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Even when divorces do not include high net-worths or children, they are complicated. This is especially true when a business is involved. There are many things to consider when a divorce involves a business, including evaluating how much the business is worth and how it is going to be divided during divorce proceedings. Anyone going through a divorce should speak to an attorney. However, when a business is involved, divorcing spouses must speak to a divorce lawyer for business owners in Oakland County.
Before a business is properly valued or divided, it must first be determined if the business is separate or marital property. Property division is part of any divorce, but it becomes particularly complex when a business is involved.
The courts will first consider whether the business was acquired during the marriage, or if one of the spouses already owned and ran the business prior to the marriage. If the business is considered completely separate property, meaning it was brought into the marriage, it still does not automatically mean it is separate property.
The courts will also determine where the funding for the business came from and how each spouse contributed to the business. Did the couple purchase it together but one spouse was mainly responsible for the day-to-day operations? Did one spouse own the business before marriage, but marital funds were used to expand the business? These are all important questions and a judge will consider all of them when dividing the business or awarding it to one spouse.
When dividing a business or determining which spouse to award the business to, the business must first be evaluated. There are three general approaches used when evaluating a business.
The first is the actual book value of the business. This typically involves identifying all of the business’ assets, its depreciation over time, and any debts the business has incurred. While book value provides a general guideline, there are other evaluation methods, as well.
Another method used is the market value, or what the business would be worth if it was sold at the same time as the divorce. The last method is called the ‘going concern value.’ This evaluation assumes that there will be no changes in the business and it will continue to operate and earn a profit in the coming years. This approach typically results in the highest evaluation of the business.
Once the business has been properly evaluated, the courts can then begin to decide how to divide it during a divorce.
In most cases, there are three possible solutions for divorces that involve businesses. These include:
The solution chosen will largely depend on the wishes of each spouse, and what the courts deem fair.
During a divorce, you are already losing your marriage and some assets that are important to you. You do not want to lose your business, too. At Iafrate & Salassa, PC, we are the divorce lawyers in Oakland County who can help. We have the necessary experience to help business owners going through a divorce and protect their interests so they do not lose years of hard work. If you are considering divorce and want to keep your business, call us today to schedule your free consultation to learn more about how we can protect you, and your business.