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What to consider when dividing a business in divorce

On Behalf of | Jan 26, 2021 | Firm News |

In every divorce, there are concerns about the division and money and property. When a professional practice is part of the property, the division of business assets can add another layer of complexity to an already tense situation.

Determining an accurate number for the value of the business is key as it will be subject to fair distribution among the spouses.

Important questions to ask

Before looking into the value of a business, you must first establish whether the business is separate or marital property.

  • Was the business acquired before or during the marriage?
  • Where did the money to start the business come from?
  • What role did each spouse have in the operation of the business?

Even if one spouse started the business before the marriage, it may be marital property if the other spouse contributed to the success of the business during the marriage. They can contribute in any number of ways, including keeping the home running smoothly or making personal sacrifices that allowed the spouse to conduct the business.

What to consider in determining the value

There are many acceptable methods of determining the value of a business. Some methods are very straight forward and place weight on the monetary value of the assets minus their depreciation. The value of what an outside investor might pay for the business is also a valid method in determining its value. Taking the reputation of the business into account, and allowing for how it might perform as it continues to operate in the future, may yield a more ambitious value.

There is no one correct established method for assigning a value to a business. As each spouse may take a different method in determining the value, your position on the value of the business must be clearly explained, presented and supported when you present your case. The court will determine if the value is fair and accurate when dividing business assets.