Divorcing a spouse is hard enough. Throw family business into the mix and you have a tricky situation on your hands. However, with the right approach, and the help of a trustable family lawyer (Click here to learn more about family lawyers), it may be possible to divide this asset without too much trouble. Here are some tips to get you started
1. Be clear on the value
It’s important to be clear on what you’re dividing up. Here are some questions you and your lawyer should ask:
- What is the value of the business?
- What is the value of the assets?
- What is the value of liabilities?
- What is the value of goodwill (the intangible items that make a company more valuable than just its tangible assets)?
- What is the cash flow from operations today, minus any expenses? How much do they earn per year over time?
2. Research the value and be reasonable
The first step in dividing a business is to determine its value. If you are working with an attorney, they will be able to provide guidance on this matter. However, if you are dividing the business by yourself, it might be useful for you to research some of the basic factors that go into determining the value of a company before approaching your spouse about it.
The first thing to consider is what other businesses have sold for in similar situations like yours? You can find these figures online at sites such as Google Finance or Yahoo Finance by searching for companies similar in size and revenue stream to yours. You may also want to consider consulting with an appraiser or private equity fund that has experience valuing small businesses.
The next thing that needs consideration when determining fair market value is personal worth: how much could someone pay me? To determine this amount, think about how valuable this business would be if sold today and how much money each party could make from selling their shares (and contributing capital). In addition, think about what else either party could do with these assets besides running them as part of their current operation; perhaps one spouse wants time off from work but still wants some income coming in every month–what other jobs might fit those needs?
3. Acknowledge each person’s contribution
- Acknowledge each person’s contribution to the business.
- Each person has a right to their share of the business.
This is one of the most important things you can do when dividing a family business in a divorce. Without acknowledging both people’s contributions, it can be easy for one party to feel like they’re getting ripped off and taking action against their partner or ex-partner. It’s normal for emotions like resentment and anger toward your partner/ex-partner to bubble up over time as well, so make sure you don’t let those feelings get in the way of doing what’s best for everyone involved (including yourself).
4. Know what is expected of you
- Make sure you know what’s expected of you.
- Be clear on what the business is worth
The last thing you want to do is go through a divorce and still be working in your family business. That’s why it’s so important to know what is expected of you once the divorce goes through. It also helps if there are some financial pieces in place, such as selling off assets or liquidating shares. Knowing these things can prevent any surprises that might come up during the dissolution process, which could make things much easier on everyone involved (especially if there are children).
5. Look for hidden value
The good news is that you can often find hidden value in the family business—but it’s critical to look for it. What is hidden value? It’s the money, tangible or intangible, that isn’t sitting in your bank account but still belongs to you. This might include:
- A company car (that was never yours) gifted by your spouse
- A piece of real estate bought with inheritance funds
- A patent or copyright filed by one spouse during their marriage, could potentially be worth more than $50 million combined with another patent or copyright from a different source (for example: if an inventor applied for patents on two separate inventions and received approval for only one)
6. Divorce can be hard and including a business can make it even harder
Divorce is never easy, but it can be especially difficult when you have to divide a business. Here are some tips for divorcing couples who own or co-own a family business:
- Do your research, and know what you’re getting into. Most people who go through a divorce don’t like the idea of their children working in the same business as their exes (and many don’t want them dating either). If this is an issue for you and your spouse, then it may be one worth discussing early on in your separation process. Many times it’s better to figure out how to deal with both sides before things get too far along—or else there may be no end point at all!
Conclusion
You’ve been married for years and had plans to start a family business with your spouse. After a couple of years, the business grew larger than you ever expected and prompted you to hire many employees. Your business is now successful, but you are separating from your spouse. You don’t know what’s next in store for your family as you divide your business in a divorce. What happens next?
Dividing a family business in divorce isn’t always easy, but it can be done. There are no hard and fast rules for such an occurrence, but there may be some questions you should ask yourself when considering what your next steps should be.
Divorce is never easy, especially when a business is involved. The good news is that there are ways to make the process less painful. We hope the tips above will help you and your family get through this tough time.
