Splitting business interests during a divorce

Care must be taken when handling a divorce involving a small business.

Some types of assets are pretty easy to split up in a divorce. For example, bank accounts; it's easy to put a value on a bank account and split it up accordingly between divorcing spouses. Real estate can easily be appraised or sold, as can vehicle, stock accounts and collectibles. Some joint property isn't nearly as easy to accurately value and apportion, though. A prime example of that is interest in or ownership of a privately held business.

Family business interests are inherently hard to properly and accurately value. This is because business interests are not simply defined by profits and past income. There are many factors that go into figuring out a business' true value.

The splitting up of a business is made even more complicated when one party wants the business to continue operations while the other wants to wind it up.

Assessing a business' value

The first step toward determining what a small business is worth is having a financial expert perform a thorough business valuation. This step is a difficult one, especially if business and personal assets are commingled, or if the business is in debt. A business that looks successful from the outside could suffer a substantial loss in value if mismanaged or highly in debt.

Another difficulty in valuation of small businesses comes with niche service and goods providers. The easiest method of valuing any business is to find comparable goods and services on the open market and see how much those companies are worth. This can be nearly impossible with highly specialized businesses.

Dividing the assets

Once the business valuation is complete, it's important to figure out what role those assets play in the overall property settlement arrangement. This is not an easy process, and sometimes yields more questions than answers:

  • Should one spouse buy out the other's interests to keep the business running smoothly?
  • Will the company be sold to a third party instead?
  • If the company is sold, should profits be split equally or according to relative financial, physical and emotional contributions?
  • Is it fair under the circumstances for one spouse to receive a higher property settlement award or other assets in exchange for giving up business interests?

These are all complicated questions that should only be addressed by financial experts and your experienced divorce attorney. For skilled divorce representation in the Springfield, Massachusetts, area, reach out to the law office of Claudette-Jean Girard, Attorney at Law. Contact the firm online or by calling 413-315-5518 today.