The process of ending a marriage can be unpleasant and impact the rest of one’s life. Regardless of the situation, length of the relationship, or other related factors that brought about the separation, saying farewell can still be difficult. Often as this process begins and assets are divided, many choose to focus solely on the domestic aspect, thus disregarding one of the most substantial and valuable assets: a business.
If not done properly, the managing of a business when dealing with divorce can lead to the collapse of a flourishing company. Obstacles can arise in various ways whether the separating spouses are co-owners or one spouse serves as the owner exclusively.
While there may not be a dispute over a business, divorces, regardless of how civilized they are, require a professional business appraiser when business ownership is involved.
Similar to your home or car, a business is an asset in your divorce if co-ownership is involved. However, a business can be much more difficult to relinquish. After all, buying a new vehicle is much easier than cultivating the growth of an entirely new business from the bottom up. As a joint business owner, there are 3 avenues to consider when going through a divorce: continued co-ownership, dissolution of the process, or one spouse taking over the other’s ownership share.
Continued co-ownership can be simplest solution, especially when a divorce is amicable. To be successful however, this scenario requires a solid work relationship, patience, and understanding by both parties.
Dissolution tends to be more complicated, however, it allows both parties to discontinue ownership altogether and go about their lives in different directions. If the both parties decide to sell the business, complications may emerge outside of the divorce proceedings. When dissolving a business, a certified appraiser should be used to find the value of the business. It is best to utilize one appraiser for both parties to establish the company’s value. This reduces appraisal fees and the potential conflicts of “dueling appraisers”.
Takeover of spouse’s ownership share
In instances where one spouse wants to dissolve the business and the other does not, the party interested in retaining the business can buy out the other spouse’s business shares. This type of situation lends itself to a great deal of complexities, but is often easier than selling to a third party. To accurately assess the worth of each party’s business shares a professional, certified business appraiser should be consulted. Involving an appraiser in the process is beneficial to both parties. This helps to ensure that both parties are treated equitably when determining appropriate value, sales proceedings, and owner percentages.
Similar to a vehicle, home, or piece of artwork, a business is considered to be an asset that must be accounted for throughout the divorce process. While it may seem common for the original owner to retain ownership of the business, the complicated reality of divorce may suggest otherwise.
For owners that came into the marriage with a prenuptial agreement that hinders the loss of ownership, the value of a business is still taken into consideration as a source of net income and net worth, thus impacting alimony and child support.
For those that married younger in life or prior to establishing a business, the entity may become fair game in the divorce proceedings. In less amicable separations, a poor financial position can be illustrated and income can be hidden by the business owner in attempt to conceal assets. Creative business practices such as ceasing paychecks or falsifying financial documents may have been employed far in advance, thus leaving the other spouse to debate the validity of the business’s worth. In contrast, the spouse married to a business owner may make claims alleging the value of a business is worth far more in attempt to receive a bigger payoff. Regardless of the situation, it is equally imperative for both parties to enlist the services of a certified business appraiser to settle the matter quickly and thwart any allegations of false or unfair claims.
Unlike a divorce attorney who battles forcefully for their client’s own best interest, a neutral appraiser can often smooth the situation over as their main goal is to serve both parties equitably.
While people often have the best of intentions upon getting married, the sad reality is that nearly 50% of marriages end in divorce. If you are a business owner or the spouse of a business owner and face this difficult path, Analytic Business Appraisers can simplify your situation. We offer the best, most professional services with a fast turnaround to ensure you get the best value for your appraisal dollars. Our professionals have years of experience dealing with business valuations and can provide you with accurate and trustworthy appraisals for small, family-owned businesses and large corporations. When you want to settle your divorce as fairly as possible, we are happy to help you reach the best decision for you.
Matt Cassedy can be reached at 480-857-7449. Call him with any questions you may have.