Your Career Is More Than Your Paycheck

Businesses, Professional Practices, and Complex Compensation in Divorce

For many accomplished women, the financial value of a career is not accurately reflected by the number printed on a W-2.

A physician may own part of a medical practice.

An attorney may be a shareholder or partner.

An executive may receive restricted stock or deferred compensation.

A financial professional may receive bonuses tied to annual production.

An entrepreneur may own a company she started years before the marriage.

When divorce is being considered, these financial interests deserve their own analysis.

Start With How You Are Actually Compensated

Your compensation may include:

• Salary;
• Bonuses;
• Commissions;
• Partnership distributions;
• Profit sharing;
• Restricted stock;
• Stock options;
• Deferred compensation;
• Business income;
• Retirement contributions; or
• Other employer-provided financial benefits.

Do the same analysis for your spouse.

Florida law recognizes many forms of income for support purposes, including salary, bonuses, commissions, business income, retirement payments, interest, dividends, rental income, and trust or estate income.

That means understanding compensation requires more than multiplying a paycheck by 26.

When a Business Is Involved, Identify the Ownership Interest

A professional practice or privately held company may be one of the most valuable—and complicated—assets in the marriage.

Florida equitable-distribution law specifically recognizes marital interests in closely held businesses. It currently directs courts to value those interests using fair market value and recognizes enterprise goodwill that is separate from the continued presence and reputation of the owner spouse as a marital asset.

Before filing, gather information concerning:

• Ownership percentage;
• Formation documents;
• Operating, shareholder, or partnership agreements;
• Buy-sell agreements;
• Business tax returns;
• Profit-and-loss statements;
• Balance sheets;
• Business debt;
• Owner compensation;
• Distributions;
• Accounts receivable; and
• Significant business assets.

A business valuation professional or forensic accountant may be necessary depending upon the circumstances.

A Business Can Be Valuable Without Being Liquid

One of the most important distinctions in a business-owner divorce is the difference between value and cash.

A practice could have substantial value while the owner has no ability to simply withdraw that value from the company.

Likewise, requiring a business owner to make a large equalizing payment can create cash-flow problems that affect both the owner and the company.

Florida’s equitable-distribution statute recognizes the desirability, where appropriate, of retaining an interest in a business, corporation, or professional practice intact and free from interference by the other spouse. It also permits monetary payments in lump sums or installments to facilitate equitable distribution.

This is why business cases should be evaluated strategically, not simply by assigning a number to the company.

Pay Attention to Compensation That Has Not Yet Been Paid

Professional compensation may be earned at one point and received at another.

Examples include:

• Year-end bonuses;
• Deferred compensation;
• Equity grants;
• Restricted stock;
• Stock options;
• Profit-sharing awards; and
• Partnership distributions.

Florida equitable-distribution law expressly includes certain vested and nonvested benefits accrued during the marriage in deferred-compensation and retirement-type plans.

The timing and terms of compensation should therefore be reviewed carefully before assuming that money received after filing is automatically irrelevant to the marital estate.

Do Not Restructure Your Career for Litigation Optics

Pre-divorce planning is not an invitation to artificially reduce income, delay compensation, alter business distributions, reject bonuses, or restructure ownership merely because dissolution is anticipated.

There may be legitimate business reasons for changes in compensation or ownership.

When those changes are significant and divorce is reasonably anticipated, discuss them with counsel before acting.

The goal should be to accurately understand and preserve your professional and financial life—not manufacture a different one for litigation.

Use Our Checklist to Organize Your Professional Financial Life

The Perez-Calhoun Law Firm Pre-Divorce Financial Planning Checklist includes sections for business ownership, employment compensation, retirement accounts, deferred benefits, and supporting records.

Use it to identify what exists and what additional questions may require assistance from:

• Family-law counsel;
• A CPA;
• A forensic accountant;
• A valuation professional;
• A tax professional; or
• A financial advisor.

Allow Perez-Calhoun Law Firm to Help Protect What You Built

You spent years building your education, career, professional reputation, practice, or company.

A divorce involving those interests should not begin without understanding what is at stake.

Allow Perez-Calhoun Law Firm to help you with your pre-divorce planning, evaluate the financial structure of your career or business, and identify the issues that should be addressed before filing.