Exploring Franchising: Legal and Business Considerations for Launching a Successful Franchise

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Expanding your business can be an exciting but daunting prospect—including financially. Traditionally, entrepreneurs have relied on their own resources and capital to grow their businesses; however, there are other options available that are less onerous and capital intensive, such as joint-venture transactions, licensing arrangements and franchising systems. While each of these options has its own advantages and disadvantages, franchising has become increasingly popular due to its potential for rapid expansion and revenue growth with potentially lower business and legal risks.

A franchising system is a business model under which you, as the “franchisor,” retain ownership of your intellectual property (“IP”) assets that you license to others (known as the “franchisees”) to use in connection with their own business(es) via a comprehensive franchise agreement and an “FDD” (Franchise Disclosure Document). Additionally, a franchise allows you to maintain significant control over the use of your IP and the franchisees’ operation of their businesses using your IP, and you also receive several forms of monetary remuneration from the franchisees (e.g., initial franchise fees, franchise royalties, marketing fees and other amounts) rather than share in the profits or losses of the franchisee’s own business.

To successfully launch a new franchise business, franchisors must carefully consider several legal and business aspects, including state and federal rules and requirements, as well as key launch considerations, projects and tasks.

State Rules and Requirements

From a legal standpoint, it is essential to comply with state rules and requirements when launching a new franchise. This typically involves providing written notification to the respective state(s) in which you would like to franchise before any advertising or sales of your franchise can begin. Michigan’s notification requirement is less onerous and rather simple compared to many other states, requiring only a written statement of your intention to sell or offer for sale franchises without having to submit an FDD with the franchise notification. Each state has different rules, requirements and procedures (for example, submitting the FDD with the state notification and/or requiring state feedback or approval of the FDD before launching the franchise), so it is important to consult with legal counsel familiar with franchise law to ensure compliance.

Federal Rules and Requirements

While no written notification to the federal government/FTC is required to launch a new franchise, it is mandatory to prepare an FDD, with the following among the key requirements:

  1. 23 specific items must be disclosed in detail, including the estimated total financial investment, initial franchise fees, ongoing royalties and other fees, franchisee’s obligations, restrictions on franchisee’s sourcing and sales of products/services, franchisor’s assistance, territory, trademarks and existing franchisee information;
  2. A copy of the Franchise Agreement form document must be included in the FDD, along with numerous accompanying informational exhibits and schedules; and
  3. The FDD must be provided to prospective franchisees in advance of any Franchise Agreement signing or any monetary payments to the franchisor by the franchisee.

Business Considerations for Launching a Franchise

From a business perspective, franchisors must undertake several projects and tasks to prepare for the franchise’s successful launch. These include, among others:

  1. Identifying the goals, objectives and strategies of your franchise system and overall operations;
  2. Determining in what state(s) to launch the franchise initially and other states to follow in subsequent prioritizing phases;
  3. Identifying what franchisor resources are needed to successfully launch and support the franchise system;
  4. Determining all other business and legal areas on which to focus in preparing your franchise (e.g., business entity structure, IP protection, confidential operations manual, and the key disclosure items, terms and conditions of your FDD and Franchise Agreement);
  5. Preparing and finalizing cost projections and budgets (including professional services fees and state filing fees); and
  6. Establishing priorities and a timeline to prepare and handle all of these projects and tasks.  

If you are considering starting a franchise or have any questions related to franchising, contact Timothy K. Kroninger or Timothy D. Kroninger.

California Assembly Approves the College Athlete Protection Act

Advisory Califas Athlete Protection

On June 1, 2023, the California Assembly narrowly passed legislation that could revolutionize the way college athletes are compensated. If enacted, the College Athlete Protection (“CAP”) Act, or A.B. 252, would open the door for student-athletes in California to receive payments directly from their schools, aligning their compensation with the revenue generated by their teams. Proposed by Assembly Member Chris Holden, a former basketball player at San Diego State University, the bill has gained significant momentum since its introduction in January, receiving approval from the Assembly’s Higher Education Committee and clearing the Appropriations Committee.

