A successful business enterprise can be a source of revenue and personal pride. It can also be a major complicating factor in a divorce. Frequently, those who own businesses have unique issues they must address during their divorce proceedings.
If they cannot resolve all of the business-related complications as they prepare for divorce, they may end up pursuing a contested or litigated divorce. Those who focus on resolving business-related challenges early in the divorce process can retain control over the outcome and may be able to reduce the negative impact the divorce has on company operations. The following are three of the most pressing matters for divorcing business owners to address as they move forward.
The employment of their spouse
It is relatively common for people to hire their spouses and other family members when they run a successful local business. Their spouse may have enjoyed a flexible schedule and generous pay not while working at the business. Continuing to work together may not be the best solution for spouses who have decided to end a marriage. The owner of the company may need to discuss a strategic exit with their spouse so that interpersonal conflict between the two of them doesn’t negatively impact company operations.
Business valuation and ownership
Another top consideration when divorcing as a business owner is what the company is actually worth. Business valuation requires a thorough review of the company’s holdings, liabilities and prospects. Setting a realistic business valuation is important for negotiating property division solutions. In many cases, at least a portion of the company’s value is marital property. That may mean that their spouse has an interest in the company even if they haven’t helped operate the organization.
Any company started during the marriage or maintained with marital income is potentially subject to division in the divorce. Establishing how much of the company is marital property can be an important part of protecting the organization.
Offsetting the company’s value
Once a business owner has addressed what the company is theoretically worth and how much of that is part of the marital estate, they can propose realistic terms for sharing that value with their spouse. Property division proceedings do not necessarily need to involve the shared ownership of the company or the liquidation of its assets.
While selling the business or some of its resources can be an option, many business owners want to continue operating their own companies after a divorce. To achieve that goal, they may need to offer other assets that are worth a comparable amount to their spouse’s interest in the company. Home equity, retirement savings and other investments can help offset the value of a business.
Small mistakes during divorce negotiations can put business owners at a disadvantage. Identifying likely complicating factors can be very important for those preparing for divorce when their marital estates include business holdings.
