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Business Ownership and Divorce

The theory of what occurs in a divorce can be summed up briefly–a legal union is severed, thus separating two people’s lives from one another. However, in practice, divorce is never that simple.  There are a whole host of possible scenarios that can add to the complexity of a divorce. While there is a myriad of situations that might serve to add complexity, today’s blog will focus on business ownership and its impacts on a divorce case.

What the Law Says

Ownership of a business carries distinctly different qualities than other assets you might find in a divorce. Frequently, a business owner is to some degree an employee of that business. The spouse owns the business but also earns income from it.

Handling the Division

Because a business can be both an asset and a source of income, equitable divisions can be dicey.  Not only can a spouse get a share of the business, but may also get a share of the income from the business.  These are two separate property interests.

The value of a business and its income are dependent and related. To some degree, the ability of a business to generate revenue is contingent upon its integrity.  If pieces of the business are liquidated to cover a property distribution, it may negatively impact the business’ ability to generate revenue. If the ability of a business to generate revenue is diminished, it will likely have a similar effect on the paying spouse’s income (thus impacting maintenance calculations). Therefore, it’s important that any distribution from the business take into account any impacts such distribution may have on the business’ revenue streams.

Using Experts

As highlighted previously, the presence of a business in a divorce can dramatically increase the complexity of the case. Beyond the complexity of the case, the presence of business will bring into question significant financial issues. Attorneys can’t assess the value of a business for a court. Smart lawyers will seek out those who can.

Experts come in many shapes and forms. For the area of businesses, it may be appropriate to seek the assistance of an expert to conduct a business valuation. CPAs and other accounting experts only help protect you.  Their expertise can be pivotal when it comes to resolving your divorce.

Seek Help

Business ownership can be great–that is until you are in the middle of a divorce.  Business ownership adds complexity to your divorce.  You need experienced counsel. As discussed above, your attorney won’t necessarily possess the requisite skill or expertise to conduct a business valuation. Therefore, obtaining an expert to conduct a valuation may be an appropriate solution. If you are in the middle of a divorce or expect that you soon will be, do yourself a favor and speak to an attorney. MFL is a firm dedicated solely to the practice of family law and we offer consultations free of charge. So what are you waiting for? Call us today for a free consultation with one of our family law attorneys.

Posted January 24, 2017
by: MFL Team

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