Divorce can be a complicated process when one or both spouses own a business. Without careful planning, a divorce can threaten the value, control and continuity of a company. At the end of the day, preserving business assets during divorce requires both strategic thinking and legal insight.
Most of the time, a business started during a marriage or significantly expanded with marital funds may be considered marital property. Even if the business at issue was founded before a couple’s marriage, its increase in value during the marriage might still be subject to division. This makes accurate valuation an important part of protecting business interests.
Business owners should consider securing a professional appraisal. This can help to better ensure that the value assigned to the business is fair and not inflated. Valuation methods may vary, and courts often look at factors like income, assets, goodwill and market competition. A neutral valuation can help avoid disputes and protect against unrealistic expectations from the other spouse.
A business subject to division has been accurately valued. Now what?
One common way to preserve business control is by negotiating a trade. A spouse may agree to keep other marital assets—such as real estate, retirement funds or personal property—in exchange for the business owner retaining full interest in the company. This approach can simplify the division process and keep the business intact.
However, this isn’t the right approach for every couple or every business. Some couples choose to continue running their businesses jointly – at least to some extent – after they’ve divorced. Others choose to sell their companies outright in order to make a clean break. There is no one-size-fits-all approach to preserving business assets and moving forward when business owners are married to each other and going their separate ways. This is one of the many reasons why it is so important to seek legal guidance early in the process when spouses who own businesses – separately or apart – decide to end their romantic relationship.