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For anyone who is not familiar with the divorce process, it may come as a surprise to learn that their own – or their spouse’s – individual interest in a business may be considered a marital asset that is subject to equitable distribution. In many instances, the party that does not have the ownership interest may waive their interest in the business, whether due to the nature of the business or the other party’s reliance on same. For example, a small business owner who runs an auto repair business may be able to earn a better income running their own business than they might be able to earn working for someone else. In this instance, the other party may decide it is in his or her best interest to waive the business interest in order to be entitled to a higher level of support. Regardless, there are a number of things that you will need to do if you are involved in a divorce with a business ownership.
Prepare to open the books
During the discovery process, the parties involved in the divorce are expected to exchange all relevant information with regard to their respective financial situations. This is also true with regard to businesses. Therefore, the party who has an interest in the business will need to turn over not only their personal financial records, but also those of the business.
Retain an expert to value the business
If you believe that the business is of significant value, you and your spouse may want to retain experts in order to determine what the true value of the business is. You can either hire a joint expert who does not work for either party but rather remains neutral, or you can each hire your own experts. These experts can be costly, but it is often a necessary step in the divorce process in order to ensure that the parties are both completely aware of what the business is worth so that they can determine an appropriate distribution of assets. The documents that are requested by the experts were likely turned over during the discovery period, but it may be necessary to provide further information based upon what the expert discovers during his or her valuation.
Decide what the leadership of the business will look like post-divorce
In some cases, the divorcing parties own a business together and both participated in the day-to-day operations of same. While some parties going through a divorce may feel that they will be able to continue to run the business together post-divorce, many people do not wish to continue working together following the termination of their marriage. Therefore, as part of the negotiations of equitable distribution, you may want to discuss potential buy-outs of one party’s interest; who will remain in what roles once the divorce is complete; and if any legal work is necessary with regard to the business interests in order to effectuate these changes.
Divorce is difficult no matter what the circumstances, but when a business is involved it may be further complicated. If you have questions regarding divorce and your business interests, contact the attorneys at DeTorres & DeGeorge.
