Practice Area
Divorce for Business Owners & Executives
Boca Raton Divorce Attorney for Business Owners, Executives & Professionals
When Divorce Involves a Business, Executive Compensation or Complex Finances
For a business owner or executive, divorce can involve much more than dividing traditional marital assets. A closely held business, professional practice, partnership interest, executive compensation package, stock awards, deferred compensation, investment holdings and other sophisticated financial interests can make determining the marital estate significantly more complicated.
These cases require careful financial analysis as well as an understanding of how Florida's equitable distribution, alimony and support laws interact with business ownership and complex income.
Barbra Amron Weisberg, P.A. represents business owners, executives, professionals and their spouses in complex and financially significant divorce matters in Boca Raton and throughout Palm Beach, Broward and Miami-Dade Counties.
With more than 30 years of legal experience, Barbra takes a strategic approach to identifying, valuing and addressing the financial issues that can determine a client's position during and after divorce.
Why Divorce Is Different for Business Owners
A business can be an income source, an investment, a family's primary asset and the result of years or decades of work.
During divorce, numerous questions can arise:
- Is the business marital, nonmarital or a combination of both?
- What is the business actually worth?
- How much of its value was created during the marriage?
- Did one spouse own the business before the marriage?
- Did the business increase in value during the marriage?
- Did either spouse contribute to that increase?
- Is business income accurately reflected on tax returns?
- Are personal expenses being paid through the business?
- Are profits being retained rather than distributed?
- Does the business have goodwill, and how should it be treated?
- Can the business continue operating without disruption?
- How should one spouse's interest in the business be addressed as part of the overall property division?
The answers can materially affect equitable distribution, alimony, child support and the overall structure of a divorce settlement.
Barbra approaches the business as part of the complete marital financial picture rather than treating its value as an isolated number.
Is a Business a Marital Asset in Florida?
The fact that a business is titled in one spouse's name does not necessarily determine whether some or all of its value is subject to equitable distribution.
A business created or acquired during the marriage may constitute a marital asset.
When a spouse owned a business before marriage, the analysis can become more complicated. The original nonmarital interest may remain separate, while certain increases in value during the marriage may be subject to equitable distribution depending upon the circumstances and applicable Florida law.
Issues can include:
- When and how the business was acquired
- Its value at the time of marriage
- Contributions made during the marriage
- The involvement of either spouse in the business
- Reinvestment of marital funds
- Business growth during the marriage
- Changes in the nature or structure of the company
- Commingling of marital and nonmarital assets
Establishing the history of the business and the source of its value can therefore be critical.
Business Valuation in Divorce
Determining the value of a privately held company or professional practice is often one of the most important financial issues in a complex divorce.
Unlike publicly traded stock, there may be no readily available market price for an ownership interest in a private business.
A valuation may require analysis of:
- Financial statements
- Tax returns
- Profit and loss statements
- Balance sheets
- Cash flow
- Accounts receivable
- Business debt
- Assets and equipment
- Historical earnings
- Future earnings
- Ownership agreements
- Partner or shareholder interests
- Market conditions
- Goodwill
- Prior transactions involving the company
Depending upon the circumstances, Barbra may work with qualified business valuation professionals, forensic accountants and other financial professionals to evaluate these issues.
Goodwill and Professional Practices
Goodwill can be a particularly important issue when the marital estate includes a professional practice or closely held company.
The analysis may involve distinguishing value attributable to the enterprise itself from value associated with an individual's personal reputation, relationships, skills or continued involvement.
Professional practices involving physicians, dentists, attorneys, accountants and other professionals can present additional valuation issues because the professional's individual services may be closely connected to the income and value of the practice.
These distinctions can significantly affect the value ultimately attributed to the business for purposes of equitable distribution.
Forensic Accounting and Financial Discovery
A business owner's financial circumstances cannot always be understood from a personal tax return or W-2.
Closely held businesses may involve complicated accounting, discretionary expenditures, retained earnings, distributions, loans, related entities and transactions between the business and its owners.
Financial issues that may require closer examination include:
- Business-paid personal expenses
- Shareholder or member distributions
- Retained earnings
- Loans to or from owners
- Related-party transactions
- Unusual expenses
- Changes in compensation
- Changes in distributions
- Transfers between affiliated entities
- Unexplained withdrawals
- Cash transactions
- Assets held by the business
- Deferred income
- Income that may not be apparent from a salary alone
When appropriate, forensic accounting can help develop a more complete understanding of the business, income available to the parties and the marital financial picture.
Hidden or Undisclosed Assets
Full and accurate financial disclosure is particularly important in a divorce involving substantial assets or a closely held business.
Concerns may arise when one spouse has substantially greater knowledge or control over the family's finances, business records or investment accounts.
Potential issues can include:
- Undisclosed accounts
- Transfers to related entities or third parties
- Unexplained business expenses
- Delayed bonuses or distributions
- Changes in compensation
- Unusual loans
- Assets purchased through a company
- Unreported or disputed income
- Transfers occurring before or during divorce proceedings
The existence of a business does not necessarily mean assets or income are being concealed. However, when legitimate questions arise, financial discovery and professional analysis may be necessary to obtain an accurate picture.
Divorce for Executives
Compensation Can Be Much More Than Salary
Executive compensation packages can create a different set of challenges.
An executive's W-2 income may represent only one component of total compensation.
