Business and Divorce: What Happens?
Family Lawyers Explain How to Protect Business Interests
When spouses own a family or closely held business, it can often be a point of contention in divorce. There are three main questions to evaluate when thinking about business and divorce, and each do not always have simple answers:
- The first question is whether a business interest is a marital or separate property, or partially marital and partially separate;
- The second question is how much the business interest is worth; and
- The third question is how spouses can equitably divide the business.
Our divorce attorneys will guide you through these questions regarding your closely held businesses during a divorce in a professional and efficient manner.
Are Business Interests Counted in Property Division in Divorce?
Generally, any asset accumulated after marriage will be presumed to be marital property. Separate property was owned prior to marriage or was inherited after marriage. However, whether a business is marital property or separate is not always a black or white issue. Property that was once separate may be changed (or “transmuted”) into marital property if it is comingled with marital property, or if both spouses contributed to the worth of the property.
What is the Value of My Business in Divorce?
The second inquiry regarding a business interest in divorce is valuation, or determining how much the interest is worth. This can be an incredibly complex question that is best determined by divorce forensic valuation experts.
It is extremely important that a divorce forensic valuation expert understand the differing ways of valuing a business and understand a valuation for divorce may differ than a pure market-based approach. For example, a business evaluation regarding spousal interests may include discounts for:
- Lack of control
- Lack of marketability
- Lack of transferability and more
How Can Spouses Divide a Business Interest?
A common problem, even after valuation and division has been finalized by settlement or trial, is to implement the split. Commonly, one spouse will buy out the other’s interest in the company. However, this may present problems if the spouse does not have enough cash on hand to buy out the other’s interest. In such cases, there are a few options, including but not limited to taking out loans, bartering illiquid assets with your spouse or liquidating other assets awarded in the split.
How Can I Protect Business Interests?
One way to plan against businesses becoming problematic assets in divorce is to have a prenuptial agreement or postnuptial agreement in place. However, if you do not have an agreement to fall back upon, we can guide you through the division of the business and other property and possible alimony.
A divorce attorney who handles business assets in divorce proceedings can guide owners through this process and will know respected divorce forensic valuation experts. Together, you can determine the value of your business during a divorce and plan for any outside challenges that may be brought up during proceedings. Please contact our law firm now to set up a consultation.