Divorce is an intimidating prospect for anyone. Those who have established a comfortable standard of living often find that they have more to lose during divorce proceedings than the average person. If a business is how someone gained control over their career and established a reasonable standard of living, they may fear what could happen to the company in a divorce.
There are multiple unique issues that a business owner may need to address in their divorce that never arise in other family law cases. They may technically be their spouse’s employer in addition to their marriage partner. They may have tied up the vast majority of their personal wealth or marital income in the business. They may worry about financial responsibilities ranging from spousal support to taxes. The following are some of the most important considerations for a business owner preparing for divorce.
Protecting the business itself
For business owners facing divorce, the potential demand to sell their company might be their biggest worry. They don’t want to sell the company, share ownership with their spouse or liquidate key company resources during the divorce. In some cases, careful business valuation factoring in depreciation and financial obligations can reduce how much of the company’s equity is at risk during a divorce. Other times, negotiations outside of family court can help a business owner reach an agreement with their spouse that allows them to preserve the business by making concessions elsewhere in the divorce process.
Minimizing losses related to the business
A successful business or professional practice can generate a lot of revenue. That may inspire one spouse to ask the other for ongoing spousal support following the divorce. However, that request can lead to unfair outcomes in many cases involving business ownership. Several different types of business valuation consider the future revenue that the business might produce. It is unfair to factor in future business revenue when dividing the value of the business and then also using it to calculate support obligations.
Business owners often need to partner with a forensic accountant or an attorney who has one of these specialists on staff to properly value their business and handle the financial proceedings of their divorce. The right guidance can also help mitigate tax risks that may come from liquidating business resources. Preparing for a divorce is incredibly important for those who own and run successful companies. Business owners generally need assistance at every step along the way to protect their interests and the company itself.