The Business Breakup: The Realities of Business Division in Oregon Divorce

Your business is not “just an asset.” For a lot of owners, it’s years of risk, late nights, pride, and a sense of security for the future. That’s why business ownership in an Oregon divorce can turn into one of the most intense parts of the entire case, and why the wrong assumption early on can cost you later.

We sit down with Lewis Landerholm to map out what actually needs to be answered when a company is on the table: Is it marital property or is there a credible separate property claim tied to premarital value or limited marital contribution? What happens when a spouse works in the business and gets underpaid? How do you handle the very real “double dipping” problem where the business is valued for property division and the business income is still used in spousal support?

Then we get practical about business valuation. Different industries require different expertise, and expert opinions can land far apart, sometimes by hundreds of thousands of dollars. We also dig into the messy edge cases that show up in real life: OLCC and other regulated licenses, cannabis-related complications, intellectual property like copyrights, and whether an asset can even be transferred the way people assume. Finally, we talk about entity structure, bylaws, partners, enforcement language in the judgment, and why mediation often gives business owners the time and flexibility that court can’t.

If you’re facing divorce with a business involved, subscribe for more straight answers, share this with someone who needs it, and leave a review so more Oregon families can find the guidance.

If you would like to speak with one of our attorneys, please call our office at (503) 227-0200, or visit our website at https://www.pacificcascadelegal.com.

Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.

Transcript

Welcome To Modern Family Matters

Intro/Outro 0:01

Welcome to Modern Family Matters, a podcast devoted to exploring family law topics that matter most to you, covering a wide range of legal, personal, and family law matters with expert analysis from skilled attorneys and professional guests. We hope that our podcast provides answers, clarity, and guidance towards a better tomorrow for you and your family. Here's your host, Steve Altishin.

Steve Altishin 0:31

Welcome. I'm Steve Altishin, Director of Client Partnership Service of Cascade Legal. I'm here with our founding attorney, Lewis Landerholm, to talk about what you need to know about ownership and division of a business in an Oregon divorce. Lewis, how are you doing today? Doing well. How are you, Steve? I'm doing well. This one is particularly interesting because it involves some expertise in the attorney itself. Owning a business can be really, really complicated. Property division is complicated enough. And throwing a businessing can be kind of crazy. So I thought we'd go through just some issues that you think need to be kind of talked about and resolved before you know either coming to an agreement or going to trial. So how the business will be ultimately determined. So you ready?

Why Business Ownership Gets Emotional

Lewis Landerholm 1:25

Yeah, no, I will say at the beginning, businesses are like children in divorces. Businesses are treated like children for uh divorcing couples because you've sunk so much time and energy and emotions into a business most of the time. And so small business divorces are some of the most heated, difficult to navigate because there's so many competing interests. And so it's really important to have the right person representing you because there are a lot of nuanced issues that come up. We do handle a lot of them because I think, you know, being a small business owner and understanding how that plays into the psyche of different litigants, you know, there's different leverage points and different interests and different things that people care about when you own a business. And so it's really important to have the right advocate when you own a business.

Steve Altishin 2:23

Yeah. And it's like you said, people put their money and their blood into it, which kind of gets to in business particularly, I think it's it's important to understand marital property versus separate property and how a business can kind of be determined in that, what it is.

Is The Business Marital Property

Lewis Landerholm 2:46

Yeah, it really depends on so many factors. So, kind of what you're talking about, obviously, if the law starts with any asset that came into existence during the marriage is going to be presumed to be marital property, presumed to be split 50-50. That goes for a business. But there are other arguments and other ways to argue against it becoming marital property, like a lack of contribution, or it was started prior to the marriage, or how much did the marriage contribute to the business itself? And so there's many more factors that play into it. And so it can get very complicated between a premarital valuation or somebody went and got outside investment and really there wasn't a lot of contribution from the marriage itself, there can be a different claim or different arguments to be made. And those are difficult arguments, but it brings in a lot more potential issues when business is on the line.

Steve Altishin 3:43

Yeah. And then

Double Dipping Valuation And Support

Steve Altishin 3:44

tell me, is it different if let's say one of the spouses is an employee of the business or just is that add to the sort of whether or not that's considered a marital or just an employee status? Does that matter? Is it just if if the if the the spouse is doing something?

Lewis Landerholm 4:06

Yeah, it typically doesn't matter if uh spouse is an employee. Number one, did they get paid as an employee? Because a lot of times spouse is getting underpaid as an employee. So that's it seems unfair at times to business owners. But the reality is that when you own a business, you've got two components that could be sort of hit that feels like it's double dipping. So you've got the asset component of the business, which is the valuation at the time of trial. So you've got your on your balance sheet, on your division of assets, the business itself can hold a residual value. Now that has to be done through a true business evaluator, unless the parties can agree on what the valuation is. And then from there, the income, the future income of the business, and the future income of that party can be used also for spouse support for a spousal support analysis for the soon-to-be ex-spouse. So you so you're gonna have to pay off or trade assets around to buy your soon-to-be ex out of the valuation of the business, and then also use the future income for spousal support purposes to pay for that piece as well. So it this is why it's just extremely important to really understand what's going on in the business, get a true valuation, not hope that the court will accept a low valuation because it just causes a lot of cost and added expense potentially.

