How Are Business Assets Valued in Divorce?
When a Florida divorce involves the ownership of a closely held business or professional practice, determining how that business is valued—not necessarily how it is divided—becomes a central issue. This is particularly true in high-asset divorces or when a business represents one of the most substantial marital assets.
In Florida, valuation of business interests is governed by both statutory authority and case law, and it is handled with careful attention to fairness, accuracy, and financial disclosure. If you are divorcing in Sarasota, Florida, and either you or your spouse owns a business, understanding how that business is valued under Florida law is critical to preserving your rights and interests during equitable distribution.
Florida’s Rules for Valuing Business Interests in Divorce
Florida courts are guided by Florida Statutes § 61.075, which establishes the principles of equitable distribution. This law requires courts to first determine whether an asset is marital or non-marital, and then assign a value to any marital interest before dividing it equitably.
A business interest may be classified as marital, non-marital, or a combination of both. If the business was created or acquired during the marriage, it is generally considered a marital asset. Even if one spouse owned the business prior to the marriage, any appreciation in value during the marriage may be subject to valuation and potential distribution, especially if that appreciation was the result of marital efforts or resources.
Valuation is a distinct legal step that must occur before any distribution. Florida courts use a standard of fair market value, which is essentially the price a hypothetical buyer would pay a willing seller in an arm’s-length transaction.
Common Business Valuation Methods in Florida Divorce Proceedings
Florida law does not mandate a single formula or methodology for business valuation. Instead, courts rely on the testimony of financial experts—typically forensic accountants or accredited business appraisers—to determine value using one or more well-established approaches. These generally fall into three categories:
Asset Approach
This method calculates the business’s value based on its net tangible and intangible assets. Liabilities are subtracted from the total asset value. This approach is more commonly used for asset-heavy companies, such as those with significant equipment, property, or inventory. However, it may not be appropriate for service-based businesses or companies whose value is tied largely to goodwill.
Income Approach
The income approach focuses on the present value of the business’s expected future earnings. Experts often use a discounted cash flow (DCF) model to project future income and then discount that income to present value using an appropriate risk-adjusted rate. This method is especially common when valuing businesses with consistent revenue streams and well-documented financial histories.
Market Approach
This method estimates value by comparing the subject business to similar businesses that have recently been sold. It can be useful when sufficient market data is available. However, privately held businesses are often unique, and finding comparable transactions in Sarasota, Lakewood Ranch, Bradenton, Venice, Florida or surrounding areas may be difficult or unreliable.
Courts will consider all valuation reports submitted and are not obligated to accept any single method or expert opinion in full. Instead, the court has discretion to determine what method best reflects the business’s true value in light of the circumstances of the case.
Consideration of Goodwill
An important factor in business valuation—particularly for professional practices—is goodwill. Florida law recognizes two types:
- Enterprise goodwill, which is tied to the business itself (its location, employees, systems, and brand recognition), and
- Personal goodwill, which is derived from the individual owner’s reputation, skills, and relationships.
Florida courts generally consider enterprise goodwill to be a marital asset if developed during the marriage. In contrast, personal goodwill is typically excluded from the marital estate. Differentiating between the two requires expert testimony and careful analysis of the business’s structure and operations.
Timing of Valuation
Under Florida Statutes § 61.075, the default valuation date is the date of filing the petition for dissolution of marriage. However, the court may select a different date if equity requires it—for example, if the business’s value has changed drastically due to post-filing actions, economic conditions, or misconduct.
Business valuation can be retrospective (looking backward) or prospective (forecasting earnings). The selected valuation date should reflect the most accurate and equitable measure of the business’s value in the context of the divorce.
Importance of Financial Disclosure and Forensic Review
Each party in a Florida divorce is obligated to comply with the financial disclosure requirements outlined in Florida Family Law Rule of Procedure 12.285. This includes production of business tax returns, profit and loss statements, general ledgers, payroll records, and other relevant financial documentation.
Where there are concerns about underreporting of income, unrecorded cash flows, or manipulation of records, a forensic accountant may be engaged to investigate the business’s financial integrity. A properly executed forensic valuation can identify hidden income, add-backs, and non-business expenses that should be excluded when calculating net income or determining value.
If either spouse fails to provide accurate disclosures, the court may draw adverse inferences, impose financial penalties, or award a greater share of marital assets to the compliant party.
Marital Versus Non-Marital Business Interests
The characterization of a business interest as marital or non-marital depends largely on the source of funds used to acquire or operate the business and whether marital labor or financial contributions enhanced its value.
If one spouse owned the business before marriage, the non-marital value may remain protected. However, appreciation that occurred during the marriage—especially if it resulted from the active efforts of either spouse—may be considered a marital asset.
This “enhancement in value” rule is well-established in Florida law and often becomes a focal point of litigation. The burden falls on the spouse asserting a non-marital interest to prove the pre-marital value and to show that any subsequent growth was passive in nature.
Professional Valuation Experts in Divorce Litigation
Given the complexity of business valuation, expert testimony is often essential. An experienced business appraiser will:
- Analyze financial statements
- Normalize earnings
- Evaluate goodwill
- Apply appropriate valuation methods
- Prepare a formal report and testify if needed
The court will assess the credibility of each expert and may adopt one opinion over another or may adjust values based on its own findings. In some cases, parties may agree to jointly retain a neutral expert witness to streamline the process and reduce costs.
Sarasota, Lakewood Ranch, Bradenton, and Venice, Florida Divorce Lawyer
If you are involved in a divorce where business ownership is a factor, it is vital to work with a divorce attorney who understands not only Florida’s equitable distribution laws, but also the complex financial principles involved in business valuation.
At the Law Offices of Matthew Z. Martell, P.A., we represent clients throughout Sarasota, Lakewood Ranch, Bradenton, Venice, Florida and the surrounding areas in divorce matters involving high-net-worth individuals, professional practices, family businesses, and closely held corporations. Our legal team works with qualified valuation experts to ensure your rights are protected and your financial future is secure.
To see if you qualify to schedule a free 15 minute phone consultation to discuss your legal options, contact us at the Law Offices of Matthew Z. Martell, P.A. by calling (941) 556-7020 or contacting us online.
