Dividing Business Assets Accurately During A Divorce In Sevierville
There are many ways to contribute to the success of a business. Even if one spouse started their business prior to marriage, decisions and other contributions made by the other spouse during the marriage may have helped the business succeed. This is one of the many reasons that determining the value of business assets and dividing property during a divorce can be difficult. So, when is a business considered marital property and how are business assets divided in divorce?
We at White & White, Attorneys at Law, will review contributions made during your marriage that may have led to the success of your or your spouse’s enterprise. Brandon White and Felisha White know that dividing assets is rarely black and white. If needed, we will work with financial and business valuation experts to determine exactly how each spouse contributed socially and economically. There are many ways to measure success. We are here to help you assess value accurately.
Work With Skilled, Experienced Professionals
Asset division under Tennessee law is complex, especially for 401(k)s, IRAs, businesses, investments and other accounts that have grown over time. If you and your spouse have both contributed to your shared financial success, it takes time and skill to untangle the complexities of valuable assets and business ventures.
Our attorneys work diligently with each client and invest the time and care necessary to quantify each asset. If you or your spouse has a company, the firm will work with a forensic accountant to gain an accurate valuation of that business and its assets. We will also walk you step-by-step through the process, so you will feel educated and informed about each choice you make going forward.
Defining Marital Property In A Tennessee Business Divorce
When business owners divorce in Tennessee, many think of their company as a separate asset, rather than marital property. While this can be true, there are ways in which it can become partially or wholly marital property, even if it was started before the marriage.
For instance, this can happen if the other spouse contributes significantly to the business’s success. Perhaps they were directly involved or provided support in other areas of life, allowing their spouse to focus on the business. Additionally, if the business’s value grew significantly during the marriage, such growth can be considered a marital business asset in Tennessee. For example, if a business was worth $10,000 when a couple got married and worth $10 million when they got divorced, the spouse may be able to claim a portion of that growth.
The Role Of Business Valuation Experts And Forensic Accountants
A business valuation is critical to determine exactly what the company is worth while dividing marital property. It can be useful to work with forensic accountants and business valuation experts, as couples often disagree on the value of the business.
There are different tactics used to determine business value. For instance, it may be based on the assets the company owns, such as real estate or inventory. It could also be based on the business’s cash flow, comparing income to financial obligations. Another tactic is to look for comparable businesses that have recently been sold.
Factors Affecting Business Value In Divorce
There are many factors that can influence the total value of the business, starting with the company’s outstanding debt. Even businesses that are successful often have major debts and liabilities, which can detract from their value. Market conditions and industry trends also play a major role. A tech start-up may dramatically increase in value early on, for example, if it is the only business offering a certain type of technology or addressing a specific need consumers have. However, as other companies catch up or technology evolves, the business’s value could stagnate or decline.
Finally, it is important to consider if it is a personal business, where just one person and perhaps their spouse are running it on their own, or if it is a corporate entity with shareholders, business partners and multiple locations. Some valuations are far more complex than others.
Personal Vs. Enterprise Goodwill
This is a complex and nuanced area, which can dramatically influence the division of assets or how courts view the business. With enterprise goodwill, value is tied to the business itself and its characteristics, such as the location, brand reputation and its perception among its target audience. With personal goodwill, the value comes more from the individual, who may have an excellent network, good relationships with other business owners, or personal skills and abilities that not everyone has. Part of the business’s valuation may be tied directly to that individual.
Dividing Different Types Of Business Entities
When addressing a business, it is crucial to consider its structure. A sole proprietorship is often a small company run by an individual in their own name, while a partnership means that multiple owners are contractually working together. An LLC provides liability protection for the owner, who is not personally liable for the business’s debts. The company could also be an S-Corp or a C-Corp, which can change its tax obligations. The structure of the business can play a role in division.
Common Strategies For Dividing A Business In Divorce
There are a few common strategies for splitting a business in a divorce, starting with selling the business to a third party and dividing the earnings. In other cases, a buyout will be the most viable solution, such as when one spouse wants to trade assets or use cash or structured payments to buy the other spouse’s share. In still other cases, former spouses will draft a partnership agreement and continue working together as business owners.
Negotiating Over Tennessee Divorce Business Assets
It is important to have realistic expectations when approaching the negotiation process. Financial transparency is critical. Some couples use tactics like mediation or arbitration, where they have more control over the outcome and receive guidance from a third-party neutral. Others may need to go through litigation to obtain an official court order telling them how they should divide the business.
Tax Implications Of Business Asset Division
A family business divorce in Tennessee can also have tax consequences, such as the obligation to pay capital gains taxes when selling the company, if it has significantly increased in value. Couples may also want to consider stock options, future business tax obligations or the need to use a Qualified Domestic Relations Order (QDRO) to split up certain business-related benefits, such as retirement benefits. Every case is unique, but an experienced high-asset divorce attorney in Tennessee can help when dividing a business in a divorce in Tennessee.
Call For A Free Consultation
We at White & White, Attorneys at Law, are experienced with high-asset divorce issues and we will carefully consider your needs and the contributions you’ve made to your partnership. Call us today at 865-622-7768 or send us an email for a free consultation in Sevierville and learn more about how we can help you divide assets.