Steve Altishin 5:42

That makes complete sense.

Picking The Right Valuation Expert

Steve Altishin 5:44

I mean, this isn't like there's no blue book, you know, like for a car. So can you talk just a little bit more about that valuation? Because aren't there, I mean, there's different ways businesses can be valued, and there may not be an agreement on which way they want to be valued.

Lewis Landerholm 6:04

Yeah, all the time. So this is why I don't pretend to be an expert in valuing businesses. And so we go and hire experts who are experts in valuing businesses, but not every business is created equal. So most of the time when we have a business valuation case, this is how it goes. We call Steve and we say, Steve, who in who in our business valuation, essentially Rolodex, who handles this type of business? Who have we used before that has valued something that's similar? Are we talking about a service industry? Are we talking about a you know a manufacturing? Are we talking about a construction industry? What what industry, a dental practice, a medical practice, like all of these things have differ different nuances, and there are experts all over the place who specialize in that area of business valuation. But it's really important to have that a true valuation if the if the business is really the crux of the case, because I just had a case recently that a CPA valued a business, it was a construction business valued the business at zero dollars, a business evaluator valued it at $400,000, the judge came in at a number of $300,000. That's a big difference. You know, you you're talking about a $300,000 swing between you, you know, one party says it's zero, and that's a CPA who you know presumably has some experience. The judge did not buy the CPA's argument and basically didn't cut straight in the middle, but came in at 300 grand. Well, that's a I mean, that changes everything in the analysis of the asset division. And so getting the right expert, because in that case, the judge believed the expert who valued it at 400 much more, and they found some you know things that they carved out, but you know, obviously didn't believe the CPA at zero. And you know, that uh that really helped our client to be able to get what they were looking for in the divorce. So that's just a good example of how big of a range of valuations can come out of the same business depending on multiple experts looking at it.

Steve Altishin 8:17

Yeah.

Licenses IP And Other Odd Assets

Steve Altishin 8:18

I remember a couple of cases. One was where you needed to get a valuation of wine. Yeah. And when we started looking at experts, it was it was a it was an interesting phenomenon because even among experts, there was a difference on valuing wine. And that was crazy. And I remember another one where it all there was a big issue about a copyright. That was part of the business. And one of the experts we talked to, I remember, said, well, you know, it's not just valuing that, it's being able to actually transfer that. Just because it the business owns it doesn't mean you can actually transfer these things. And again, back to the wine, that that was a deal because uh the OLCC licenses aren't necessarily transferable.

Lewis Landerholm 9:11

Yeah, I was gonna say those are the uh anything that has to deal with um liquor or now in today's world marijuana dispensary valuation is talk about a whole different area. But um, yeah, because anything where you've got an outside governing body like OLCC, even though you may want to go and do something with the business, if both spouses are on the OLCC license, the divorcing party who's going to keep it has to go reapply. And that can cause a lot of time and money. So there's there's just a ton of things to think about. And um, it's uh it's we had another case. I mean, I could talk about these cases all day because they get so detailed and so intricate, but we had another case where it made more sense for the business to keep the ex-spouse on on the payroll, so they didn't have to dissolve the business itself. Because what people have to understand is you've got not only are you divorcing in the divorce process, but in businesses in your bylaws, you potentially, if both spouses are owners, then you may be dissolving the business at the same time. And so you have to go through a disillusion of the business and a disillusion of your marriage. And that sort of confluence can cause chaos if you've got multiple partners. So in this particular case, we ended up not dissolving the business itself so that the partners could maintain everything the way it was, kept the ex-spouse on, on the payroll. And basically uh their job was to handle the taxes every year. So, you know, there's creative ways to do this stuff, but it's uh, you know, there's a lot of different um financial um, you know, there's a ripple effect if you go down the path of just scorching the earth and and wanting to dissolve everything.

Steve Altishin 10:59

Yeah.

Entity Structure Partners And Dissolution

Steve Altishin 11:00

Does the entity itself ever come into play or make a difference? I'm just thinking, are there different things you have to look at if it's uh a corporation or it's a partnership?

Lewis Landerholm 11:12

Well, yeah, all because you've got stock issues, you've got ownership issues, you've got board of directors, you've got you've got bylaws, all of those things have potential issues. You know, the larger the corporation, the less of an impact because they've got it's just spread through more people, and so it causes less of an issue, typically, outside of what the stock value is, because that's that's normally how it's set up, is they can deal with the stock, right? But for the small business, you know, where both spouses own the business, um, those are the ones that um cause you know create the most amount of difficulty because you essentially don't have a choice but to dissolve the the entity itself.

Steve Altishin 11:56

Yeah. And you know, you were talking earlier about how the business is like dealing with children. And part of that of what you do isn't is really working out the the the business's future, their ownership, their the the spout interests of each spouse. And even if it's something dissolved, there's still assets floating around. I mean, there's a there's a there's a lot of things to consider, it sounds like it's almost like a a parenting plan.

