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Assessing your business’s value before divorce

by | May 14, 2019 | Firm News

When a business owner faces divorce, the business itself may be in just as much danger of dissolving as the marriage. The laws that govern property division typically consider a business personal property of the owners, meaning that the business may qualify as marital property. Unless an owner takes proper precautions to protect the business from divorce, the owner’s spouse may take their share with them when the divorce finalizes.

If you are a business owner in Tennessee with concerns about how your divorce may impact your business, the sooner you address these issues, the better. Even in ideal circumstances where both spouses work together to separate their lives amicably, your business may not survive property division unless you act intentionally to protect it.

Does your spouse have a claim on your business?

It is not always simple to determine whether one spouse has a strong claim on the other’s business. If, for instance, the owning spouse protected their business with a prenuptial agreement, then those protections may keep the business safely off the property division table.

Similarly, if the owner acquired the business prior to the marriage or if their spouse had little-to-no involvement in the operation of the business, the owner may sometimes successfully keep it off the table.

However, it is never wise to assume that your business is safe without reviewing your circumstances carefully. If your spouse does have a claim to the business, then it is important to make sure you know exactly what your business is worth and whether it is important to salvage it, if possible.

Business valuation protects owners from unfair division

If your spouse has a viable claim on a portion of the owned value in your business, you need to understand exactly what that value is. A professional business valuation carefully assesses many aspects of a company to understand what it is truly worth so that you and your spouse do not enter negotiations with different perspectives on what is at stake.

Unlike a boat or savings account, a business does not have a simple value. Practically speaking, a business is often both an asset and a liability, and it is easy for one party to inflate the value or deflate the value to serve their own goals.

Navigating divorce is rarely simple, so it is always wise to build a strong divorce strategy to help you understand which assets and liabilities are priorities to keep and which are not worth fighting to preserve.

By approaching your divorce with a thoughtful, well-built strategy, you can focus on moving to the next chapter of your personal life while your rights and priorities remain secure.