When a couple divorces, there are numerous items to split up. The couple will need to decide how to divide the family home, any vehicles the couple shares and other valuable assets. However, spouses who started a business during the marriage have even greater issues to contend with.
Business owners spend years building a company from the ground up. In a divorce, it is natural to worry whether your ex will take half of the business. An angry ex-spouse can hinder everything you have worked hard to attain, which is why it is important to know how courts typically divide businesses and what you can do to protect your financial interests.
Valuation of the business
The first step a court will require involves placing a value on the business. You will need to hire a professional business appraiser to perform the valuation. You can contact the American Society of Business Appraisers or the Institute of Business Appraisers to find someone. Both spouses should obtain a valuation expert to make sure the value determined is fair.
The appraiser looks at numerous factors during this process, including:
- Cash flow
- Assets, such as real estate, inventory and equipment
- Profit and loss statements
- Customer good will
Through all this, the professional will come up with a fair market value. You can then work from there.
Division of assets
To retain full ownership of the business, you may need to give other assets to your former spouse. As the business owner, it may be in your best interest to give your ex the house in exchange for full ownership of the company. The court will come up with an equitable division of assets so neither of you feels like you lost substantially. There may even be circumstances where a court will not even factor in the business because the court views it as separate property.