Saturday, October 27, 2007

What happens to an Indiana business in a divorce?

Keep in mind that a business is property. Indiana divorce law presumes a 50-50 split of the property.

Here is a current statement of the law from Frederick v. Frederick (NFP opinion 10-24-2007, PDF format):

oncerning personal goodwill and enterprise goodwill, our supreme court has held:
[B]efore including the goodwill of a self-employed business or professional practice in a marital estate, a court must determine that the goodwill is attributable to the business as opposed to the owner as an individual. If attributable to the individual, it is not a divisible asset and is properly considered only as future earning capacity that may affect the relative property division. . . . [T]o the extent a business or profession has goodwill (or has a value in excess of its net assets) it is a factual issue to what extent, if any, that goodwill is personal to the owner or employee and to what extent it is enterprise goodwill and therefore divisible property.

Yoon v. Yoon, 711 N.E.2d 1265, 1269-70 (Ind. 1999). “If a party wishes to exclude personal goodwill from a business’s valuation in a dissolution proceeding, they must submit evidence of its existence and value to the trial court by ensuring that their chosen expert provides proof of such existence and value.” Balicki, 837 N.E.2d at 538.
Which means that the court gets to decide how to divide the property unless there is a prenuptial agreement.

If want to read more about prenuptial agreements, this link will take you to all the articles I have posted on prenuptial agreements at my Indiana Divorce and Family Law Blog.

Please give me a call if you live in Indiana and are thinking about a prenuptial agreement.