Portland Divorce Attorneys for Business Owners

For most business owners, a business is more than a way to generate income; it is a passion and a way of life. For most married business owners, the thought of divorce may not have crossed their minds. However, the reality is that nearly half of all marriages in the United States end in divorce. Not surprisingly, business ownership is one of the most contested aspects of many divorces. At Gearing Rackner & McGrath, LLP, our experienced team of divorce attorneys help to protect our clients’ interests in their businesses. With a detailed understanding of business valuation as well as general family law concepts, our attorneys confidently represent all types of small business owners in Portland divorce cases.

Is a Business Considered Marital Property?

For many couples contemplating divorce, a business owned by one or both spouses are the couple’s most valuable asset. Thus, one of the most important considerations is whether business interests are potentially subject to division in a divorce. In most states, before a judge divides a couple’s assets, the court first determines which of the couple’s assets are marital property. Oregon, however, is different in that assets obtained by a spouse before the marriage may still be subject to equitable distribution. Although unusual, this may mean that a spouse who did not start a business accrues an interest in the business during the course of the marriage.

Typically, if a business is started during a marriage with joint funds, it is marital property. Otherwise, Oregon family courts look to the following three factors when determining if a business is marital property:

• Whether the business owner’s interest in the business predated the marriage;
• How the business owner acquired the business; and
• Each spouses’ contributions to the business during the marriage.

If the court determines that a business is marital property, it will be group together with the couple’s other marital assets.

When it comes to the division of property, Oregon is an equitable distribution state. Under an equitable distribution analysis, Oregon divorce courts distribute assets between the spouses based on what is fair, but not necessarily what is equal. Unlike many other states, there is not a specific list of factors a judge must consider when dividing property. Courts must consider the contribution of a non-working spouse as a homemaker; however, other than that, courts have broad discretion when dividing a couple’s assets. For example, the following are common factors in an equitable distribution analysis:

• The length of the marriage
• The education and employment opportunities of each spouse
• Each spouse’s ability to work
• The child support obligations of either spouse
• The tax consequences of asset division

In Oregon, there is a presumption that each spouse contributed equally to the marriage. However, this presumption can be rebutted by presenting evidence that one spouse contributed to the marriage more than the other.

How Are Business Valued in Oregon Divorces?

If the court determines that a business is marital property, the value of the business is subject to division between the spouses. Of course, few divorcing spouses want to be business partners, so dividing business interests between the spouses rarely makes sense. Instead, courts will often determine the value of the business, allow one spouse to keep the business, and then award the non-business owner spouse other marital assets to offset the value of the business. Thus, the value of the business becomes a critical part of the divorce proceeding.

As many business owners will know, there are multiple ways to value a business. Business valuation can be tricky, and valuation determinations are often at the center of a dispute during a divorce. Even the manner in which the court goes about calculating the value of a small business can be the subject of disagreement. Most often, Oregon divorce courts use one of three ways to value a small business:

• Asset approach
• Market approach
• Income approach

Depending on the type, size and complexity of a business, a business valuation expert may be necessary to help the court determine the value of a business. At Gearing Rackner & McGrath, LLP, our team of skilled Portland small business divorce lawyers understand the various business valuation methods, and the differences between them. This knowledge allows us to effectively cross-examine any valuation expert who overvalues our client’s business interests, and possibly keep more of their hard-earned assets.