Depending upon the employer and position, compensation may include:
- Base salary
- Annual bonuses
- Performance bonuses
- Commissions
- Restricted stock units (RSUs)
- Stock options
- Performance shares
- Deferred compensation
- Long-term incentive plans
- Profit-sharing
- Carried interests or other equity interests
- Retirement benefits
- Supplemental executive retirement plans
- Signing or retention bonuses
- Severance benefits
- Other employment incentives
Each component may have different vesting requirements, payment dates, restrictions and tax consequences.
Determining whether compensation is marital, nonmarital or partly marital can require analysis of when it was earned, when it was granted, why it was granted and when it becomes payable or vested.
Stock Options, RSUs and Equity Compensation
Stock-based compensation can be particularly complicated during divorce.
An award may be granted during the marriage but vest after divorce. Another award may have been granted before marriage but continue vesting during the marriage.
Some awards reward past performance, while others are intended to encourage future employment or performance.
Relevant questions may include:
- When was the award granted?
- Why was it granted?
- When does it vest?
- Is vesting dependent upon continued employment?
- Is the award tied to past or future performance?
- What restrictions apply?
- Can the interest be transferred?
- What happens if employment ends?
- What are the tax consequences when the award vests or is exercised?
The plan documents and award agreements can be as important as the account statement itself.
Bonuses and Deferred Compensation
Bonuses can also create disputes over both property division and income.
A bonus received after a divorce is filed may relate to work performed during the marriage. Deferred compensation may have accumulated over several years. A retention bonus may be contingent upon remaining employed into the future.
These distinctions matter. A careful analysis should determine what the compensation represents rather than simply relying on the date the payment happens to be received.
Business Income, Alimony and Child Support
Determining Actual Income
Business and executive income can also affect alimony and child support.
For a traditional salaried employee, determining income may be relatively straightforward.
For a business owner, income may include more than the salary reported on a paycheck.
Relevant financial information may include:
- Salary
- Distributions
- Bonuses
- Business-paid personal expenses
- Investment income
- Rental income
- Deferred compensation
- Other recurring financial benefits
Similarly, an executive's income may fluctuate significantly from year to year because of bonuses, commissions, equity compensation or other incentives.
Determining an appropriate income figure can therefore require analysis of multiple years of compensation and financial information rather than relying upon a single paycheck or tax return.
Protecting a Business During Divorce
For many business owners, protecting the continuing operation of the company is just as important as determining its value.
A divorce should not unnecessarily damage the asset the parties are attempting to divide.
Depending upon the circumstances, important considerations may include:
- Maintaining normal business operations
- Protecting relationships with employees, partners and customers
- Preserving confidentiality
- Avoiding unnecessary disruption
- Determining how information will be exchanged
- Addressing ownership interests without forcing an impractical result
- Structuring a potential buyout
- Evaluating other marital assets that may offset a business interest
- Considering liquidity and tax consequences
The objective is not merely to assign a number to the company. It is to develop a practical strategy for addressing the business within the overall divorce.
Structuring the Division of a Complex Marital Estate
A financially sophisticated divorce should be evaluated as an integrated financial transaction.
For example, one spouse may retain a business while the other receives a greater share of investment accounts, real estate or other assets.
Retirement assets may have different tax characteristics from cash. A business interest may be valuable but illiquid. Real estate may have substantial equity but also substantial carrying costs. An executive compensation award may have significant potential value but may not vest for several years.
For these reasons, two assets with the same stated value may not provide the same economic benefit.
A thoughtful settlement should consider:
- Liquidity
- Taxes
- Risk
- Timing
- Future income
- Debt
- Transaction costs
- Asset appreciation or depreciation
- The ability to satisfy financial obligations after divorce
Barbra works to understand these relationships before evaluating proposed settlement terms.
Negotiation, Mediation and Litigation
Not every complex divorce needs to become prolonged litigation.
When the parties have reliable financial information and reasonable positions, negotiation or mediation may provide an effective path toward resolution.
However, complex financial cases sometimes involve genuine disputes over valuation, income, disclosure, classification of assets or other significant issues.
When litigation becomes necessary, preparation matters.
Barbra's approach is to understand the financial case thoroughly, identify the issues that truly matter and prepare for litigation while remaining open to a reasonable negotiated resolution.
With a background that includes trial and appellate experience, Barbra prepares her cases with an understanding that important financial positions may ultimately need to be presented and supported in court.
Representing Either Side of the Financial Equation
Barbra represents both individuals who own or control substantial business and financial interests and spouses who may have less direct access to the financial information.
For the business owner or executive, the objective may include ensuring that assets and income are accurately characterized and valued while protecting the continuing viability of a business or career.
For the other spouse, the objective may include obtaining complete financial disclosure, understanding complicated compensation or business structures and ensuring that marital interests are properly identified and considered.
The appropriate strategy depends upon the facts of the particular case.
Frequently Asked Questions
Experienced Representation for Business Owners & Executives
A divorce involving a business, executive compensation or substantial assets can affect far more than the immediate division of property.
It can affect a business built over many years, future income, retirement, investments, taxes and long-term financial security.
These cases require careful preparation, financial understanding and a strategy tailored to the client's circumstances.
Barbra Amron Weisberg has more than 30 years of legal experience representing clients in divorce and family law matters, including complex and financially significant cases.
From her Boca Raton office, Barbra represents clients in Palm Beach, Broward and Miami-Dade Counties.
Schedule a Private Consultation
If you are a business owner, executive or professional facing divorce — or are married to someone with complex business or executive compensation interests — contact Barbra Amron Weisberg, P.A. to discuss your circumstances and legal options.