Dividing your business interests during a divorce

Special care must be taken when valuing and dividing your business interests in a divorce.

Some assets are relatively easy to divide during a divorce. Bank accounts, for example, can be equitably split between divorcing spouses. Homes can be appraised or sold, as can tangible items like cars, real estate, collectibles and stock accounts. Some property is more difficult to accurately value and apportion as part of a dissolution, however. Interest in a privately held business is a prime example of this.

Closely held or family businesses are inherently difficult to accurately and properly value. Business interests are not simply limited to profits and past income. A wide range of criteria go into determining the worth of a business. It can be more difficult still when one party wants the business to fold and the other wants it to continue.

Valuation

So, how do you determine what a small business is worth? The first step is a proper and thorough business valuation by a financial expert. Even this can be difficult, though, particularly if personal and business assets are commingled, or if debts have been taken out in the name of the business. An otherwise successful business, even one that regularly turns a profit, can suffer a substantial loss in value if it is highly indebted to others or notoriously mismanaged.

Valuation of small businesses is sometimes done by finding comparable goods or services provided by other companies and seeing how much those companies are worth on the open market. This method is certainly the easiest, but it isn't always possible, particularly with niche businesses.

Division of assets

Once a business has been properly valued, the time has come to determine what role it will play in the creation of the overall divorce property settlement. This step in the process often raises many questions. For example:

  • If the spouses started the business jointly, will one "buy out" the other's interest in the company to keep it going?
  • Will the company be sold to someone outside the family?
  • If so, will the profits be split equally, or as according to the relative contribution each made financially to the business?
  • Could one party be given the total value of the business in exchange for the other party receiving a higher share of other marital assets (the family home, vacation property, collectibles, etc.)?

These are complicated questions that can only be answered with the help of financial experts and an experienced family law attorney. To find the answers you seek and protect your business interests in the event of a divorce in Tennessee or Kentucky, contact the Law Office of Steven C. Girsky online or by calling 931-266-4689.