Your Couple-Owned Business and Divorce
If you and your spouse own a business together, you know the joys and challenges of running and owning a business. Your business is almost certainly a labor of love and dedication. If you face a divorce, determining how you will transition your business ownership can be one of the most challenging components. Ultimately, business ownership goes beyond mere profitability and requires careful consideration when it comes time to divide your marital property.
Business Valuations Are Complicated
There are many ways to value a business, but one of the most commonly used in divorce situations is the fair market value, which refers to the amount a willing buyer would pay if you were ready to sell. Coming up with a fair market value for a business, however, involves many challenges. There is no other business out there that is exactly like yours, making it challenging to compare selling prices. By contrast, while your home is another big-ticket item when it comes to marital property – it is much easier to assign a value to (because comparable homes in your neighborhood are sold regularly).
Approaches to Valuation
Several basic approaches can be employed to help assign a value to a business in divorce (based on the kind of business and the current market), and these include:
Market Approach – The market approach, as noted, compares available market studies of recent sales in your area involving similar businesses. If your business is quite unique, however, the market approach can be quite nebulous.
Asset Approach – An asset approach, rather than comparing market values, tallies and totals the assets that make up your business. This includes assigning a value to tangibles such as your inventory, equipment, and other assets – but also takes your company’s name and brand recognition in the community into consideration.
Income Valuation Approach – In this approach, the income your business generates over a specific period of time will be implemented to calculate the projected value of your business.
If you and your divorcing spouse each obtain your own valuation, and they vary considerably, many courts will simply split the difference. Further, if one of you ran the business and worked there every day while the other played little to no role in running the enterprise, the judge may factor this sweat equity into his or her calculation. Ultimately, deciding who will continue running the business and who will walk away – if you do not sell it – can be one of the most challenging divorce decisions of all.
Turn to an Experienced Killeen Family Law Attorney
Owning a business together can be one of the most difficult hurdles when it comes to divorce. Brett Pritchard at The Law Office of Brett H. Pritchard in Killeen, Texas, is an accomplished family law attorney with impressive experience guiding divorce cases like yours – that involve business ownership – toward favorable resolutions. Mr. Pritchard approaches every divorce he handles with the careful attention it deserves, so please do not hesitate to contact us online or call us at 254-501-4040 for more information today.