Divorce is complicated no matter the circumstances, but conflict can quickly develop if we add the complexity of owning a business together. Ideally, however, the individuals involved are open to having a civil discussion about how to move forward in a way they both benefit from.
When a couple owns a business and is getting divorced, there are several important issues they must consider.
Valuation approaches
Couples should first know that there is more than one way of valuing the business. Usually, divorcing couples use one of three methods to value their business:
- Income approach
- Market approach
- Asset-based approach
Which way you determine the value of the business matters a great deal because, ultimately, these are the numbers you will work with when it comes time to divide assets.
Calling in the pros
Just like you are much better off working with divorce attorneys in a divorce, bringing in a qualified individual to appraise the business can help enormously. However, valuation is more than just a number.
Other factors
You must consider other factors besides the numbers and your bottom line when valuing your business. For example, how stable is the industry you are in? How much did each spouse contribute to the business, and in what way? How well would the company do in a financial downfall?
The bottom line
Now that you have financial and non-financial factors resulting, hopefully, in a number or a range you can both agree on, decide what you will do with the business.
- Is one spouse going to keep the business running and buy out the other spouse?
- Will the couple continue to own the business even after the divorce?
- Is it best to sell the business?
These questions will guide your actions in this stage. Once you have decided, your attorneys will guide you through the legal and tax processes, which are critical regardless of how you decide to value your business.
Accurately valuing a business is not easy. Conflict can often arise, which is why it is important to have experienced attorneys who can negotiate on your behalf and for the good of all.
Remember that it is best to walk away from a deal that you had a say in rather than giving away the decision-making process entirely to someone else, like the court.