What are your options for your business during divorce?

On Behalf of | Apr 6, 2022 | Divorce |

If you have a family business, then you’re probably worried about what’s going to happen to it during your divorce. This is understandable given the value that’s oftentimes attached to these businesses, and you don’t want to be left feeling like you’ve thrown away everything that you’ve worked hard to build. That’s why you need to know your options when it comes to dealing with the family business during your marriage dissolution.

The options

You have a handful of options that you can utilize in your divorce. Let’s briefly look at them here:

  • You can buyout your spouse so that you retain full ownership of the business. Depending on the value of your business, this can be an expensive prospect, but it ensures that you retain control over the business, and it may provide you with more long-term financial stability.
  • Consider giving up other marital assets in hopes of retaining the business and the stability that comes along with it.
  • Continue to co-own the business with your spouse. This arrangement can work in some circumstances, especially when a marriage ends on amicable terms. It can also simplify processes, since you won’t have to worry about removing your former spouse from the business’s operations. But be careful here, as continued co-ownership can lead to heated disagreements post-divorce that could negatively impact your business.
  • Sell the business to a third-party and split the proceeds in a fair fashion. This may be the cleanest way to break yourself away from your spouse, but it can deal you with a severe emotional and financial blow. Bu it might be a good option if your business was already facing financial difficulties. So, think carefully before you utilize this option.

Don’t overlook the importance of a thorough and accurate valuation

Before you choose one of these options, you need to take care in obtaining an accurate valuation of your business. Without it, you could be putting yourself at a significant financial disadvantage. What are your valuation options? Let’s briefly look at some of the many options that may be available to you.

  • Market approach: Here, your business is valuated based on similar businesses that have sold in your geographic region, taking into account everything from your market reach to your commercial property and equipment. The problem with this approach is that it’s often difficult to find a business that is directly comparable to your own.
  • Income approach: With this approach, a valuator will assess your revenue streams and your historical income to determine what financial value the business will have for the owner in the future. Expenses and tax liabilities are taken into account to try to give a realistic picture.
  • Liquidation approach: This approach is pretty straightforward. It’s simply the money that is left over after all inventory is sold and assets are paid off. This approach, of course, is best suited to situations where you plan on selling the business and dividing the proceeds with your spouse.
  • Cost approach: This approach looks at a business to determine how much it would cost to build the business from scratch or to replace the business. This approach requires the valuator to consider every aspect of the business, from its marketing to its equipment and training.

Dealing with a business in your divorce can be complicated If you think that you need guidance on how to obtain one of these fair valuations and how to handle your business during your divorce, then you may want to consider turning to an experienced legal professional for help.