For business owners, divorce introduces unique challenges that can significantly impact their financial future. At Wilder Mahood McKinley & Oglesby, we understand the complexities of valuing and dividing a business during divorce proceedings, especially in a high-asset divorce where substantial assets and business interests are at stake. Proper legal guidance is essential to ensure your rights and interests are protected throughout the process.
Valuing a Business in Divorce
One of the most significant challenges in a divorce involving business ownership is determining the company’s value. Courts and financial experts use several methods to assess business worth, including:
- Income Approach: Evaluates the business based on its past earnings and projected future revenue.
- Market Approach: Estimates the business’s value by analyzing recent sales of similar companies.
- Asset Approach: Calculates the business’s value by assessing its tangible and intangible assets.
A professional business valuation conducted by a forensic accountant or valuation expert is often necessary to ensure a fair and accurate assessment. A party’s counsel provides directive to the expert and can assist in coming up with the most accurate value for the business.
Splitting a Business in Divorce
Once the business’s value is determined, the next step is deciding how to divide it. The division depends on multiple factors, including whether the business is considered marital or separate property. Additionally, the value of the business must be looked at in comparison with other assets and liabilities of the marital estate. If the value of the business cannot be offset against other assets of the marital estate, a division of the business may have to occur.
Common approaches include:
- Buyout: One spouse buys out the other’s share, allowing the business to remain operational under single ownership.
- Co-Ownership: Some couples opt to continue running the business together post-divorce, though this can be challenging.
- Selling the Business: If neither spouse wants to retain ownership, selling the business and dividing the proceeds may be the best solution.
RELATED: Read how to prepare for a high-asset divorce.
Protecting Your Business During Divorce
Business owners can take proactive steps to safeguard their companies before and during divorce proceedings, such as:
- Prenuptial or Postnuptial Agreements: Clearly define how the business will be handled in the event of divorce.
- Business Structures: Set up the business with a structure that limits transferability of the business interests via shareholder agreements or similar documents.
- Keeping Business and Personal Finances Separate: Maintaining clear financial records prevents complications in asset division.
Consult an Experienced Divorce Attorney
Divorce and company ownership issues require strategic legal and financial planning. At Wilder Mahood McKinley & Oglesby, our experienced divorce attorneys understand the complexities of business owner divorce and can help protect your interests. Whether you need guidance on valuation, asset division, or business protection, we are here to assist.
Contact us today to schedule a consultation—via telephone, video, or in person—and secure your business’s future.
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