Posted in Firm News
I get it. This is one of the most stressful conversations we have with clients who own businesses. You’re already dealing with the emotional weight of ending your marriage, and now you’re worried about losing the company that’s been your livelihood. At Fait & DiLima, LLP, we work with business owners all the time on exactly this issue, and I want to walk you through what you need to know.
Is Your Business Actually At Risk?
The first thing we need to figure out is whether your business counts as marital property under Maryland law. Maryland follows equitable distribution. That means the court divides marital property fairly, but not necessarily fifty-fifty. If you started your business before you got married and kept the finances completely separate, you might be okay. It could qualify as non-marital property. But that’s a big “if.”
If your spouse contributed to the business in any way, we’ve got a problem. Maybe they helped with bookkeeping on weekends. Maybe you used joint savings to cover payroll during a rough month. Maybe they just supported the household so you could work eighty-hour weeks getting things off the ground. Any of that can make at least part of your business marital property.
Timing matters too. Started the business after you said “I do”? It’s almost certainly going to be considered marital property. Used marital funds to grow a business you started before marriage? Same issue. The line between what’s yours and what’s “ours” gets blurry fast.
How The Court Figures Out What Your Business Is Worth
You can’t just tell the judge what you think your business is worth. Doesn’t work that way.
Maryland courts want a professional business valuation. And I’m not going to sugarcoat this: it’s expensive and it takes time. But it’s also necessary because this is where a lot of divorce cases involving businesses get decided. The valuator will dig into your financial records, look at assets and debts, examine revenue streams, and try to project future earnings.
There are three main ways they do this:
- Asset-based approach – They add up everything the business owns and subtract what it owes
- Income approach – They look at what the business is likely to earn down the road and figure out what that’s worth today
- Market approach – They find similar businesses that have sold recently and use those as comparisons
Each method can give you a wildly different number. That’s why both sides often hire their own valuators, and then we end up arguing about whose number is right. A Frederick divorce lawyer who understands business valuations can challenge an inflated assessment and protect you from paying more than you should.
What You Can Actually Do To Protect Your Business
So what are your options?
Documentation is everything. Start gathering records now that show which money came from the business and which came from personal or marital accounts. If your spouse wasn’t involved in running the company, get that documented, too. Employee statements, business records, anything that shows they weren’t part of daily operations.
Some clients decide to trade other assets to keep full ownership of the business. You might give up your share of the house or offer retirement accounts in exchange for keeping 100% of the company. It’s not always possible, but when it works, it’s clean. You keep control, they get assets of equivalent value, and everyone moves on.
Buy-sell agreements can help, but only if you set them up before things go south. These agreements with your business partners often include language that prevents your ownership stake from going to a spouse in a divorce. If you don’t have one already, it’s too late for this divorce. But it’s worth thinking about for the future.
Can You Still Work Together After Divorce?
Some people do. Honestly, though? Most don’t want to.
Continuing as business partners with your ex-spouse requires an unusual level of maturity and communication. You’ll need clear boundaries and probably some very detailed operating agreements about decision-making authority. Most business owners I work with would rather buy out their spouse’s interest and be done with it.
If you can’t afford a buyout right now, we can structure payment plans or deferred compensation. Your Frederick divorce lawyer can draft agreements that protect both of you while keeping the business running. But it’s complicated, and you need everything in writing.
Why You Need To Deal With This Early
Don’t wait. The earlier we address your business in the divorce process, the more options you have. Wait until the last minute, and you’re going to make decisions under pressure that you’ll regret later. Courts in Frederick County see plenty of divorce cases involving business owners. The judges get it. They understand that destroying a viable business doesn’t help anyone. But they also won’t let you hide assets or undervalue your company to avoid paying your spouse what they’re entitled to. You need documentation, professional valuations, and a strategy that makes sense for your specific situation.
We work with forensic accountants and business valuators regularly to build strong cases for clients who own companies. The goal isn’t just protecting what you’ve built, though that matters. It’s finding a resolution that’s fair and allows you to keep operating without your business becoming collateral damage in your divorce.
If you own a business and you’re thinking about divorce or are already in the middle of one, let’s talk about your situation. We can help you understand what you’re dealing with and put together a plan that protects your future.