The CAP Act, which aims to provide rights, benefits and safeguards for college athletes, requires certain intercollegiate athletic programs at four-year private universities or campuses of the University of California or California State University that receive an average of $10,000,000 or more in annual income from media rights for athletics to comply with specific requirements regarding student-athlete rights. These requirements include a degree completion fund for college athletes, distribution of notices outlining college athlete rights and protection against retaliation for reporting violations. Following graduation, student-athletes would earn access to the designated funds, which not only support degree completion programs but cover medical expenses and improve safety measures. The CAP Act would further establish the College Athlete Protection Program within the Office of Planning and Research, overseeing a 21-member CAP Panel composed of appointed individuals responsible for administering the CAP Act. A California Athlete Protection Fund would also be created, with appropriated funds allocated to the CAP Panel for implementing the CAP Act.

The bill proposes equal pay for both men’s and women’s program members, requiring institutions to demonstrate annual compliance with Title IX. Under the proposed plan, starting from the 2023–24 school year, revenue exceeding the baseline of the 2021–2022 academic year would be shared among student-athletes. Payments to players would be distributed using a formula that allocates half of the funds to male athletes and the other half to female athletes each year, benefiting players in revenue-generating programs. Schools would have discretion over the distribution of any remaining funds in the men’s or women’s pools, potentially providing paychecks to graduating student-athletes in sports that do not generate profits.

The National College Players Association, a California-based advocacy group for college athletes, is a major proponent of the bill. In 2019, they successfully advocated for and helped pass the first state law protecting college athletes’ name, image and likeness (NIL), a move that prompted the Supreme Court to strike down the NCAA’s policies against NIL in 2021. Despite the bill’s uncertainties and complexities, it represents a significant development in expanding college athlete protections through state legislation, and is blurring the lines between “amateurism” and “professionalism” in college sports, challenging the NCAA’s long-held policies that regarded student-athletes as amateurs in their sports.

Although the CAP Act primarily targets California schools and student-athletes, its potential passage could have far-reaching implications for the rest of the country. When California enacted the first NIL bill in 2019, it triggered a wave of similar legislation in other states that were driven by the desire to stay competitive in the college sports arena. If the CAP Act is signed into law, a similar domino effect may occur, creating a nationwide paradigm shift in how student-athletes are able to benefit from their name, image and likeness.

2023 summer associate Dilan Kama contributed to this advisory. Dilan is currently a student at Wayne State University Law School.

Download Varnum's State-by-State NIL Compliance Playbook

Cover of Varnum's State-by-State NIL Compliance Guide PlaybookTo aid individuals, schools and collectives with the often inconsistent and rapidly developing legislative and executive actions of the states, Varnum’s dedicated team of NIL attorneys created an all-inclusive, state-by-state compliance playbook. Learn more and download your free copy: varnumlaw.com/NILguide

IRS Declares NIL Collectives Not Tax-Exempt: Implications for Athletic Boosters

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In a significant development for higher education athletic boosters, the Internal Revenue Service (IRS) recently declared that Name, Image and Likeness (NIL) collectives, in many cases, are not tax-exempt entities. This ruling carries significant implications for NIL collectives, as it could directly affect tax deductions for athletic donors and the organizational structure of these collectives.

On May 23, 2023, the IRS issued a statement asserting that NIL collectives operating for a substantial nonexempt purpose (e.g., serving the private interests of student-athletes), which is more than incidental to any exempt purpose furthered by the activity, do not qualify for tax-exempt status, reshaping previous assumptions that these collectives operate as tax-exempt entities, like nonprofit organizations. In its memo, the IRS argues that in most cases, NIL collectives, unlike traditional nonprofit organizations, do not serve a charitable purpose or provide a public benefit. Therefore, they do not meet the criteria for tax-exempt status under the Internal Revenue Code.

Tax Implications for NIL Collectives

The IRS ruling is expected to have a significant impact on the operations and appeal of NIL collectives. By removing the tax-exempt status, this ruling could deter donors from joining or forming these collectives in the future. The financial advantages previously associated with the collectives may be reduced and could also lead to increased administrative burdens for NIL collectives. Collectives may be subject to additional reporting and compliance requirements that come with being taxable entities, potentially straining the resources and capabilities of these collectives and requiring them to adapt and restructure their operations accordingly.

Conclusion

Although it has not set precedent, the IRS’s declaration that NIL collectives, in many cases, are not tax-exempt marks a significant shift in the tax treatment of athletic booster activity. While it’s still uncertain how this decision will impact the popularity and viability of NIL collectives going forward, the IRS ruling serves as a reminder of the evolving landscape surrounding NIL and the continuing investigations into the frameworks that govern NIL policies.

