Accounting for the Marital Appreciation of a Business in a Florida High Net Worth Divorce
A common issue in Florida high net worth divorce cases is how to classify a business owned by either spouse. Generally speaking, a business that a party owned prior to the marriage remains their separate property. But the appreciation in value of that business due to the efforts of either spouse during the marriage is considered marital property. This means that, while the individual spouse can retain sole ownership of their business post-divorce, a court may determine that the increase in value of the business from the day of marriage to the date a party files for divorce will be equitably distributed to the other spouse to account for their share of value added to the business as a result of the marriage.
Appeals Court: Judge Could Not Order Direct Distribution of Business Assets
In equitably distributing the marital value of the business, a court may not directly order a distribution from one spouse’s business to the other spouse without formally adding (or “joining”) that business as a party to the case. This recently came up in a decision from the Florida Third District Court of Appeal. In Noss v. Noss, the former wife owned a staffing business that she started prior to her marriage. The former husband worked for the business during the marriage but was not a co-owner.
The former wife filed for divorce after approximately 13 years of marriage. At that time, the former husband stopped working for the staffing business and established his own company. A key issue at trial was how to classify the staffing business. The trial judge ultimately determined the increase in value of the former wife’s business that occurred during the marriage was a marital asset. The court therefore subsequently ordered the former wife to turn over 50 percent of her business’s cash assets–i.e., its savings and checking accounts–to the former husband.
On appeal, the Third District said that was not a proper remedy. The cash assets belonged to the business, which was a corporation, and not the former wife personally. The trial court had the authority to distribute the former wife’s ownership interest in the corporation to the former husband as part of its equitable distribution order, but the court could not “distribute the assets of the non-joined company itself.” In other words, unless the corporation was added as a party to the litigation, the trial court had no jurisdiction to dispose of its property. The Third District therefore returned the case to the trial court for further proceedings.
Contact a Miami Division of Property and Assets Attorney Today
Valuing a business, or an appreciation in the value of a business, is often a tricky subject in a high net worth divorce case. It often requires both parties to bring in skilled experts to perform a business valuation. Even then, the parties may still disagree as to a final valuation, requiring a judge to make the final determination.
If you find yourself in this kind of situation, it is in your best interests to work with an experienced Miami equitable distribution lawyer who specializes in high net worth divorce cases. Contact Hamilton O’Neill today at 305-371-3788 to schedule a consultation.