prepare for what to expect.

Remember that judges can assign income to you even if your reported numbers don’t reflect your real earning capacity. This can work against you, meaning if you’re dishonest, a judge could assign you more income than you earn, since they are making an estimate. In other words, the pendulum swings both ways.

Tax Consequences of Dividing a Business in Divorce

Dividing a business in a divorce can come with serious tax consequences. For example, you’ll want to be careful that transfers related to the business don’t trigger unexpected tax liabilities. As with most legal issues, timing and method matter here. A Norwood, MA divorce attorney familiar with business divorces can help you avoid tax pitfalls and help you structure any transfer proactively.

How to Protect a Business Before Divorce Is on the Table

If you own a business and aren’t getting divorced but want to protect what you’ve built, there are options. The same is true if you are marrying or are married to a business owner and want to protect yourself. Shareholder, prenuptial, and postnuptial agreements can all help outline what would happen should divorce become inevitable.

For example, a thorough prenup or postnup drafted by a Norwood, MA, divorce lawyer can spell out what happens to the business if the marriage ends. On the other hand, shareholder agreements in Massachusetts can restrict ownership transfers or include buy-sell provisions that kick in during a divorce.

Real Business Divorce Stories from Norwood Clients

Over the years, we’ve worked with many Norwood business owners and their spouses going through a divorce to find solutions that protect and preserve their financial stability and peace of mind. Here are a couple of examples.

We handled a business divorce involving a client who owned multiple gas stations. We brought in a trusted valuation expert to sort through the financials and arrive at a fair value for each location. That valuation, in turn, gave us an even more solid foundation to use during negotiations and helped us to move the case forward without unnecessary conflict. We also connected this client with a financial professional to help him fine-tune the software he was using, giving him better clarity and control over his business finances going forward.

In another case, we represented the spouse of a business owner. She hadn’t been involved in the daily operations but had spent years raising kids and managing the household. In this instance, we helped the wife understand the value of her contributions and, in the end, secured a fair settlement for her reflecting both her role in the marriage and the business’s growth.

Though no two cases are ever the same, when experienced divorce attorneys are involved and the financials are handled with care, there’s a definitive path forward.

FAQs

Below are some of the most common questions Norwood, MA, business owners ask during divorce.

Can a business started before marriage still be divided in divorce?

Yes. In Massachusetts, even property owned before marriage can be considered marital and divided, depending on how it was used and how the couple handled their finances during the marriage.

Will my spouse get half of my business in the divorce?

Not necessarily. Division of assets in Norfolk Probate and Family Court is based on what’s equitable and does not do 50/50 splits across the board. The outcome depends on the business’s value, the length of the marriage, and your and your spouse’s contributions to the marriage.

How do I keep my business from being divided?

Planning is your best defense. Prenuptial and shareholder agreements can help. If you’re already married, a postnup may be an option if your spouse is open to it. Talk to a lawyer about what makes sense for your business and relationship.

What happens if my spouse isn’t cooperating with the business valuation?

A judge can compel cooperation and may, as a result, draw adverse inferences against the uncooperative spouse. An unwillingness to cooperate by one or both spouses can also increase legal costs and lengthen the divorce process, so cooperating usually benefits everyone.

Can my spouse force me to sell my business in a divorce?

It’s rare for a court to order a business sale. Courts generally prefer not to disrupt operating businesses, especially if there’s support involved. More often, the spouse who owns and runs the business keeps it, and the other gets compensated through other means, like a buyout or asset trade.

Talk With an Experienced Norwood, MA, Divorce Lawyer About Your Business Divorce

Whether you’re a business owner or married to one, it’s worth getting advice tailored to your unique circumstances. Whatever stage of divorce you are in, even if you are just thinking about it, having the advice of a Massachusetts legal professional can positively affect the outcome.

At Farias Family Law, our Norwood divorce attorneys have decades of cumulative experience working with business owners and their spouses across Massachusetts to resolve divorce issues related to business ownership of companies of any size. We are here to support Norwood business owners and their spouses with any divorce-related issues. Contact us at our Norwood office today to schedule a consultation.