Download Varnum's State-by-State NIL Compliance Playbook

Cover of Varnum's State-by-State NIL Compliance Guide PlaybookTo aid individuals, schools and collectives with the often inconsistent and rapidly developing legislative and executive actions of the states, Varnum’s dedicated team of NIL attorneys created an all-inclusive, state-by-state compliance playbook. Learn more and download your free copy: varnumlaw.com/NILguide

Navigating Michigan’s Corporate Practice of Medicine Doctrine

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A Reference for Starting Medical Practices and Investing in Health Care-Related Entities

Medical professionals and entrepreneurs looking to invest in health care enterprises face a complex regulatory landscape. To operate within this regulatory framework, medical professionals and entrepreneurs must comply with the Corporate Practice of Medicine doctrine and Michigan’s LLC Act, which establish requirements for health care professionals forming limited liability companies (LLCs) to provide professional services.

What is Michigan’s Corporate Practice of Medicine Doctrine?

Michigan’s Corporate Practice of Medicine doctrine is a legal principle that prohibits unlicensed individuals or entities from owning medical practices in the state of Michigan. The doctrine serves to protect the public by ensuring that medical decisions are made by licensed professionals accountable to their respective licensing boards. Its principles are captured in Michigan’s LLC Act, which permits medical professionals—including, but not limited to, physicians, osteopathic physicians, chiropractors, dentists, optometrists, surgeons and podiatrists—to form LLCs for the purpose of providing professional services.

Key Considerations for Corporate Practice of Medicine and LLC Act Compliance

1. Professional LLCs Must Be Owned by Licensed Individuals

Michigan’s Corporate Practice of Medicine doctrine requires that medical practices be owned exclusively by licensed health care professionals to protect patients from unqualified individuals making medical decisions and mitigate compromises of professional judgment. While certain non-licensed individuals, such as managers or administrators, may be involved in the business operations of the medical practice, they cannot own any equity in the entity.

2. All Owners Must Generally Be Licensed in the Same Professional Service

Michigan’s LLC Act generally requires all members of a health care-related professional LLC to share the same profession. Simply put, medical practices must typically be owned by individuals who hold the same type of license to practice medicine. For example, physicians and dentists may not co-own a single professional LLC. However, the LLC Act carves out a notable exception: chiropractors, physicians, osteopathic physicians and podiatrists may own a practice together and cross-practice.

3. Fee-Splitting Arrangements Between Licensed and Non-Licensed Individuals are Prohibited

Michigan’s Corporate Practice of Medicine doctrine prohibits fee-splitting arrangements between licensed medical professionals and non-licensed individuals or entities. This means that medical professionals within the LLC cannot share their fees with non-licensed individuals, including non-licensed investors or non-licensed employees. The prohibition also extends to indirect fee-splitting arrangements, such as profit-based bonuses and compensation of non-licensed individuals. To mitigate the risk of violating Michigan’s Corporate Practice of Medicine, compensation of unlicensed individuals and entities, including management companies, should be set at fair market value for commercially reasonable services.

4. Management Services Organizations Enable Flexible Ownership and Investment Structures

Management Services Organizations (MSOs) are an increasingly popular compliance structure that permits flexibility in ownership and investment structures. MSOs are separate entities that provide management and administrative services to the medical practice, such as billing, accounting and human resources, allowing medical professionals to focus on providing patient care by offloading administrative tasks. Although the medical practice itself must be owned exclusively by licensed health care professionals, the MSO may be owned by non-licensed individuals, such as investors. Notably, though, MSOs must be carefully structured to comply with state and federal regulations and avoid potential conflicts of interest between the medical practice and the MSO. Accordingly, entrepreneurs and medical professionals interested in utilizing this option should seek legal counsel to navigate its complexities.

As medical professionals and unlicensed entrepreneurs structure and invest in health care-related entities, they should take careful note of these key requirements to help ensure compliance with Michigan’s Corporate Practice of Medicine doctrine and LLC Act. By adhering to these regulations, professional LLCs and unlicensed individuals can mitigate the risks of noncompliance and focus on building thriving medical practices.

Please contact your Varnum attorney with any questions.

