Business ownership brings its own unique challenges during separation or divorce. It is often the main source of income for both people and must be handled in a way that keeps that much-needed income flowing.
When couples have been deeply involved in the business together, they may plan to remain business partners. Ending a marriage but preserving a business partnership, although not impossible, is very challenging indeed. In those cases where people believe they can do it, it is important to clearly define the terms of the continuing business relationship. It is also wise to have a legal “off ramp” in place for when one of them decides to leave the business.
Most often couples decide that one of them will keep the business and the other will leave when they decide to separate or divorce. Once that decision is made, the next challenge is to decide what value the business has.
This can be done by using an “informal business valuator” who decides the value based on a brief review of key business financial documents. A more in depth analysis can be provided by a trained “business valuation expert”, which is much more costly.
Many factors go into valuing a business including a business’s “good will.” Some businesses have no value under law whatsoever, so it is always good to seek the advice of the Attorney-Mediator who can offer the right guidance.
If there will be child support or alimony payments coming from the business earnings, there is an additional challenge to be addressed. Business earnings must be analyzed to “add back” certain deductions that are legal under IRS law but not legal under divorce law. Those matters are more fully addressed by an accountant who specializes in divorce.
Owning a business does present additional challenges when you separate or divorce and it is always best to deal with those challenges with the help of neutral experts.