Property division can be one of the most complicated and stressful aspects of a divorce, and for business owners it can also make every aspect of the divorce more complicated.
Here are some of the most important issues that need to be resolved before coming to an agreement (or going to trial) as to how the business will ultimately be determined.
Whether the Business Is Marital Property Or Separate Property
Owning a business can make the divorce more complicated. The first step in evaluating the effect a divorce may have on a business is to determine if a business is marital property. Whether a business is considered marital property will depend on the following:
- Whether the business owner’s interest in the business predated the marriage.
- If acquired during the marriage, how the business owner acquired the business (i.e. earned ownership vs. gift or inheritance).
- The extent of each spouses’ contributions to the business during the marriage.
- Whether the business appreciated in fair market value during the marriage;
How To Value the Business
In a divorce, the judge must determine the value of a couple’s property before determining a distributing of the assets, and the valuation of the business is often at the center of the dispute during a divorce. Typically, courts use one of three ways to value a small business:
- Asset approach
- Market approach
- Income approach
Determining the Business’ Future Ownership And Spouses’ Interests
Every business is different, and these differences make each divorce that involves a small business unique. The following are facts that may be important to consider:
- Whether the business was run separately by one of the spouses.
- Whether both spouses were involved in the business's day-to-day operations and the role of each spouse’s past and present role in the business;
- Whether one spouse will continue to run the business.
- Whether it's practical to sell the business.
- The legal structure of the business.
Other Issues in Divorce That May Affect How to Handle the Business
On top of this, there are a handful of other factors that should be considered when determining how a shared business should be split in a divorce. These considerations may include:
- Whether there is other real property, retirement accounts, or spousal support to consider.
- Whether there are minor children.
- Whether there are other extenuating circumstances.
The process of dividing a business in a dissolution matter is unique and can be complex. For this reason, it’s always a good idea to consult with a family law attorney about the best way forward, so that your best interests are being considered and advocated for. Call our office today at (503) 227-0200 to speak with one of our seasoned attorneys.