Filing for a divorce is never an easy thing to do. Emotions are running high, the children are confused and money is flying out the door quicker than you imagined. And whilst you and your ex-spouse are no doubt wanting the ‘clean break’ principal, dividing assets and sorting finances can get messy – especially when there’s a business involved.
Now the business is thriving and your marriage is not. You want half of the value of the business if it’s your partner’s, but if it’s something you started before that legal binding; you certainly don’t want to be giving your hard work up. So where do you start? Given the significant damage a divorce can do to a business, it’s essential to find ways to not just protect you and your family – but your corporate assets too. Here are a few tips to get you started:
1. Plan ahead: Get a fair business valuation
One of the biggest headaches is valuing the business and determining what you and your ex-spouse should both receive. Even if the business is something that was yours before you were married (or theirs), it doesn’t mean to say that the non-owner spouse can take no value from it. The business and its value will still be treated as another family asset. Thus it’s absolutely essential you get a fair and neutral court-appointed valuation. This figure should then be reviewed by an outside party before agreed upon.
A business evaluator will properly value the business to divide all corporate assets in a divorce. The most popular methods are an asset valuation or a share valuation. If the business is booming and likely to obtain high profits in the future, a share valuation can be appropriate. This will offer an estimate about how much the business is likely to earn now and in the future to determine the company’s assets. Consider both parties obtaining a professional valuation.
2. Arrange gradual payments to your spouse
If you and your ex-spouse can come to an agreement where one will buy the other person out in terms of settling the business, payments can be arranged over time. It’s fairly common in a divorce situation to pay an ex for a share of the business gradually. This saves the excessive financial pressure of needing to come up with the funds straight away and monthly payments can come from the business’s cash flow. It does however, require the company to have profits and the spouse to continue to have some residual trust in the other to run the business capably and in good faith.
3. Get a good lawyer – That’s working for YOU
Getting a good lawyer that has your best interests at heart is critical to streamlining the process. Plenty of divorce attorneys will look to prolong the proceedings, but you want to ensure it’s as quick and as friendly as possible. Not only will this save you a lot of money, but sanity too! Don’t be in a situation where the meanest person ‘wins’ during a drawn-out legal process – divorce is painful enough, so you want someone who’s looking out for you when you’re dividing assets.
Having a smart professional and personal adviser is key to a smoother divorce. Divorce is distracting – so having someone you can trust and rely on to double-check thinking before making any strategic moves involving your corporate assets is vital.
4. Consider other ‘trading’ options
If obtaining full custody over the business is at the top of your priorities, it can be in your best interests to consider other trading options with your ex-spouse. Swapping your share of other marital assets like the house or an investment property for their equity interest in the business can be a good option and serve well for both parties – especially if one would rather the house over the corporate assets. You can also to combine a variety of different asset options to get full access to the business if your spouse is willing to compromise or agree to such terms. Make sure you understand how assets get divided in a divorce though.
5. Avoid the two-headed 50-50 monster
Most couples don’t want to be connected to one another after a divorce. Sure, you most certainly will need to be for the children – but business wise? The cleaner the break, the better. And you definitely don’t want to be running any corporate company together. Because of this it’s a much safer and practical option to get half of the value of the business (not half of the shares) for finality.
The business should be avoided at all costs being split between you two. A business with two equal partners who are already in the middle of a divorce and at war with each other isn’t likely to last – and it’ll cause you more heartache than it’s worth. This is why it’s better (and safer!) to use other assets to buy one another out. You don’t want to be intertwined through a business when there are already problems.
Have you experienced this before? Do you have any tips to add? Please share in the comments below.
Image courtesy of Shutterstock.com
Please ensure you seek professional advice for any divorce proceeding to ensure your personal situation is taken into account.