Massachusetts Business Owner Divorce Lawyers

A business interest is part of the marital estate in Massachusetts. Section 34 lets the court assign to either spouse all or any part of the estate of the other, and a closely held company, a professional practice, or a partnership interest sits inside that grant whether or not the other spouse ever set foot in the place.

Two questions follow from that. What the business is worth, and how much of what it produces counts as the owner’s income for support. They are answered under different bodies of law, and the answers can pull against each other.

Is a business marital property in a Massachusetts divorce?

Yes. M.G.L. c. 208 § 34 permits the court to assign to either spouse all or any part of the estate of the other, and the statutory list of included property reads “including but not limited to.” A business interest falls inside the estate regardless of which spouse holds title or who ran the company day-to-day.

Title does not determine whether an asset enters the estate, and it does not control how the estate is divided.
Being in the estate is a separate question from what share the other spouse receives. The section 34 factors decide the second question.
The same is true of a business that existed before the marriage. Massachusetts does not automatically place premarital property outside the divisible estate.

How is a business valued in a Massachusetts divorce?

By a business valuation expert, usually a forensic accountant or credentialed appraiser, using one or more of three standard approaches:

Income approach: value based on the earnings the business is expected to produce, adjusted for risk.
Market approach: value based on sales of comparable businesses.
Asset approach: value based on what the business owns minus what it owes.

Each spouse often retains their own expert, and the same company can support a range of defensible numbers. The dispute is usually over assumptions:

The earnings figure the valuation rests on, and which years it draws from.
What level of compensation is treated as reasonable for the owner, which moves both the value of the business and the income available for support.
Growth and risk assumptions applied to projected earnings.
Whether discounts apply, and at what rate.

Massachusetts appellate courts have reviewed how closely held businesses and partnership interests should be appraised, and the reasoning turns on the fact that divorcing spouses are not arm’s-length buyers and sellers.

Value that depends on one person continuing to work is a different thing from value that would transfer to a buyer. In an owner-dependent business — a practice built on the owner’s own relationships and reputation — the allocation between the two is often the single largest point of disagreement, and it is one reason valuation disputes become high conflict quickly.

Can an S corporation be discounted for taxes it does not pay?

That question reached the Supreme Judicial Court in Bernier v. Bernier, 449 Mass. 774 (2007). An S corporation pays no federal tax at the entity level. Its income passes through and is taxed to the shareholder when earned, whether or not the company distributes it. Tax-affecting discounts projected earnings by entity-level taxes anyway.

In Bernier, the husband would receive all shares of two supermarket corporations and the wife would relinquish all ownership. One expert tax-affected at the average corporate rate for a C corporation. The other did not tax-affect at all.

The Court held it was error to adopt a valuation that tax-affected the S corporations at the C corporation rate, particularly because the parties were not arm’s-length buyers and sellers but fiduciaries entitled to equitable distribution of their marital assets.
Applying the C corporation rate severely undervalued the businesses while failing to account adequately for the loss of S corporation benefits to the wife.
The Court held that a key man discount should not have been adopted, since the husband was not likely to be lost to the enterprise, and that a marketability discount was not warranted given his testimony negating any possibility of a sale.
It vacated the valuation portion of the judgment and remanded for further proceedings on tax affecting, those discounts, the growth rate applied to account for inflation, and the equalization of attorney’s fees. The alimony portion of the judgment was affirmed.

What happens to the business itself?

In most cases, the value is accounted for within the overall division rather than by splitting or selling the company. The section 34 factors govern what the other spouse receives, and the form that takes depends on what else is in the estate and what each spouse wants going forward.

A liquid estate creates options that a business-heavy one does not, which is why the business question is rarely separable from the rest of the marital estate.
A prenuptial or postnuptial agreement addresses ownership and transfer directly rather than leaving the question to the court’s discretion later.
Spouses who reach their own agreement on value resolve the approach question without competing appraisals, and mediation is one route to that.

How is a business owner’s income calculated for support?

