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Dividing a business in a Maryland divorce

On Behalf of | May 22, 2024 | Divorce |

When you’re facing a divorce in Maryland and own a business, you’re dealing with not just the end of a marriage but also the complex task of dividing a significant asset. The first step is identifying all assets, categorizing them as marital or non-marital, and then planning for a fair distribution.

If your business is marital property, it’s subject to valuation and division, just like your home or retirement accounts. Here’s what you need to understand about the equitable division of business assets in Maryland.

Ensuring a fair business valuation

Getting an accurate valuation is crucial when a business is a marital asset. This process sets the stage for fair distribution and affects other financial aspects of the divorce, such as alimony and child support.

In Maryland, a business that either spouse started during the marriage typically counts as marital property. But if you owned a business before marriage, or if it was a gift or inheritance, it might retain its non-marital status unless it was commingled with marital assets.

Valuing a business in a divorce is a complex task. It’s not just about what the business is worth on paper; it involves understanding its potential, its debts and its assets. Here are some common methods used to ensure an accurate valuation:

  • Market approach: Compare your business to similar businesses sold recently.
  • Income approach: Looking at the revenue streams and potential future income.
  • Asset approach: Evaluating the value of all tangible and intangible business assets.

Each method has nuances, and the chosen approach may depend on the nature of the business and its financials.

Options for dividing a business

When it comes time to divide the entity, there are several paths you and your spouse might take. The right option for you will depend on various factors, including your relationship post-divorce and your individual goals. Here are some potential outcomes:

  • One spouse buys out the other’s interest.
  • Sell the business and split the proceeds.
  • Both spouses continue to run the business together.

You should consider how each of these options will affect not just your immediate financial situation but also your long-term financial health.

Remember that dividing a business during a divorce is a complex process that can have significant financial consequences for both parties. Working with a professional who understands the intricacies of Maryland’s equitable division rules is crucial.