How A Business Owner Can Get Divorced
Being a business owner can make getting a divorce even more complicated, but far from impossible.
Divorces are already complex enough, but when there's a business involved, it can get far more difficult. Business owners considering divorce must think carefully about what it means for their company. This doesn't mean that divorce isn't the correct answer, but that many considerations need to be made to figure out how the business will weather the divorce – if it can. It's crucial for business owners who are planning to divorce to seek legal advice and work through the information below with their lawyer.
Determining if the Business is a Marital Asset
The good news is that some businesses are not marital assets. Unfortunately, some may be considered marital assets, and the other spouse could be entitled to a percent of the company during the divorce. If the business was started during the marriage, it's likely (but not always) considered a marital asset. If the business was created before the marriage, it could be a marital asset, depending on how much the other spouse invested into the business. Advice from a divorce attorney in Cullman is needed to help determine if the company is considered partially or wholly a marital asset.
If the business was started before the marriage, the spouse might have a claim if any marital funds were invested in the business. They could have a claim due to the company's growth during the marriage. If a spouse isn't involved directly in the marriage, they may still have some claim due to other factors like keeping up with the house while the business grows. It is crucial to consider exactly what impact each spouse had on the company and its success, no matter when the business was started, to see if part or all of the business is considered a marital asset.
Finding the Value of the Business
If the business is considered partially or wholly a marital asset, it's necessary to determine the value of the company. This can be helpful in negotiations during the divorce and can help determine the various ways to split the business as well as the value both spouses are entitled to in the divorce. There are multiple options for evaluating the company, including the cost, market, and income approaches. The right one to use will vary from situation to situation, so it's a good idea to look into each of them and determine which one to use for the divorce. Once the value is known, it's possible to start thinking about how the business will be handled in the divorce.
Selling the Business and Splitting the Profit
One of the most commonly discussed ways to handle a business in a divorce is to sell it and split the profits. This provides a clear answer to the company's value and makes it easier to know how much each spouse will receive. However, this may not always be the right option. Once the business is sold, where will the income come from for the spouse that owned the business?
While the money from selling the business can help cover living costs for some time, how long it lasts will depend on the value of the company when it's sold and the share received by each spouse. It's also crucial to consider other expenses that may be required after the divorce, such as child support or alimony, that will still need to be covered once the business is sold.
Continue to Co-Own the Business
It may be possible to avoid any concerns about the business by simply continuing to own it together. If both spouses have an active role already and work well together for the company, there's no requirement to sell or split the business. Both spouses can continue to own the family business and see a share of the profits, and the divorce won't have to include the complexities of handling the business. Unfortunately, this will not work for many couples, as they may not be able to work together as well once the divorce is finalized.
Buy Out the Spouse's Business Interests
The third option that many people will consider is buying the spouse out of the business interests. This works similarly to one spouse keeping the home and paying the other spouse for their ownership to avoid selling the family home. The business owner would have to determine how much they can sell the business for, then use that value to determine how much money to pay the other spouse, depending on how much of an interest they have in the company. This can be more expensive than it may seem but can be an excellent option to keep the business going. It's also possible to trade other assets in exchange for the value of the spouse's share of the divorce, so it doesn't necessarily mean paying cash for their total share.
Impacts on Other Areas of the Divorce
The splitting of the business isn't the only impact of the divorce. It will also impact child support, parenting time schedules, and related issues, depending on what happens to the business during the divorce. Being a business owner can often mean last-minute schedule changes or other issues that can impact child sharing times, and being able to determine child support amounts can be difficult, too, depending on how the business is doing. The inconsistent income may also make it challenging to determine alimony payments. It will be necessary to carefully consider all of these when negotiating the divorce to avoid potential problems in the future.
Going through a divorce is complicated, but it can become even more complex when there's a business involved. Questions about whether the company is considered a marital asset and how it should be split if it is regarded as an asset can be highly contentious and difficult to answer, so proper legal assistance is needed for these situations. Divorcing while owning a business is possible – it just takes extra work to determine how everything will be split. Contact a lawyer today to discuss the business's impact on your upcoming divorce.