Common Contract Concerns for Community Associations

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Most community associations in Florida operate with the assistance of outside vendors. As such, many community associations do not have in-house staff to pressure wash sidewalks or maintain the elevators. Communities often have a compilation of contracts with multiple vendors ranging from one-page estimates with no contractual provisions other than price, to lengthy contracts with exhibits and many pages of small print.

Arguably, every provision in each contract is important, but there are three specific provisions that are most relevant today. With increasing insurance costs, contractor unavailability and market fluctuations, many contracts either ignore these important terms, or include creative and vendor-friendly drafting that puts the Association at a significant disadvantage. 

Clause 1: Termination

It is a common myth that all contracts in Florida can be terminated for convenience with 30 days written notice; however, in Florida, the general rule is that unless the contract specifically provides otherwise, a contract can only be terminated when one party breaches a material term of the contract. Limited termination rights can be desirable if the association has favorable pricing or exclusivity with a specific vendor, but limited termination rights provide no flexibility.

Most community associations prefer the flexibility of being able to terminate an agreement with or without cause. If an association wants this flexibility, the contract must expressly state that that the association may terminate with or without cause.

Additionally, even if an association has the right to terminate without cause, it should also be aware of any termination penalties in the agreement and should read the entire agreement. There are several contracts providing that the association may terminate without cause, but another part of the contract provides that there is a fee to terminate for convenience. Termination fees vary, but anything above zero should be included in the Board’s consideration.   

Clause 2: Limitations on Liability and Exculpation Clauses

An exculpation clause seeks to limit the contractor’s liability for his or her negligence, or for any claim whatsoever arising out of the agreement. These provisions effectively state that the contractor’s maximum exposure for any claim is the price of the contract, or sometimes three months of the monthly fee, or in other cases a nominal sum like $1,000.  For example, if a contractor is paid $10,000 for a project and causes $250,000 of damage and injury, the contractor and its insurance carrier will argue that the total exposure is $10,000. If enforced, the community association will be in a very poor position.

Recently, some contractors have become more aggressive in including these liability limits in their agreements. When challenged, the contractors routinely respond that the provision is required by their insurance carrier, but the carrier wants this provision because it benefits from capping its exposure to $10,000 while providing $1,000,000 of coverage.   

In Florida, exculpation clauses are generally looked on with disfavor, but they can be enforceable. If it is determined that the community association and the contractor had equal bargaining power, and if the language in the contract is clear and unequivocal, a contractor can potentially avoid significant liability for its own negligence. This means an association may be without recourse when there is significant damage or liability.

Thus, it is critical to clearly review proposed agreements to determine if they include exculpatory language. As noted above, the contractor may carry a lot of good insurance, but that insurance may be irrelevant if the contractor has clearly limited its exposure to an amount that may be even less than the contractor’s deductible.

Clause 3: Price Escalations

Lingering supply chain issues from the pandemic, inflation and demand fluctuations arising from recent hurricanes all create uncertainty and price risk. A painter, for example, may not know if their overhead, material and labor costs will be remotely similar in six months. Conversely, community associations have fixed budgets and limited sources of revenues. The community association wants assurances that the negotiated contract price will be the same on the day of signing and the day the work begins. 

As a result, some contractors include crafty language allowing them to pass through all price increases resulting from ambiguous causes, such as “anything beyond the contractor’s control.” Under this standard, every price increase for any reason could be unilaterally passed through to an association and without its approval.

If a community association wants a fixed price agreement that hedges its risk against market conditions and unilateral increases, it is imperative that it includes a fixed price and also reviews the agreement for any provisions that would allow the contractor to unilaterally pass through increases without consent, as this risk should be included in the fixed price at signing.

In summary, both simple and complex agreements can have significant implications for community associations. These contractual issues exist in many agreements and are negotiable. If an association wants flexible termination rights, fixed costs and favorable recovery options, it should have these agreements reviewed by legal counsel during negotiations – not after. One recommendation is to include a proposed agreement as part of bidding package so that contract negotiations start with neutral or favorable language on these key terms. Additionally, community associations should employ a standard addendum for short estimates or simple contracts that include minimal and favorable terms such as insurance, timely performance and termination rights.

If you have questions concerning your community association’s contract clauses, please contact a Varnum real estate attorney.

