There are numerous ways that co-ownership of a business can complicate an upcoming divorce. Especially if both spouses work at a family company, the comingling of work and finances can make untangling each spouse’s interests in the business a truly challenging task.
Dividing the financial interest that spouses have accrued in the business can be a detailed, stressful and time-intensive feat. When evaluating the realities of a small business to determine its value for the purpose of an upcoming divorce, there are multiple issues that may arise during profiling that can influence the company’s value and, therefore, how the spouses divide their interests in it.
Small businesses can be more volatile than bigger companies. One worker having a few bad months on the job could be devastating for a small, closely-held organization. Changes in interpersonal relationships could sometimes also affect business relationships.
A customer or client might cease doing business because of the divorce, which could lead to a drop in revenue. Some talent might also leave the company when they sense instability to protect themselves from unexpected job loss. All of these concerns and more can have major implications for the overall value of a business that may be held – at least partially – as marital property.
Is the industry in which the company operates in decline? Are operating costs projected to increase substantially in the next few years? Many other factors, like liability for future lawsuits and equipment depreciation, can influence the value of a business.
Careful profiling that assesses liabilities, likely future revenue and other complicated financial considerations is necessary to establish a reasonable value for the business and an appropriate means of compensating a spouse for their share of that value.
Businesses require a nuanced approach to negotiations
Especially if someone must give up ownership interest or leave their job at the company, thorough research and direct negotiations will likely play a major role in ensuring a fair outcome to the overall asset division process.
Business interests are often complicating factors in modern divorces. Those who own a business or who have a spouse who runs a small company may need to take a more careful approach to divorce proceedings and undertake a more thorough evaluation of financial circumstances to secure a fair outcome. Identifying key factors that can complicate divorce for business owners and seeking proper legal guidance can both benefit those who are preparing for marital dissolution.