Can a Spouse Receive a Share of the Family Business? Important Florida Case Law and Analysis

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In Orloff v. Orloff, 36 Fla. L. Weekly D643a (Fla. 2d. DCA Mar. 30, 2011), th Second District Court of Appeal addressed the decision making process a court must complete when determining whether a spouse is entitled to received a share of a family business started before the marriage upon divorce.

Under Florida law, a non-marital business that is started prior to marriage will not become a marital asset subject to equitable distribution solely because of the fact that the business was later reincorporated during the marriage. However, any enhancement in value of the non-marital business since the date the parties married may be considered a marital asset, subject to equitable distribution if such enhancement was due to either party’s contribution of marital labor or marital funds.

In Orloff, the husband formed a sole proprietorship before the parties were married in the late 1980s. The business was incorporated in Massachusetts and the husband was the sole stockholder. Following the marriage and relocation to Florida, the husband reincorporated his business in Florida and continued to be the company’s only stockholder.

The trial court held that the business was a marital asset subject to equitable distribution because the business was reincorporated during the marriage. However, the Second District Court of Appeal reversed this decision and determined that the business was a non-marital asset because the husband used solely non-marital assets to form the company. The court explained that, pursuant to Section 61.075(6)(b)(1), Florida statutes, non-marital assets are “[a]ssets acquired and liabilities incurred by either party prior to the marriage, and assets acquired and liabilities incurred in exchange for such assets and liabilities.” According to the Orloff court, the mere fact that the business “was reincorporated under Florida law upon the parties’ relocation to Florida” was “not material” to the determination of whether the husband’s business was a marital asset subject to equitable distribution.

Fashioning an appropriate equitable distribution scheme can be complex process, especially when a family business is involved. A Jacksonville Florida family law and business attorney can help sort out these issues.