When parties are married, everything that is earned or created during the marriage is marital property. Also included in the definition of marital property is a portion of any asset that was acquired before the marriage but increased in value during the marriage.
An asset that people often overlook when they are getting divorced is a business owned by one of the parties. If it was started during the marriage, the other spouse, whether they were involved in the business or not, has a marital claim to a portion of the spouse’s business interests.
This business interest is not just the amount of income the spouse would make in a given year. It includes any inventory owned by the company, any assets of the company such as a company car, and any income received by the business outside of salaries. This interest is offset by any amount of the value of the company that is attributable to the name of the spouse themselves. This is known as a key person discount.
An easy way to think of the business value is what it would be worth if the business were sold today. It is, of course, much more complicated than that. In divorce proceedings, both sides may hire experts to do a business valuation and determine exactly what it is worth and what should be awarded to each spouse in a divorce.