One of the sad facts of life for business owners and corporate officers is that divorces happen.
Their existence, however, doesn’t make
them any less palatable.
“For high net worth individuals, getting divorced not only brings with it the
usual emotional trauma, it can also be
financially devastating,” says Jason R.
Marks, a member of the law firm of
Kluger, Peretz, Kaplan & Berlin P.L.
“Any high net worth individual should
use the same approach when getting
divorced as they do when making critical decisions for their business. Think
with your wallet and not with your
Smart Business talked to Marks
about some of the issues that arise
when a high net worth individual goes
through a divorce in the state of
Are the assets of both publicly held and privately held companies subject to inclusion
in divorce proceedings?
Divorce can have consequences
whether closely held or publicly held
businesses are involved, no matter
what your job title or position is, no
matter whether you’re the plaintiff or
defendant. Legally, your spouse is your
de facto partner during your marriage;
if your interest in your business was
acquired during the marriage, Florida
law requires that you part with 50 percent of its value when you get divorced.
How does the court split assets?
All assets acquired and liabilities
incurred during the marriage by either
spouse are subject to equitable division,
no matter whom the asset is titled to.
Court’s have substantial discretion
when splitting up assets. One option is
for the court to give the owner spouse
100 percent of the asset and give the
nonowner some other asset to equalize
things; for example cash or equity in
If the company was formed before
marriage, the nonowner spouse gets 50
percent of the company’s enhanced
value over the course of the marriage.
In Florida, each party in a divorce is
obligated to exchange financial affidavits that show the party’s incomes,
expenses, assets and liabilities. In
determining the value of a business,
sometimes you will need to go back in
the records to find the company’s value
when it was formed or acquired, when
the marriage occurred, and at the date
of the filing of the divorce petition.
How can one avoid having business assets
be the object of a divorce proceeding?
Two words prenuptial agreement.
Prenups are a high net worth individual’s best friend. Courts will uphold
these agreements, as long as they were
entered into freely and voluntarily and
with full financial disclosure.
In a prenup, the nonowner spouse can
agree that he or she will not share in any
of the owner spouse’s share of the business, and the business will remain intact upon the dissolution of the marriage.
Before you get married, you should
consider a prenup that allows you to do
on the front end what is difficult to do
on the back end that is, cut a deal.
For better or for worse, at least you will
know what you are getting in the event
that your marriage breaks down.
The only other way to limit the impact
a divorce will have on your business is
to figure out an approach to extricate
the business from the conflict. Once the
nonowner spouse understands what the
value of the owner spouse’s interest is in
the business, he or she can then begin to
assess what other assets he or she may
want in its place. The problem for the
high net worth individual is when the
business is all you’ve got to give.
Can a divorce clause be included in the
documents of incorporation when partners
It’s important for companies to understand that whether they like it or not,
the company will be involved when one
of the owners or partners goes through
a divorce. The court will require documents from the business, even when
other owners or partners may not want
the nonowner’s accountant rummaging
through confidential, proprietary financial information.
The governing documents of the business/partnership can state that no
owner/partner can convey away his or
her stock or assign the stock to a
spouse as security to meet any other
obligation in the event of a divorce and
contemplate what will happen to the
business if an owner/partner does. The
objective is to ensure that the business/partnership remains intact if an
owner/partner later gets divorced so
that the ongoing operations of the business are not affected.
JASON R. MARKS is a member of the law firm of Kluger, Peretz, Kaplan & Berlin P.L. practicing in the litigation and dispute resolution department, focusing on matrimonial and family law. Reach him at (305) 341-3152 or [email protected].