Could My Spouse Acquire Half of My Business in a Virginia Divorce?

January 11, 2022
Komal H. Khan
Divorce
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In Virginia, the courts are required to divide marital property in a way that is equitable and fair to both parties. Not all property is subject to division and distribution, however. Separate property, which typically consists of property owned by either spouse before entering the marriage (as well as inheritance and gifts), cannot be divided by a court. The court can only divide marital property or property jointly held by the two spouses.

In Virginia, businesses whether started before or during the marriage may be considered marital property or hybrid, which means that they are subject to property division by the court. There are large distinctions based upon when the business was started, how many owners are in the business, the personal efforts of the owning spouse and the personal goodwill of the owner. Therefore, determining how to divide a company can quickly become complicated. Deciding the value of a business is typically more challenging than determining the value of a home, car, investment accounts, and other types of marital property. That’s why it is crucial to consult with an experienced Virginia divorce lawyer if you have questions about business property division in a divorce.

Below, we will discuss how businesses are divided between spouses during divorce proceedings. The Vienna divorce lawyers at Roop Xanttopoulos Babounakis & Klam PLLC have the knowledge and resources to help you navigate through the divorce process and protect your property rights. Contact us today for a consultation.

How Businesses are Valued and Divided in Virginia

Courts in Virginia approach the valuation and distribution of businesses by considering a business’s intrinsic value or what it is worth to the two spouses. To value the business, a court might use the following methods:

Excess earning method –The court considers how much income the business owner brings in each year and weighs that against others in similar positions. If the business owner makes more than others in similar positions, then that income would be considered “excess.” The court will allocate it as part of the business’s overall worth. This is also projected into the future, based on the expected excess earnings of the business owner over the rest of their career.
Market value method –The court evaluates the current value of similar properties on the market to determine the business’s worth.
Asset value method – The court will tabulate all the business’s assets to discern their value.

If you own a business, you will most likely not have to sell or share the business with your soon-to-be former spouse once your divorce is finalized. However, if your business is a valuable property, then your ex-spouse might be paid part of the company’s value when the divorce is finalized. That particular amount would be specified in a settlement agreement or set by a court. Payments terms will also be important in order to ensure the sustainability of the business.

You and your spouse can decide for yourselves how you will divide a family business. However, if you and your partner cannot agree, the court will decide using the equitable distribution code section Virginia Code 20-107.3. Although equitable distribution requires a court to divide the business fairly, that doesn’t mean it will be split 50/50. There may also be separate property interests in the business based upon the personal goodwill of the owning spouse.

How a Virginia Divorce Lawyer Can Help

Dividing a business is one of the most complex components of property division during a divorce proceeding. That’s why it is so important to retain legal counsel when you file for divorce. The Virginia divorce lawyers at Roop Xanttopoulos Babounakis & Klam PLLC have the resources and experience to offer you sound legal counsel, defend your rights, and ensure that your property is valued fairly and equitably.

Divorce proceedings can be contentious, but our attorneys can also smooth out and expedite the process by helping you resolve disputes when they arise, always keeping your best interests as our priority.

Contact the Vienna divorce attorneys at Roop Xanttopoulos Babounakis & Klam PLLC today for more information about how we can help you.