Lewis Landerholm 12:31

Yeah. Well, especially if people are going to continue to operate the business together post-divorce. For people who can make that work, it's it's pretty amazing, you know, that they can uh divorce uh on the marriage side, but still be able to run a business together. Obviously, there's a lot of potential you know issues with that. But really, you know, for the for most people, um, it's untangling all of that and it takes time. And yeah, it's really like building a parenting plan because you've got to, you know, really project into the future what if this happens, what if that happens? And so, yeah, there's a there's a lot of work that goes into how to do that appropriately.

Steve Altishin 13:10

Did you ever find times where both parties, like you said, sometimes it just has to dissolve, go away. Both parties want to continue working and separate and just form their own businesses, but basically doing the same thing. Is that something that's possible?

Lewis Landerholm 13:28

You mean like they would split and then stay in the same industry

Co Owning Competing And Enforcement

Lewis Landerholm 13:32

and become competitors? Or uh oh, yeah. I mean, anything's possible, happens all the time. You know, specifically in like service industries, it there can be business challenges to that if one spouse believes that the other spouse is like taking clients, taking customers, because obviously uh there's another case where one party was intimately involved and started to um not intimately involved in that, but just knew that all the workings of the business and was opened up a secondary business, and the uh soon-to-be ex-spouse on the other side believed that they were taking all of the clients with them. And that became a business litigation um situation on top of the divorce. So um, yeah, I can get really nasty.

Steve Altishin 14:22

Yeah, geez. Is there dangers and I know you you you've talked about it, of trying to keep the business uh interests uh after? And I and I what I'm thinking is I I remember a case that that you had where I they decided to uh I think he the the the husband would keep the business, but he would employ the spouse to to do the taxes and and to be the accountant. And everything was great until he got a new wife who I think fired her. Yeah, I mean, is that and I guess I'm getting into the sort of modification sort of enforcement. Can these things be enforced kind of like again, custody and parenting time? I mean, if if if it's not just a is it not just a civil case, but can you enforce some stuff like that after the the case is over, or is it treated more like property it's over and done with?

Lewis Landerholm 15:32

Well, it depends on how it's written. This is why it's really important to have the judgment mirror what is supposed to happen, because that becomes your um guidance to the judge in the future as to what was supposed to happen. You know, um forcing somebody to you know have the other person work for them is uh is a non-traditional way of doing things, obviously. So what we need to do is draft it accordingly. So it really, it's really about a dollar figure, not necessarily forcing somebody to employ the other person. And in that situation, it it um we did have protection language in there. And so it ended up the money still continued. It was what was the position going to look like? And so we were able to adjust some of that stuff. But just bringing up those issues, they're extremely complicated issues because obviously, how long is this going to work? And if you, you know, going back to like the OLCC and those type of things, if if that then sets off a dissolution of the business at that point, then you're going through the whole process almost again, and um and and that costs a lot of money and takes a lot of time. So um they're really you know, they're they're really nuanced issues that come into play when when you've got a small business in the mix.

Steve Altishin 16:56

Yeah.

Mediation Practical Next Steps

Steve Altishin 16:57

And you you mentioned it earlier, other just regular parts of the divorce, you know, support, um dividing other stuff, maybe like your retirement accounts or other real property, those all kind of come into play when you're when you're looking at dividing the business or how you divide it. If you need to also, like you said, do support.

Lewis Landerholm 17:24

Yeah, because the future income of the business is also going to be factored in for a support valuation and number. So it gets really tricky, and there's a lot that we just have to, a lot of accounting, a lot of information that is required to get to that point. A lot of times, mediation is a much better outcome or much better uh, I should say, venue than going to court. Judge just has limited time, and so a lot of times we really recommend getting into mediation in those cases because there are so many competing interests between the parties, and we it really just takes time to work them all out.

Steve Altishin 18:00

Yeah. Wow. Well, we run out of time, but this is great, great information, so thanks for sitting down, you know, just talking about ownership, division of a business, and an Oregon divorce. And I think the bottom line is make sure your divorce attorney understands all of those things.

Lewis Landerholm 18:18

Yeah, you're welcome. Uh, happy to uh have the conversation.

Steve Altishin 18:22

You

Final Takeaways And Contact Info

Steve Altishin 18:23

got it. And everyone else, thank you for joining us. Please feel free to contact our firm. We can get you connected with an attorney can help you and stay safe, stay happy, and be well.

Intro/Outro 18:34

This has been Modern Family Matters, a legal podcast focusing on providing real answers and direction for individuals and families. Our podcast is sponsored by Lander Home Family Law and Pacific Cascade Family Law, serving families in Oregon and Washington. If you are in need of legal counsel or have additional questions about Family Law Matters, please visit our website at landerhome.com or PacificCascadeFamilyLog.com. You can also call our headquarters at 503-227-0200. Schedule a case evaluation. Advocating for your better tomorrow.