If you are getting a divorce and you own all or a portion of a business, but your spouse does not own any portion of that business, you might wonder, Will my business be considered a marital asset, to be divided between my spouse and I, even though my spouse wasn’t involved with the business at all?
The answer is, most likely, yes. When a spouse in a divorce case owns a business, the value of the business will most likely be divided among the two spouses in an equitable division of the martial assets. As long as both spouses engaged in “joint efforts” toward the marriage, and the spouse’s ownership interests in the business were acquired after the date of marriage, the business will likely be considered a marital asset (or perhaps a marital debt). See, for e.g., Savage v. Savage, 658 P.2d 1201, 1204 (Utah 1983).
However, the way in which the value of the business gets divided, or in other words, the portions of the business’ value that each spouse “receives,” might vary from situation to situation.
Usually the value of the portion of the business which is owned by a spouse will be divided 50/50.
And usually the value of the business is determined by its fair market value, or in other words, how much the business would sell for. Divorcing couples will sometimes get a “business valuation” conducted to better discover this fair market value.
But what if a spouse acquired ownership interests in this business before the date the spouses were married? In that case, the ownership interests in the business might be considered separate property. However, if the business’ value grew or appreciated during the marriage, the increase in the business’ value might be considered a marital asset. See Elman v. Elman, 45 P.3d 176 (Utah Ct. App. 2002).
Or, what if part of the business’ value is the business’ “goodwill”? “Goodwill” is an intangible asset of a business, often described as the business’ reputation and ability to generate income from continued patronage. Usually, if part of the business’ fair market value is its goodwill, the value of the goodwill will be equitably divided between the spouses, just like the rest of the business’ value.
However, if the business’ goodwill is attributed solely to the spouse who owns the business, such as is the case with most sole practitioners of professional practices and most sole proprietor owners of other types of businesses, then the value of the goodwill will likely not be considered a martial asset. The rest of the business’ value would still be considered marital property (such as the value of the business’ equipment, accounts payable, stock, debts, etc.), but not the value of the goodwill.
It might be helpful to think of it this way: Utah courts want to know, would the business have any goodwill left if the working spouse hypothetically left it, or rather would the business’ good reputation walk out the door with the spouse? If this might describe your situation, it is best to speak with an experienced Utah divorce attorney to further discuss whether the business in your divorce case might involve “goodwill” that is attributable solely to one spouse. See Sorensen v. Sorensen, 839 P.2d 774 (Utah 1992).
Dividing the value of a business in a divorce case is usually complex. It is best to speak with a competent, experienced Utah Attorney to learn more about your particular situation and your rightful claims to the value of your marital business.