What Happens to My Business in Divorce?
Will you lose your business? Will you have to sell it? Few issues in divorce have a greater financial impact than what happens to a business owned by a divorcee. Businesses are part of property division in divorce, and learning the basics about how they’re treated can help you prepare for the road ahead. The business is relevant to both property division and either spousal or child support, as it’s considered an asset and its income used in calculating support. First, if there’s a support order, the income earned from the business will be used for purposes of the calculation. For both child support and alimony, total gross income is the key number. For property division, the business is an asset subject to division. The parties must decide what they want to do with the business. If the parties are selling it, the proceeds will be included in the property division calculus. If one of the parties wants to keep the business, the parties can arrange for a buyout, which usually involves either a cash payment or an offset with other assets, such as investments or real estate. However, whether the business will actually be considered a significant asset that warrants consideration in the property division calculus in the first place depends on its value. And whether a valuation is necessary depends on a number of factors, including the size of the business, its revenue, the number of employees, the length of the marriage, other available assets, and other factors. Generally, the smaller the business, the less likely it is that it’ll be a substantial factor in property division. A business valuation is an expert’s attempt to arrive at a value for a business for which no market price actually exists. It consists of the expert thoroughly analyzing the business, including revenue, assets, the owner’s compensation package, taxes, and the overall inner workings of the business’s financial management, among other factors. Business valuations are generally expensive and can cost tens of thousands of dollars, But they’re the most effective means of arriving at a reliable value.