Other than a home, and perhaps a retirement plan, a business is often the biggest asset a couple has to divide, especially in longer marriages. Unlike other assets, however, a business can be very complicated to divide. There’s more than one way to do it and many of the factors courts look at can be interpreted differently by each side.
Here are a few key points to keep in mind if you’re considering tackling this issue in your divorce.
1. When the business started is important
It’s common for someone to have started a business before getting married, grow it during a marriage, and then continue to grow it after separation. If this is the situation, timing matters, because the business would not just belong to one person nor would it be split equally – it would be both.
This is often referred to as a “mixed asset”, meaning that part of the business belongs to one spouse, and the other part belongs to both spouses.
As with a home, the most common solution to dividing a business is for one spouse to buy out the other or, if necessary, sell the business altogether.
2. A few factors can make a big difference
On top of dividing the business properly, determining who was more responsible for growing it and what the business is actually worth can be an entirely separate challenge. Judges need to review a lot of information to try and make sense of what really happened – information such as:
- Which spouse worked in the business and when
- What each spouse did for the business
- Where the money to start the business came from
- If either spouse worked another job at the same time
- How much money did the business distribute to each spouse
- The health of the business then and now
Any one of these factors can have a significant impact on one spouse’s ownership percentage of a business or how much the business is worth.
3. Determining the value of a business requires experts
Regardless of how amicable a divorcing couple might be, determining the value of a business will almost always require an expert’s evaluation. A specialized forensic accountant, with some knowledge and plenty of experience in family law, will usually prepare an evaluation in a way that can reliably hold up in court.
These evaluations can increase the time and money cost of your divorce but may be well worth it if there is a successful business at issue. A skilled forensic accountant doesn’t only describe the past but can give future projections of income and cash flow that could go a long way toward helping a judge make any sort of final decision on issues that are otherwise hard to pin down.
In these complex cases, your side of the story matters
The courts expect the spouses to do the work of digging through the paper trail of the business and explaining the significance of what is found. Numbers, just like relationships, are often open to interpretation. When fighting for your right to a business, it’s important to share your side of the story with documentation to back it up.
Hiring the right attorney for the job can make all the difference in these complex cases, so reach out to us today if you’re struggling with dividing a business!
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He is a hard worker and an honest person. He has a calming demeanor which I need. I will continue to consult with Ben for legal advice. You will be so lucky to have him represent you or assist in the legal guidance of your business!