24 Aug What To Know About Divorcing a Business Owner
Divorce can be complex, but it can become even more so when one or both spouses own a business. Beyond the emotional and logistical challenges of splitting up, there are financial and legal intricacies that demand attention. Find out what to know about divorcing a business owner to protect your financial future and ensure a fair resolution.
Valuation of the Business
One of the first steps in divorcing a business owner is determining the value of the business. It may be the largest asset within the marriage, and its valuation affects property division. A qualified forensic accountant or business valuation professional will typically need to assess the business’s worth. They will examine multiple factors, including revenue, cash flow, tangible assets, and market trends.
Common approaches include market-based, income-based, and asset-based valuations. Working with a professional who will thoroughly review financial records is crucial for receiving an accurate assessment.
Community Property vs. Separate Property
Property classification is another key consideration. If you are divorcing in Washington, for example, be mindful that it is a community property state. This means equal division of the assets and debts acquired during the marriage between spouses.
Still, the classification of the business can vary depending on your circumstances. If the business began or grew significantly during the marriage, it may fall under the marital property classification. Alternatively, an inherited business or one that predates the marriage might be separate property.
Even in cases where the business is separate, any increase in value during the marriage could be subject to division. Disputes often arise over whether certain assets or funds used for the business originated from community property.
Turn to a divorce lawyer in Washington State for help and clarification. At LaCoste Family Law, an attorney well-versed in the state’s property classifications and other family law aspects can help you determine which category your spouse’s business falls under.
Income and Support Considerations
Another important factor to know about divorcing a business owner is that their income can influence spousal support and child support decisions. Business income may fluctuate, which determines the owner’s earnings. Courts may scrutinize financial statements to distinguish between personal and business expenses, uncover hidden income, or address attempts to lower reported income falsely.
Additionally, the financial health of the business could impact support obligations. For example, if the business struggles, the owner may seek payment adjustments. Conversely, businesses with consistent revenue streams might lead to higher support calculations.
Division Options
Dividing a business during divorce requires careful planning, as outright selling the company may not be a practical or desirable solution. Here are a few division types to consider:
- Buyout: One spouse purchases the other’s interest in the business, allowing operations to continue under one person’s management.
- Co-ownership: Divorced spouses may agree to retain joint ownership, especially if both parties are active in the business.
- Business sale: Selling the business and splitting the proceeds is another approach.
Protect Your Interests
Given the complexities of divorcing a business owner, legal guidance is essential. At LaCoste Family Law, you receive representation for your interests, whether by advocating for a fair division of assets, reviewing valuations, or negotiating support arrangements. Every divorce is unique, but understanding the interplay of business ownership, finances, and property law can provide clarity and reassurance in uncertain times.