Closely Held Businesses Treatment Under Maryland Marital Property Law

The Baltimore-Washington Corridor, including Howard County, Anne Arundel County, Baltimore County, Harford County, Prince Georges County and Montgomery County, is blessed with many successful privately held business that create a special issue for Maryland Divorce Lawyers.

A closely held business is one that is privately owned as opposed to one whose stock is publicly traded. In Separation and Divorce, an interest in a closely held business can become quite contentious. In such cases, it is helpful to engage legal counsel who has experience not only in Maryland Divorce cases but also in Business and Business Litigation.

If legal formalities have been followed in the establishment of the business, ownership of the business can be established.

If legal formalities have been carefully followed in the establishment of the business, ownership of the business can be expeditiously established. The next issue is whether the business is marital property. A business that was started during the marriage is probably marital, unless an exception such as a valid Pre-Marital Agreement can be proven. Even if a spouse owned his or her business prior to the marriage or received an interest by gift or inheritance, it may become partially marital property due to efforts expended during the marriage to increase the value of the business.

Once a business is identified as Marital it needs to be valued as of the date of the divorce. If the business is partially Marital (e.g. owned prior to the marriage), the necessary valuation is the difference between the values of the business at the time of the Divorce and at the time of the marriage.

The value of Marital Property in the form of a closely held business is added to the value of other Marital Property. Considering the Marital Property in the possession each party, the Court will consider each of the factors set forth in Section 8-205 of the Family Law Article to determine the grant of a Monetary Award. Such an award it intended to correct any inequity created by the way in which property acquired during the marriage happened to be titled.