When a couple divorces, they must divide their assets according to the doctrine of equitable distribution. When a couple divorces in court, the court determines an appropriate way to divide their assets. Couples who choose collaborative divorce have more control over how their assets are divided, but often follow equitable distribution guidelines at the recommendation of their lawyers.
Equitable distribution is a way to ensure that both partners leave the marriage with a fair share of their marital assets. Each partner’s contributions to the marriage and their personal needs are considered to determine the right breakdown of their assets. When both partners are employed in the traditional sense, valuing and dividing their assets can be a simple process. When one or both partners are self-employed, on the other hand, valuing and dividing their assets can be more complicated because the partners are considered business owners, and the business itself is a marital asset.
Gathering and Reporting Relevant Financial Facts can be Difficult
With a traditional job, determining an individual’s total compensation is easy. All it takes is a few pay stubs. Self-employment is not always as consistent, and if the self-employed spouse does his or her own accounting, it can be difficult to piece together the business’ value through the documents he or she can provide. It can also be easy for the self-employed spouse to hide assets through the business or under-report his or her income. Sometimes, a third party like a forensic accountant has to get involved to accurately value a small business.
The Small Business will Need to be Appraised Appropriately
A small business is a marital asset that has to be appraised to be included in a marital pool. Even sole proprietorships and hobbies like selling crafts on Etsy or boarding dogs are considered small businesses and if they provide income that supports the couple, they are subject to division.
How to appraise a small business depends on the couple’s plan for it. If one partner wants to continue operating the business after the divorce, he or she may have to “buy out” the other spouse’s interest in it or allow the other partner to take a larger share of the couple’s marital assets.
If the self-employed partner operated the business before entering the marriage, the business’ entire value might not be subject to valuation and division. This is because it would be considered a commingled asset, an asset that grew in value because of the spouse’s efforts.
Work with an Experienced Winter Park Divorce Lawyer
The complexity of your divorce depends on the relevant factors in your marriage and lifestyle. If you, your spouse, or you both are self-employed, this is a relevant fact that will play a crucial role in your asset division and other parts of your divorce settlement. Contact Aubrey Law today to schedule your initial consultation with an experienced Winter Park divorce lawyer, where we can discuss your employment status and other topics relevant to your divorce.