Dividing a Business in a Maryland Divorce When the Business is Marital Property

In cases of divorce where businesses are among the spouses’ marital property, the issues can be very intricate. A value must be established for the business (just as it must be for every other marital asset), and this often requires the services of an accounting and business valuation expert. In order to achieve your fullest and fairest outcome in your divorce, it may often be worth your while to retain your own expert witness to perform a valuation of the business. Whether it is expert witness evidence, document evidence or testimony, when it comes to amassing and presenting the evidence you need for a fair result in your divorce case, be sure to reach out to a knowledgeable Maryland family law attorney.

L.H. and K.K.’s divorce was a case that centered around asset division and a business as a marital asset. The pair married in the fall of 1997. They separated 15 years later and their divorce became final in 2016. With regard to the division of assets, the court concluded that a tree service company owned by the wife was a marital asset. The court ordered that the wife keep the business, but that the husband should receive a monetary award for his portion of the marital asset.

In order to make an equitable division and set a proper amount for the award to the husband, the court needed to know the business’s worth. The husband retained an expert to assess the value of the business. (The wife hired an accountant to serve as her expert, as well.)

Obviously, the goal that you’re seeking from your expert is a conclusion that will mesh your arguments in the case. However, it is important to ensure that your expert engages in methodology and a conclusion that the court can find believable. Otherwise, the expert may lose all credibility with the court and the judge may ignore his conclusions entirely.

That was, in fact, what happened in this couple’s case. The husband’s expert prepared a report concluding that the business was worth $204,000. The wife’s expert concluded that the business was worth $0. The judge found the latter assessment less than credible, given that the business paid 11 employees several hundred thousand dollars in annual salary, including paying raises and bonuses, went an entire year (2015) making zero purchases on the company credit card and just leased a new, additional space at a cost of $3,500 per month. In other words, the proof simply didn’t match the conclusion that the business wasn’t profitable. As a result, the judge simply adopted the husband’s expert’s conclusion and set the value of the business at $204,000, ordering the wife to pay the husband a monetary award of $103,500.

Putting your “best foot forward” in the trial court, as this husband did, is very important. The law gives trial courts wide discretion in the rulings they make. Once your trial judge has made a ruling in your favor, your spouse generally can only overturn it if the judge abused his discretion, which is a fairly high hurdle to clear. In K.K.’s case, the appeals court concluded that the trial judge was within his discretion to conclude that the wife’s expert’s opinions were not credible and simply to adopt the husband’s expert’s opinions in setting the value of the business.

For all of your property division and other divorce-related needs, consult experienced Maryland family law attorney Anthony A. Fatemi, who has been helping Maryland spouses for many years to achieve fair resolutions to their divorce cases. To find out how we can help you, contact us at 301-519-2801 or via our online form.

More blog posts:

When Does an Idea Become an Asset and When Does an Asset Become Subject to Marital Property Division in Maryland?, Maryland Divorce Lawyer Blog, Aug. 15, 2018

Making Sure You Complete the Correct Procedural Steps to Seek the Division of a Marital Asset in Maryland, Maryland Divorce Lawyer Blog, Nov. 14, 2016

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