Portland Closely Held Corporation Divorce Lawyer

Every divorce includes questions about property distribution. Each divorcing couple must determine how to divide their property, including property acquired during the marriage itself.

The more diverse a divorcing couple’s assets are, the more complex questions about property distribution become. A couple that owns a closely-held corporation, for instance, may need assistance from experienced attorneys and financial professionals to ensure that the corporation is divided equitably.

At Gearing, Rackner & McGrath, our Oregon family law attorneys have experience with complex high-net-worth divorce situations. We can help you understand and face the challenges of handling a closely-held corporation during a divorce so that you reach a workable solution.

Oregon Property Distribution and Closely-Held Companies

Oregon’s law on divorce states that property should be distributed equitably between the divorcing spouses. An “equitable” distribution seeks to leave each spouse on relatively equal footing. Consequently, an equitable distribution will not always be a fifty-fifty split of assets.

When considering how to divide property, Oregon courts examine several factors. These factors include

• Personal information about each spouse, including their age, health, education, work experience, and overall earning power.
• The length of the marriage.
• Each spouse’s contributions to the marriage, both financial and otherwise.

In addition, courts consider whether property is “separate” or “marital” property. Separate property is property owned by one spouse before marriage or received by one spouse during a marriage - for instance, an inheritance left to just one of the spouses. Marital property is property acquired during the marriage.

Courts assume that both spouses have an interest in marital property, but that separate property will typically stay with the spouse to whom it belongs. Courts may divide separate property, however, if doing so would create a more equitable result.

Questions for Divorcing Spouses With Closely-Held Corporations

Closely-held corporations held by two spouses follow the same default rules as other types of marital property in Oregon. When two spouses each have shares in a closely-held corporation, the court will treat the corporation as marital property unless presented with a compelling reason to do otherwise. Similarly, shares in a closely-held corporation owned by only one spouse will be evaluated as either separate or marital property and treated accordingly.

Several questions arise when a couple seeks to handle a closely-held corporation in the context of a divorce-related property distribution. Common questions include

How is ownership of the corporation organized and valued?

By definition, a closely-held corporation is a separate legal entity from those who hold shares in that corporation. Who owns shares, how many shares each person owns, and how decisions are made may all affect property distribution decisions, however.

Another question that frequently arises is what the closely-held corporation does. A corporation that manages real estate on behalf of a couple, for instance, may be handled differently than one operating as a public-facing business.

Divorcing parties will often benefit from an independent valuation of a closely-held company. Valuation places concrete numbers on questions like the current worth of the business or its projected worth.

How has each spouse contributed to the corporation?

Both financial and labor contributions will be considered when exploring the answer to this question. This question is similar to one asked when two spouses own and operate a family business. To reach an equitable distribution result, both financial contributions and effort in the form of labor are examined.

Will other parties’ interests be affected by decisions made during the divorce process?

Some closely-held corporations are held only by two spouses. Others, however, have additional shareholders or other parties with interests in the future of the corporation.

Even when the spouses are the only shareholders, their interests may be affected by sources outside the divorce proceedings or the closely-held company. A prenuptial agreement, for example, may set rules for dissolving the corporation or otherwise managing each spouse’s interest in it during a divorce.

Can the parties continue to hold their interests in the corporation?

In some cases, the spouses can work together as business partners even if they can no longer maintain a marital relationship. When a divorce is otherwise amicable, allowing the corporation to continue its business may be an option.