What happens to a closely held or family business in a Shepherdsville divorce? What happens when one of the spouses is a member of an LLC, holds shares in a corporation, or owns and runs their own small business?
The central questions in these cases are the nature of the asset(s) and their “valuation” if the asset(s) are considered to be marital property, in whole or in part.
The Family Courts of Jefferson, Bullitt, Hardin, Spencer, Shelby, and Oldham counties have established rules and guidelines to help determine the nature of an asset and its valuation. If the closely held or family business was obtained after the date of the marriage, it would likely be considered marital property subject to equitable division under Kentucky Family Law. However, if the asset was owned or acquired before the date of the marriage, part or all of that asset may remain the separate property of the spouse who owns it.
If the asset is a marital asset, the valuation of the marital interest in that business must be established before the Court. This can be quite complex, especially when the business is a professional practice or a company with multiple owners. Many business entities have corporate documents such as the “operating agreement” for an LLC or the “shareholders agreement” of a corporation that specifically establishes the process for establishing the value of an owner’s share(s) in cases such as divorce.
This would seem to make it easy for the parties to agree upon the value of the closely held or family business. However, these internal corporate documents are not necessarily a legally valid method for the valuation of an asset during the divorce process. For example, many such companies and professional practices have been known to build in what is known as a “poisoned pill” in order to falsely and significantly lower the actual value of an owner’s share(s).
In these cases, the Court may order a professional independent valuation, the cost of which is shared by the parties. One or both parties may hire their own expert professional to establish a valuation to equitably divide the marital interest in that company or portfolio of business interests.
Marital property valuation and division can be quite challenging from a legal and financial perspective. My name is John Schmidt, and after more than 25 years of experience as a family law attorney based in Shepherdsville, I can tell you it is important to seek sound advice and counsel to guide you through the divorce process while protecting your goals and interests.
We invite you to contact us via e-mail, schedule an appointment or call us today at (502) 509-1490 to get answers to your questions and to learn more about your unique circumstances and how to protect what is most important to you in your family law case.