NLRB General Counsel Targets Non-Compete Agreements as Unlawful

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On May 30, 2023, the General Counsel for the National Labor Relations Board (“NLRB”), Jennifer Abruzzo, issued GC Memo 23-08 requiring Regional Directors to submit cases involving “arguably unlawful” non-compete agreements to Advice. As in McLaren, the General Counsel’s view is that offering, maintaining and enforcing an overbroad non-compete agreement creates a chilling effect on employee exercise of Section 7 rights. The General Counsel has urged the Board to adopt the standard that a provision in an employment agreement violates the Act if it “reasonably tends to chill employees in the exercise of Section 7 rights unless it is narrowly tailored to address special circumstances justifying the infringement on employee rights.” The General Counsel stated that narrowly tailored non-compete agreements may be justifiable; however, she forecast that it is “unlikely” that an employer’s justification for requiring a non-compete agreement with low and middle-wage workers will be justifiable.

The General Counsel’s Memo provided the following examples of how she believes overbroad non-compete provisions “chill” employees’ ability to engage in protected concerted (group) activity or the individual exercise of Section 7 rights:

  • Discourages employees from threatening to resign in support of a demand for better working conditions;
  • Discourages employees from carrying out group threats to resign for the purpose of securing better working conditions;
  • Prevents employees individually or as group from seeking or accepting employment with a competitor for the purpose of securing better working conditions;
  • Prohibits former employees from soliciting their former co-workers to go to a competitor to secure better working conditions; and
  • Prevents employees from seeking and accepting new employment for the purpose of organizing a new workplace.

The GC Memo sets forth the views of the NLRB’s General Counsel and does not necessarily represent the views of the Board. The standard urged for adoption by the General Counsel was submitted to the Board for consideration in the General Counsel’s brief to the Board in Stericycle, Inc., 04-CA-137660. Varnum’s Labor & Employment Group will continue to monitor and report on this important issue. In the meantime, existing employment agreements and handbook policies regarding non-competition and non-solicitation should be reviewed and updated as necessary. 

Please contact your Varnum attorney with any questions.

2023 Summer associate Charlotte Jolly contributed to this advisory. Charlotte is currently a student at Wayne State University Law School.

SCOTUS Restrains Wetland Regulation By Narrowing “Waters of the United States”

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The US Supreme Court has just handed down a highly anticipated decision in Sackett v. EPA, reining in the federal government’s ability to regulate wetlands under the Clean Water Act (CWA). Specifically, this ruling provides important clarity on whether CWA applies to wetlands not directly adjacent to “waters of the United States.”

The Sacketts, the Idaho property owners that have battled the federal government in this case for many years, sought clarification from the Court on whether the federal government could regulate wetlands on their property and prevent the couple from building on their land. Specifically, the Sacketts’ property contained wetlands near a ditch that fed into a non-navigable creek that in turn fed into Priest Lake more than 300 feet away from their property. The Court ruled unanimously that the Sacketts were not subject to federal CWA permitting, but split 5-4 on the CWA’s applicability to adjacent wetlands.

Justice Samuel Alito, the majority opinion’s author, held that, “the CWA extends to only those ‘wetlands with a continuous surface connection to bodies that are waters of the United States in their own right,’ so that they are ‘indistinguishable’ from those waters.” In sum, the Court established a two-part test to determine if an adjacent wetland falls within the definition of “waters of the United States” so as to be under the CWA’s jurisdiction: (1) a party must establish “that the adjacent [body of water constitutes] . . . ‘water[s] of the United States’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and (2) the wetland has a ‘continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.” In essence, the Court found that the CWA applies to a particular wetland only if it blends or flows into a neighboring water that is a channel for interstate commerce.

In the case of the Sacketts, the Court ruled that the Sacketts’ wetlands were “distinguishable from any possibly covered waters.” Consequently, the CWA did not apply, and the federal government could not regulate the Sacketts’ building activities. This narrow reading of the CWA is a win for land developers, farmers and others in the energy sector who’ve recently experienced excessive enforcement of environmental regulations. 

Although this ruling has a large impact around the country, its significance is much smaller in Michigan, which has its own wetland statute (Part 303 of Michigan’s Natural Resources and Environmental Protection Act) that is more restrictive than the CWA’s rule.

For more information about this landmark case, or wetland regulation contact a member of Varnum’s Environmental Law Practice Team.