Not from the tax return alone. Under the Child Support Guidelines, income from self-employment, rent, royalties, proprietorship of a business, or joint ownership of a partnership or closely held corporation is gross receipts minus the ordinary and necessary expenses required to produce income. The Guidelines state that in many cases this amount will differ from business income determined for tax purposes.

They also direct that income and expenses from self-employment or the operation of a business be carefully reviewed to determine the level of gross income actually available to satisfy a support obligation.

The commentary cites Whelan v. Whelan for the point that a judge must determine whether claimed business deductions are reasonable and necessary to the production of income, without regard to whether those deductions may be claimed for federal or state income tax purposes.
It notes separately that a depreciation deduction permitted under the tax laws does not mean those funds, which are not out-of-pocket expenses, are unavailable to pay support.
Listed income sources reaching an owner include self-employment, commissions, bonuses, income derived from businesses and partnerships, net rental income, capital gains to the extent they represent a regular source of income, and perquisites or in-kind compensation to the extent they represent a regular source of income.
A Guidelines worksheet must be completed and filed in every case where child support may be established or modified, regardless of what the parties earn.

Do undistributed earnings count as income?

Sometimes. The Guidelines commentary cites J.S. v. C.C., 454 Mass. 652 (2009), in which the Supreme Judicial Court held that whether and to what extent the undistributed earnings of an S corporation should be deemed available income to meet a support obligation must be determined on the particular circumstances presented in each case.

The Court set out a non-exhaustive list of relevant considerations:

The shareholder’s level of control over corporate distributions.
The legitimate business interests justifying retained corporate earnings.
Affirmative evidence of an attempt to shield income by means of retained earnings.
The allocation of the burden of proof on the treatment of undistributed earnings.

An owner who controls whether the company distributes is in a different position on that list from a minority holder who does not.

Can business perks and personal expenses be counted as income?

Yes. The Guidelines provide that expense reimbursements, in-kind payments or benefits received by a parent, personal use of business property, and payment of personal expenses by a business in the course of employment, self-employment or operation of a business may be included as income where those payments are significant and reduce personal living expenses.

Where the court finds a parent has undocumented or unreported income, it may impute income based on all the evidence, including the parent’s ownership and maintenance of assets, lifestyle, expenses and spending patterns.
Where income is unreported, the court may adjust the figure upward by a reasonable percentage to account for the income taxes that would otherwise have been due.
The commentary illustrates the point with Crowe v. Fong, where a payor earned $275 per week working at a business owned by his mother, lived rent-free in a home owned by his father, and had the use of a vehicle. The Appeals Court upheld the judge’s characterization of the free use of the home as a perquisite or in-kind income for purposes of the support calculation.

Is the same money counted twice when a business is divided, and its income supports an order?

The court examines that question rather than assuming an answer. The Guidelines commentary cites Fehrm-Cappuccino v. Cappuccino, 90 Mass. App. Ct. 525 (2016), for the proposition that there is no risk of double counting where neither the value of a party’s interest in an asset nor that party’s ability to earn income is diminished by treating the interest as a marital asset as well as a source of income by which support obligations can be met.

A statutory version of the same concern appears in the alimony provisions. When issuing an order for alimony, the court must exclude from its income calculation capital gains income, and dividend and interest income, deriving from assets equitably divided between the parties under section 34.

Whether a similar analysis reaches business earnings depends on how the business was valued and on what the owner’s ability to earn looks like after the division.
A valuation built on projected future earnings raises the question more sharply than one built on net assets.

What if the other spouse never worked in the business?

That does not keep the business out of the estate. Section 34 permits the court to consider the contribution of each party in the acquisition, preservation or appreciation in value of their respective estates, and separately the contribution of each party as a homemaker to the family unit.

Both of those are discretionary. The statute says the court may consider them, in contrast to the factors it must consider, which are:

The length of the marriage, and the conduct of the parties during the marriage.
The age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each party.
The opportunity of each party for future acquisition of capital assets and income.
The amount and duration of alimony, if any, awarded under sections 48 to 55.
The present and future needs of the dependent children of the marriage.

