With the increase of divorce in Minnesota, divorce lawyers have to become versed in business entities and law. The days of the general legal practitioner are gone. But, let me tell you a dirty little secret that most Minnesota divorce lawyers have, they are divorce lawyers….not business lawyers. They don’t like to look at the books, K-1 statements or god forbid, the taxes! Let me
explain a little more.
What often occurs in a divorce involving an S or C corporation or closely held partnership is that the income tax filings often have very little relationship to what the company actually makes. For example, depreciation is a tax issue, but one that does not really matter in a divorce, In fact, under Minnesota Child Support and spousal maintenance laws it’s excluded. Remember most small business owners don’t like to pay taxes and will do any legal thing they can to avoid paying them..
Another place to look for income is a “like kind” payment, this can mean cell phones, retirement contributions, car payments and insurance payments. Your divorce lawyer must, must understand this and be comfortable in dealing with these issues.
Finally, valuing a small business is often the most difficult part of the case. Many divorce or general practice lawyers who are not experienced will say that a partnership of closely held corporation has no value because it can’t be sold. While that’s a great argument, it’s not the law in Minnesota. Minnesota case law explains that while the ability to transfer ownership rights is a factor that the court should look at, it is not the final factor in determining the value of a business.
If you are in the need of a Minnesota divorce lawyer and have an ownership in a small business, it’s critical that you interview your Minnesota divorce attorney and ask what type of experience they have with both valuing the business and determining the cash flow of the business.
As always send comments, criticisms or questions to firstname.lastname@example.org
* DISCLAIMER: Most small business owners in Minnesota do not use $100 bills to light a cigar while they are getting divorced, but this was a hard post to get a fun picture for!
Rosengren Kohlmeyer, law office chtd.
For more information please visit my website at www.MankatoFamilyLaw.com