Five Frequently Asked Questions About Divorce Property Division in Michigan

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For many couples, dividing assets and debts is one of the most difficult parts of a divorce. Although a stressful process, the valuation of assets is extremely important, particularly real estate, businesses and deferred compensation plans. For instance, if a couple speculates as to the value of a business, any agreement based upon the value may be impossible to fulfill. This may prevent the ability of both spouses to move forward financially and can even destroy a business which once provided the family with a great standard of living.

1. What Does Equitable Distribution Mean in a Divorce Case?

Equitable distribution is the process of dividing marital and divisible property in court. In a perfect world, spouses would negotiate the division of their marital property without a judge’s involvement. Of course, most spouses don’t divorce if they’re finding it easy to cooperate. If they can’t come to an agreement (which is not out of the ordinary), the court will schedule a hearing and divide marital property using a theory of equitable distribution. Marital property includes both assets and debts. Based on this theory, a judge will split the couple’s property 50-50 unless such a split would be inequitable or unfair. When a judge assesses the fairness of a split, they consider a series of factors, some of which are:

  • Each spouse’s income, debts and property
  • How long the marriage lasted and each spouse’s age
  • Ways in which a spouse directly or indirectly contributed to the other’s educational and professional opportunities
  • A custodial parent’s need to occupy or own the marital home or other household items
  • Both spouses’ physical and mental health
  • Tax consequences related to the property division
  • Any other factors that are “just and proper”

Note that the court will not consider child support and alimony payments when dividing marital property.

2. What Is Marital Property and How Much Is It Worth?

For the purposes of property division, courts classify property into three categories:

  • Marital Property: This category includes any income, assets, property and debts accumulated during the marriage. Marital property can include wages, pension and retirement funds, investment accounts, real estate, personal property, mortgages, car loans and credit card bills.
  • Separate Property: Spouses typically do not get a share of their partner’s separate property, which includes pre-marriage assets and debts as well as gifts or inheritances that someone specifically gave to one spouse and not the other. It’s important to note that separate property can transform into marital property if it is commingled, meaning mixed with marital assets. For example, if a spouse uses an inheritance to buy a jointly-titled asset, it might become marital property.
  • Divisible Property: There’s always some time that passes between when spouses separate and when the court gets around to handling property distribution, and this category exists to deal with assets that the spouses receive during that period as well as assets that change in value during that period. Note that an asset that was earned before the date of separation will still count as divisible property if it’s received after separation.

3. Can a Prenuptial Agreement Protect My Assets?

Nuptial agreements can occur either before (prenuptial) or during a marriage (postnuptial). In a nuptial agreement, you and your spouse define which property is marital and which is separate. This can streamline your property division process during a divorce.

Not every nuptial agreement is valid, however. Spouses can dispute the validity of a nuptial agreement if they didn’t enter it voluntarily, if it was based on fraud or misrepresentations, or if it wasn’t properly signed. Even if a couple doesn’t have a nuptial agreement, they can still negotiate a separation agreement, which is an out-of-court property settlement that divides marital and divisible property and identifies separate property. A separation agreement can also resolve child custody and support issues. However, it’s important to keep in mind that once a couple enters a separation agreement, it will become legally binding and won’t be easy to change. Couples should always get advice from a lawyer before entering a separation agreement.

4. Who Gets to Stay in Our House?

If a couple has minor or dependent children, the parent who has primary physical custody may get to stay in the marital home. However, that spouse will need to consider whether they can afford to pay the remaining mortgage and other costs before trying to stay in the house.

Sometimes, the best option for both parties is to sell the marital home and divide the proceeds.

5. How Are Businesses and Real Estate Divided?

In terms of real estate, the housing market can be a roller coaster, as the value can fluctuate based upon location and market forces. Rather than estimating the value, an appraisal is necessary to determine market value. Then, an agreement must be reached about who will be awarded specific properties.

When looking at businesses, each is truly unique. The value of a business consists of analyzing financial data for several years as well as looking at recent trends. A proper business valuation is important to ensuring a realistic and fair division of assets.

Other Factors to Consider

Frequently, executives enjoy deferred compensation based upon job performance and company loyalty. Accurately accounting for compensation benefits earned during the marriage, but not yet received, is critical to a fair division of assets. If a couple does not value such an asset, one spouse may end up with a windfall and the other shortchanged. As a result, couples facing divorce should consult with experienced legal counsel about asset valuation to ensure that the division of their assets is based in reality and not speculation.

If you have any questions, please contact a member of Varnum’s Family Law Practice Team.