A spouse who worked in the business and a spouse who did not are both reached through the contribution factors, not through a rule about whose name is on the shares.

What happens if an owner reduces their own compensation during the case?

The court can look past it. Income may be attributed where it finds a parent capable of working is unemployed or underemployed, in which case it considers potential earning capacity rather than actual earnings. Under M.G.L. c. 208 § 53, the court may likewise attribute income to a party who is unemployed or underemployed when determining incomes for alimony.

Attribution and imputation are separate mechanisms. Imputation reaches income that exists but is not documented. Attribution assigns a hypothetical figure to someone earning less than they could through reasonable effort.
Owner compensation cuts both ways in a business case. The figure treated as reasonable compensation affects both what the company appears to be worth and how much income is available for support.

Which court handles a divorce involving a business?

The Probate and Family Court for the county where the spouses live, not the county where the business operates. Under M.G.L. c. 208 § 6, a divorce is heard in the county where the spouses last lived together if either of them still lives there, and otherwise in the county where either spouse lives.

The statute ties the courthouse to residence alone. Where the company is headquartered, where it is incorporated, and where its job sites, clients or patients are located do not enter the venue test.
A couple living in Westborough whose company operates out of Boston files in Worcester County, not Suffolk.
Where one spouse has moved, the court may transfer the case for hearing to a court in the county where that spouse lives, in the event of hardship or inconvenience.
Worcester County divorces are heard at the Worcester Probate and Family Court, which serves every city and town in the county.
Each of the Commonwealth’s fourteen counties has its own Probate and Family Court division, so an owner living in Essex or Barnstable County files there, wherever the business is based.

Request a case evaluation

O’Connor Family Law has offices in Westborough and Hanover and represents owners and their spouses throughout Central and Eastern Massachusetts, including Worcester, Middlesex, Norfolk, Plymouth and Bristol counties, in divorces involving closely held businesses, professional practices, and partnership interests. Request a free case evaluation to go over your situation, your options, and whether the firm is the right fit for your case.

Frequently asked questions about business owner divorce in Massachusetts

Does it matter that the business existed before the marriage?

It is relevant but not decisive. Massachusetts does not automatically exclude premarital property from the divisible estate, so a company started before the wedding can still be reached. How it was handled during the marriage bears on the discretionary contribution factors, including each party’s contribution to the acquisition, preservation or appreciation in value of their respective estates.

Is a worksheet required if the owner’s income is hard to pin down?

Yes. A Guidelines worksheet must be completed and submitted in every case where a support order may be established or modified, regardless of the parties’ income. Two rebuttable presumptions apply: that the Guidelines govern the case, and that the amount the worksheet produces is the appropriate amount of support.

Does it matter if the owner holds only a minority interest?

It can, on both sides of the case. For support, J.S. v. C.C. lists the shareholder’s level of control over corporate distributions among the considerations for whether undistributed S corporation earnings count as income. For valuation, whether discounts apply, and at what rate, is one of the assumptions commonly in dispute.

Is business income counted for alimony as well as child support?

It is counted under the same definition, but not twice. Income for alimony purposes is defined as it is in the Child Support Guidelines, and when setting alimony the court must exclude gross income it has already considered in setting a child support order. Where both orders are at issue, the court also compares the results of calculating them in both sequences, as the Supreme Judicial Court required in Cavanagh v. Cavanagh.

Do bonuses and overtime count toward income?

Bonuses are a listed source of income. Overtime and secondary employment are treated separately: the court may consider none, some, or all of that income, and where a parent begins working overtime or takes a second job after an order enters, having not done so before, there is a presumption that the income should not be counted in a future order.

This page is provided for informational purposes only and does not constitute legal advice. Reading it or contacting our firm does not create an attorney-client relationship. Prior results do not guarantee a similar outcome. Valuation and support outcomes depend on the specific facts of each case.

Last reviewed: October 2026