Going through divorce as a business owner comes with risks that can affect your business significantly, including legal disputes over the company’s ownership. Facing divorce as an entrepreneur may have substantial tax implications, and the business can be considered during asset division, especially if it’s seen as community property. This can disrupt the company’s organizational hierarchy and financial stability. Discussed below are five tips for business owners facing divorce.
Understand the consequences of divorce on entrepreneurs
Divorces have substantial financial implications for entrepreneurs, potentially affecting their financial stability and business future. Property division is among the top concerns business owners have during a divorce. Determining how you and your divorcing partner will share the assets requires the expertise of financial experts and divorce attorneys. In addition, spousal support or alimony might come into play, impacting your financial health even further.
A comprehensive understanding of family law and the regulations regulating property division in your jurisdiction and family law can help you navigate divorce successfully. Consulting divorce lawyers specializing in marriage dissolutions involving businesses, including Freed Marcroft’s divorce attorneys, can guide you on the effects of divorce on business while helping safeguard your interests as an entrepreneur throughout the proceedings.
Hire the right divorce attorney
Navigating a divorce involving a business is a complex scenario with numerous challenges. Handling a business division in a divorce isn’t easy. This is where a divorce lawyer comes in. Their specialized guidance and advice on the division of company assets ascertain fairness in business valuation and distribution. Your divorce lawyer’s legal expertise will not only protect your business interests but also advocate for equitable outcomes. The right divorce attorney must have an excellent track record dealing with divorce cases involving businesses and great reviews from past clients.
Value your business
Professional and independent business valuation is key to ensuring fair distribution of assets and financial support decisions. Experts usually analyze valuation strategies based on the grounds stated in the State divorce regulations, ascertaining a fair assessment before arriving at a final resolution. Financial experts will employ techniques like asset-based and income-based approaches to assess the value of your business. Assessment stretches to intangible assets such as goodwill, necessitating an in-depth analysis.
Determine if your business is marital or separate property
Understanding if your business is separate or marital property helps you determine if it’s subject to division during a divorce. If you started or acquired your business during the marriage, it’s considered marital property, meaning it’s eligible for distribution in a divorce. However, if you acquired or began the business before marriage, it means it’s separate property. Note that your company can begin as a separate property and end up as marital property based on numerous elements, including:
The business borrowed from jointly owned accounts
You invested marital assets in the company
You and your spouse materially contributed and worked in the business
Opt for collaborative divorce
Opting for a collaborative divorce as a business owner is strategic. It involves you and your partner working together to arrive at a business-friendly post-divorce solution. You can decide to run the business as co-partners instead of splitting it 50/50, ensuring its long-term survival. Alternatively, one of the divorcing partners can choose to buy out the other’s interests.
Endnote
Going through divorce as a business owner has many challenges and risks. However, understanding the implications of divorce on entrepreneurs, hiring a divorce lawyer, valuing your business, determining if your business is separate or marital property, and opting for collaborative divorce can help ensure a more favorable outcome.