A divorce that involves a family business is undoubtedly complicated. However, with the help of an experienced Fairfax divorce lawyer, the business can be fairly valued and equitably divided.
Division of Family Business in Divorce
Dividing a family business during a divorce does not necessarily mean both parties will retain the same ownership rights. For example:
- One party may buy out the other.
- One may keep the business and its assets, while the other receives some combination of the marital home, spousal support, and certain retirement accounts.
The exact outcome depends on several factors, including the skills and contribution of each individual to the business and the marriage.
Importance of Business Valuation
A key aspect of this process is ensuring the business receives a proper valuation. This requires securing the services of a qualified business valuation expert. The expert will work with your attorney to:
- Gather necessary documentation,
- Interview relevant parties,
- Testify at trial, if needed.
The Hugh v. Hugh Case
This situation was recently at issue before the Court of Appeals of Virginia in the case of Hugh v. Hugh, an appeal from the Circuit Court of Prince William County.
Case Background
The husband appealed the court’s ruling on spousal and child support, while the wife cross-appealed regarding the court’s refusal to value and equitably distribute her husband’s business as a marital asset.
- The couple married in 1997 in South Korea and moved to the U.S.
- They had three children during the marriage, with the wife acting as the primary caregiver and the husband as the primary wage earner.
- The husband owned and operated a business, frequently dissolving and re-incorporating it under different names.
Although the court was unable to clearly define the business’s exact nature, it appeared the husband acted as a broker for the semiconductor industry.
Testimonies and Business Valuation Issues
- The husband testified that the business had no value, and no documents were provided to support the idea that the business was worth anything.
- However, tax documents indicated annual revenue of $6 million to $10 million, with profits ranging from $400,000 to $700,000 per year.
- Before the firm’s latest dissolution, the wife had been named majority owner, with the husband owning 49%.
The wife’s expert witness also testified, though the husband provided insufficient evidence for the expert to offer a precise valuation. The expert suggested an intrinsic value of $1.4 million, though this did not meet American Institute of Certified Public Accountants standards due to the lack of available data.
Court Rulings
- The trial court found there was insufficient evidence to assign a value to the business and thus did not distribute it.
- On appeal, the appellate court disagreed with the trial court’s decision.
- Under Virginia law, the court must assign a value to the business and distribute it equitably, even in complex cases where evidence is limited.
Conclusion
Dividing a family business during divorce can be challenging, but with the right legal representation and expert valuation, it can be done fairly. If you are facing a similar situation, it is essential to work with experienced divorce attorneys to ensure your business and assets are properly handled. Contact DiPietro Law Group, PLLC at (888) 530-4374 for a consultation.
