Valuing and Dividing a Business in Divorce
Marital property in a divorce includes anything that either spouse has bought or contributed marital assets to during their marriage. For business owners, this means that their business is likely included in the division of property, even if they started or purchased the business before their marriage. As with any property, you and your spouse can claim an equal share of the business. However, a business is different from other properties in how you will assess its value and divide it.
Dividing a Business
There are three ways that you can divide your business during a divorce:
- One of You Retains Ownership: If only one of you is involved in running the business, the most sensible option may be to give complete ownership to that person. However, the person who receives ownership will need to compensate the other spouse with marital properties of similar value. You are essentially buying out your spouse as an owner.
- Both of You Own the Business: Co-owning a business means you will remain financially connected to your former spouse, but you do not necessarily have to work together. One of you can be in charge of operating the business or have a larger ownership share. Even if you are not involved in the business, you may want to maintain an ownership interest in the business if you believe you can profit from it.
- You Sell the Business: In certain situations, it may make sense to sell the business and split the money you receive with your spouse. You may be planning to retire or want to pursue another business venture. However, the sale process can delay a divorce as you wait for a buyer and make sure you receive fair value.
Business Valuation
No matter how you decide to divide your business, you will need to assess its value. A business’s value is measured by its:
- Revenue, minus expenses;
- Capital properties; and
- Future earning potential.
Other factors may add to or subtract from the value of the business, such as its location and the personal equity that the owner contributes. You should each hire your own assessor to determine the value of the business. Your spouse may have an incentive to misstate the value of the business to gain an advantage in the division of property.
Contact a Batavia Divorce Lawyer
How you value and divide a business can be one of the most consequential aspects of your divorce. A Kane County divorce attorney at Van Larson Law, P.C., can help you protect your business or make sure that you receive fair value for it. To schedule a consultation, call 630-879-9090.
Source:
https://www.forbes.com/sites/catherineschnaubelt/2019/03/15/how-to-divide-the-family-business-in-a-divorce/#464ef4e642fe
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